Three Simple Steps To Start Your Investment Journey
So, you want to start investing but have no idea where or how to start. We have tons of articles that will help you get into investing!
However, sometimes we just need a basic and easy introduction into investment to get us started. So, here are some simple steps that will help get you started!
Step 1: Save Up!
This is the most important step, savings is the root of your financial planning. Get this right and you should be good to go!
Some banks such as FRANK by OCBC provide low volatility investments allows you to start investing with them with amounts as low as $100, with this said, ensure that you have emergency money squirreled away somewhere as you do not want to rely solely on that $100. To be safe, have at least 6 months worth of expenditure in your savings which you can depend on when in need.
If you are unsure about how much you should have before investing, check out our checklist which could help you decide on the big question “Should I Invest?”
Step 2: Set Up Your Accounts
Before you can start investing you must have a place to invest and a place to keep whatever you have invested in. In order to do so, two accounts are required.
Account 1: CDP (Central Depository Account)
This ensures that the stocks/shares you purchased through your broker go directly to you, which makes you the direct owner of your shares. What’s great is that you will only need one CDP account although you may have multiple brokerage accounts.
Where can I set this is up?
Before you can start signing up for a brokerage account, you will be required to have a CDP account present. You will be required to fill in a form which will require you to fill in your personal details, the bank that you have an account in and your tax residency.
Once this is done mail it over to the address below and wait for your application result!
The Central Depository (Pte) Limited
11 North Buona Vista Drive
The Metropolis Tower 2
Account 2: Brokerage Account
An arrangement between an investor and a licensed firm which will allow the investor to deposit money with the firm and buy investments.
In layman terms, a brokerage account is an account you set up with a licensed middleman which will allow you to deposit your money and buy investments.
Where can I set this is up?
They are many banks and companies in Singapore which allows you to set up a brokerage account. Here are a few of them:
Step 3: Identify Your Investments
Now that you have the savings to invest and your accounts set up, it’s time to decide what you should invest in. Let’s take a look at the common types of investments:
This is an umbrella term that represents investing in business equity through buying of shares. Stocks can be broken up into two types; common stock and preferred stock.
Preferred stock owners will have higher priority on the company’s assets, this means that when dividends are distributed or when the company goes into liquidity, preferred stock owners will be paid first whereas common stock owners will be only be paid after preferred stock owners if the company liquidates and the board of directors also have the right to decide if they would like to pay dividends to common stock owners.
Check out our other articles if you would like to know more about the different types of stocks available in the market.
Think of it as a form of borrowing, the company that issues bonds will use the money they receive as a loan which they will then pay back over time inclusive of interest.
Bonds can also be purchased through a brokerage, however, the minimum investment is usually between $500 and $1000.
Singapore Savings Bond is a great place to start investing if you’re interested in bonds, it is safe and flexible which makes it great for beginners!
This is for those of you with more money in your hands, real estate is one way to make a lot of money IF you do things right!
How this investment works is that you purchase a residence, through which you rent out to tenants (take note rental prices are on average $15,000 per square metre) and wait for the price changes in the market – this means you have to choose your residence correctly, you want it to be a place of high demand thus increasing it property value.
Pro Tip: Let’s say you are interested in delving into real estate investment but you do not have enough money, consider joining a REIT. A REIT is a company that invests in real estate using the money from investors which saves you all the hassle of having to maintain a property if you were to do it on your own.
Check out our guide to all the REITs in Singapore
Are you ready for it?
On top of stocks, bonds, and real estate, there are so many other things which you can invest in and always remember, high risks = high returns, so be sure to know if you’re up for it
As Benjamin Franklin once said, “An investment in knowledge pays the best returns” so aim to continuously expand your financial knowledge by attending seminars, there are even free lessons hosted by SGX which you can sign up for. On top of that, join a group where you can learn together as well as discuss opinions with the members of the group! 🙂
Check out our blog for more unbiased opinions on your personal finance journey.