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26-08-2012, 09:36 AM
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The Straits Times
www.straitstimes.com
Published on Aug 26, 2012
Starting work? Time to think of retirement
Young working adults should consider getting a head start on saving and investment
By Magdalen Ng
A fresh batch of eager young adults is just entering the workforce, after the three local universities held their commencement ceremonies recently.
In the weeks ahead, many of them will be receiving their first pay cheques. How to spend the money? New clothes, a holiday or perhaps a nice meal out for the family?
But there is one somewhat less glamorous item that should also certainly feature on that list: setting aside funds for investment.
Time is every investor's best friend, because the more time an investor has, the more options are available to him. So while retirement or planning for a child's tertiary education may seem light years away, there is certainly no harm in starting early.
For those taking their first steps into the world of investments, things may seem confusing, and they probably are. For others, forking out the initial sum of capital may be daunting as well.
Investment requires financial literacy, a well-thought-out strategy, and discipline to execute it.
Insurance agent Bernard Lin, 27, has zero investments, except some investment-linked insurance policies, but hopes to be able to invest soon. He is trying to amass a sum of capital before he starts.
Mr Brandon Lam, senior vice-president and head of investment and treasury products at DBS Bank, explained that each person's human capital - or ability to generate income - diminishes over time.
He said: "An early head start in saving or investing for retirement is important. If you start earlier, there is a greater probability of meeting your lifestyle needs when you retire."
How much money do I need to start investing?
Ideally, Mr Lam recommends that working adults save from 15 per cent to 35 per cent of their monthly income, depending on lifestyle requirements and existing financial commitments.
He added: "A good rule of thumb would be to invest 30 to 50 per cent of your savings in a diversified portfolio that suits your risk profile."
However, Mr David Gerald, president and chief executive of the Securities Investors Association Singapore (Sias), also advised that it is good practice to set aside six months of savings for emergency use, and also to cover any insurance needs first.
So just how much do you need to make your first plunge into the stock market?
At last Friday's closing price, it would cost $3,590 to buy one lot of StarHub shares, or $3,060 for CapitaLand shares - two of the best performing large-cap companies on the local bourse in the year to date. Assuming you put aside $400 a month, buying your first lot of shares would be just a few months away.
Phillip Securities also offers the Share Builders Plan - which allows investors to buy small amounts of shares for a minimum of $100 a month.
For example, an investor can choose to invest $200 a month, to be split into $100 worth of DBS Group Holdings shares and $100 worth of Keppel Corp shares. The mix of shares can be changed, and the shares can be sold at any time. Phillip Securities will arrange for the shares to be sold on the odd-lot market.
Are my savings considered investments too?
It is essential not to confuse saving with investing. Savings are important and necessary to provide a comfortable cash buffer, but they tend to be a losing investment.
Bank deposit interest rates are at an all-time low, while the consumer price index for last month, as released by the Department of Statistics last Thursday, was 4 per cent. This means that money sitting idly in a bank account will be slowly but surely whittled away by inflation.
How do I start?
OCBC Bank offers a Young Investor Pack (YIP) programme, targeted at young investors aged between 18 and 29.
For investors below 21, the YIP provides them with access to a pre-trading account that allows them usage of all the services and resources such as a stock watchlist, charting tools and research reports.
DBS Bank also offers various finance-related workshops through the DBS Remix platform. New investors can learn more about specific investment vehicles and how to manage one's finances properly.
"Such programmes are often complimentary, and designed to give young adults the skills and knowledge to save, protect and grow their wealth," said Mr Lam.
The Singapore Exchange (SGX) also conducts regular educational programmes for investors. This week, the SGX, together with Sias, will hold the inaugural Singapore Investment Week 2012.
Lasting till Friday, members of the public can learn more about investing through seminars, online videos and radio programmes.
The SGX will be running an online investment competition, StockWhiz, which may be a good opportunity for amateur investors to familiarise themselves with a stock trading environment.
----------------------
Common mistakes you should avoid
Mr Gerald cautions that young investors may make the mistake of borrowing to invest, and rushing into it without adequate knowledge.
With a longer-term investment horizon, there is also no need to rush to sell even if the share prices fall, because you have the ability to wait out the downturn.
Mr Tan recommends that investors avoid taking on investments bigger than their risk appetites, and blindly following advice without adequate understanding of the mechanics and risks associated with the investment.
"New investors should also recognise that stock investments come with the possibility of losses," he said.
songyuan@sph.com.sg
-----------------
Young investor bounces back
It was a lifestyle seminar that led student Andrew Heng to start investing three years ago at the age of 21.
The seminar showed him that trading could generate passive income. It also showed him that he had to invest to achieve his financial goals.
Mr Heng, now 24, started a forex trading account with $2,000 and made some money in the first few months.
But the third-year student majoring in finance at the National University of Singapore (NUS) said he was "overcome by greed" and lost all his money.
"I started to feel like I could do better and traded bigger lots. I became almost obsessed, checking the markets every 10 minutes. I ignored all the rules that I set for myself," he said.
"It was a painful experience. Imagine growing the money in your account and seeing it disappear the next day."
He now spends about one hour in the morning and one hour at night monitoring the markets and his portfolio of equities, commodities and currencies.
His investments have grown into a five-digit sum, which he declined to reveal.
Mr Heng, who is also the research director of the NUS Students' Investment Society, has some advice for new investors.
"You need money to make money. I worked a few jobs and saved really hard for my initial capital. But don't invest all of your life savings."
He also recommends setting an annual target rate of return that one hopes to achieve. This will provide a goal and hopefully the discipline to cut losses at a level one is comfortable with.
He added: "You also have to be able to stomach the losses. Sometimes, even when we think we can withstand certain risks, it feels different when we actually make a loss.
"A market won't stay low forever, but similarly, it won't remain high forever."
Magdalen Ng
The Straits Times
www.straitstimes.com
Published on Aug 26, 2012
Starting work? Time to think of retirement
Young working adults should consider getting a head start on saving and investment
By Magdalen Ng
A fresh batch of eager young adults is just entering the workforce, after the three local universities held their commencement ceremonies recently.
In the weeks ahead, many of them will be receiving their first pay cheques. How to spend the money? New clothes, a holiday or perhaps a nice meal out for the family?
But there is one somewhat less glamorous item that should also certainly feature on that list: setting aside funds for investment.
Time is every investor's best friend, because the more time an investor has, the more options are available to him. So while retirement or planning for a child's tertiary education may seem light years away, there is certainly no harm in starting early.
For those taking their first steps into the world of investments, things may seem confusing, and they probably are. For others, forking out the initial sum of capital may be daunting as well.
Investment requires financial literacy, a well-thought-out strategy, and discipline to execute it.
Insurance agent Bernard Lin, 27, has zero investments, except some investment-linked insurance policies, but hopes to be able to invest soon. He is trying to amass a sum of capital before he starts.
Mr Brandon Lam, senior vice-president and head of investment and treasury products at DBS Bank, explained that each person's human capital - or ability to generate income - diminishes over time.
He said: "An early head start in saving or investing for retirement is important. If you start earlier, there is a greater probability of meeting your lifestyle needs when you retire."
How much money do I need to start investing?
Ideally, Mr Lam recommends that working adults save from 15 per cent to 35 per cent of their monthly income, depending on lifestyle requirements and existing financial commitments.
He added: "A good rule of thumb would be to invest 30 to 50 per cent of your savings in a diversified portfolio that suits your risk profile."
However, Mr David Gerald, president and chief executive of the Securities Investors Association Singapore (Sias), also advised that it is good practice to set aside six months of savings for emergency use, and also to cover any insurance needs first.
So just how much do you need to make your first plunge into the stock market?
At last Friday's closing price, it would cost $3,590 to buy one lot of StarHub shares, or $3,060 for CapitaLand shares - two of the best performing large-cap companies on the local bourse in the year to date. Assuming you put aside $400 a month, buying your first lot of shares would be just a few months away.
Phillip Securities also offers the Share Builders Plan - which allows investors to buy small amounts of shares for a minimum of $100 a month.
For example, an investor can choose to invest $200 a month, to be split into $100 worth of DBS Group Holdings shares and $100 worth of Keppel Corp shares. The mix of shares can be changed, and the shares can be sold at any time. Phillip Securities will arrange for the shares to be sold on the odd-lot market.
Are my savings considered investments too?
It is essential not to confuse saving with investing. Savings are important and necessary to provide a comfortable cash buffer, but they tend to be a losing investment.
Bank deposit interest rates are at an all-time low, while the consumer price index for last month, as released by the Department of Statistics last Thursday, was 4 per cent. This means that money sitting idly in a bank account will be slowly but surely whittled away by inflation.
How do I start?
OCBC Bank offers a Young Investor Pack (YIP) programme, targeted at young investors aged between 18 and 29.
For investors below 21, the YIP provides them with access to a pre-trading account that allows them usage of all the services and resources such as a stock watchlist, charting tools and research reports.
DBS Bank also offers various finance-related workshops through the DBS Remix platform. New investors can learn more about specific investment vehicles and how to manage one's finances properly.
"Such programmes are often complimentary, and designed to give young adults the skills and knowledge to save, protect and grow their wealth," said Mr Lam.
The Singapore Exchange (SGX) also conducts regular educational programmes for investors. This week, the SGX, together with Sias, will hold the inaugural Singapore Investment Week 2012.
Lasting till Friday, members of the public can learn more about investing through seminars, online videos and radio programmes.
The SGX will be running an online investment competition, StockWhiz, which may be a good opportunity for amateur investors to familiarise themselves with a stock trading environment.
----------------------
Common mistakes you should avoid
Mr Gerald cautions that young investors may make the mistake of borrowing to invest, and rushing into it without adequate knowledge.
With a longer-term investment horizon, there is also no need to rush to sell even if the share prices fall, because you have the ability to wait out the downturn.
Mr Tan recommends that investors avoid taking on investments bigger than their risk appetites, and blindly following advice without adequate understanding of the mechanics and risks associated with the investment.
"New investors should also recognise that stock investments come with the possibility of losses," he said.
songyuan@sph.com.sg
-----------------
Young investor bounces back
It was a lifestyle seminar that led student Andrew Heng to start investing three years ago at the age of 21.
The seminar showed him that trading could generate passive income. It also showed him that he had to invest to achieve his financial goals.
Mr Heng, now 24, started a forex trading account with $2,000 and made some money in the first few months.
But the third-year student majoring in finance at the National University of Singapore (NUS) said he was "overcome by greed" and lost all his money.
"I started to feel like I could do better and traded bigger lots. I became almost obsessed, checking the markets every 10 minutes. I ignored all the rules that I set for myself," he said.
"It was a painful experience. Imagine growing the money in your account and seeing it disappear the next day."
He now spends about one hour in the morning and one hour at night monitoring the markets and his portfolio of equities, commodities and currencies.
His investments have grown into a five-digit sum, which he declined to reveal.
Mr Heng, who is also the research director of the NUS Students' Investment Society, has some advice for new investors.
"You need money to make money. I worked a few jobs and saved really hard for my initial capital. But don't invest all of your life savings."
He also recommends setting an annual target rate of return that one hopes to achieve. This will provide a goal and hopefully the discipline to cut losses at a level one is comfortable with.
He added: "You also have to be able to stomach the losses. Sometimes, even when we think we can withstand certain risks, it feels different when we actually make a loss.
"A market won't stay low forever, but similarly, it won't remain high forever."
Magdalen Ng
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
