Should a young person invest hard earned savings in stocks in a volatile environment? The answer can be found here: http://money.cnn.com/2011/11/04/pf/expert/young_investors/index.htm?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top+Stories%29
I agree with the advice that money for the long term, e.g. for retirement, should be invested in stocks and that money needed for the short term, e.g. to make down payment for a home or other specific purpose, should be invested in a secure asset, such as an insured bank account.
I agree with the advice that money for the long term, e.g. for retirement, should be invested in stocks and that money needed for the short term, e.g. to make down payment for a home or other specific purpose, should be invested in a secure asset, such as an insured bank account.
If you're a younger person with 25+ years of working and saving ability, then you should go for regular and consistent investments into strong dividend paying blue chips, or broad stock ETFs.
ReplyDeleteMost people are not consistent. When markets drop 30%, they will stop their RSP. After market recovers 30% or 40%, then they re-start their RSP. This will not work, especially for UTs and ETFs --- you may still lose money over 10 years becoz of this behaviour.
Most people hit problems becoz they do not pay attention to having a strong foundation --- emergency savings and adequate insurance. You need 6-12 months of worth of emergency savings before you even think about investment. As for insurance, 99% of people in Singapore buy the wrong types of insurance which are high cost, low cover and give low returns, such as wholelife, endowment and regular ILPs. Just stick to low cost term insurance to cover life and medical, such as Shield plans.
In Singapore, many people are also exposed to jobless risk and over-extended risk due to committing to high-priced property that they can only pay by 30-yr mortgage and using dual-incomes somemore. Especially for those 37+ yr old, high chance of losing job and not able to get another job that pays as well, due to constant influx of younger & cheaper foreigners with degrees and MBAs. If you maxed out your mortgage and other loan quantums and duration, you will be in trouble.