Many people look for a good return with low risk. As they are not familiar with investing, they rely on a financial adviser. But that is usually a bad approach.
Why?
The financial adviser has to earn a living. They give their advice and earn a commission on the financial product that is sold to the retail investor. The commission and the profit margin of the financial institution reduces the yield of the investor.
Worse, the financial product may instead by risky. The investor could lose a large part of the investment.
Here are some recent examples:
a) The retail investors in the preference shares and perpetual securities could stand to lose nearly 90% of their investment in what was perceived to be a safe investment in a national strategic asset (i.e. desalination plant).
b) Many retail investors bought dual currency investments recommended by bank officers. Some have lost all of their investment - due to leverage, i.e. borrowing money to increase the investment.
What can retail investors invest in safely?
I suggest the following:
a) Buy government bonds and be prepared to accept a yield of around 2%
b) Keep the money in the CPF special account and earn 4% (but the money is locked up for retirement)
c) Invest in the index fund for the long term - and do not worry about the market fluctuation. The risk is reduced through diversification.
To understand more about investing in the index fund, join FISCA as a member and attend the talk on financial planning.
Tan Kin Lian
https://fisca.sg/ArticleDisplay.aspx?ID=630
Why?
The financial adviser has to earn a living. They give their advice and earn a commission on the financial product that is sold to the retail investor. The commission and the profit margin of the financial institution reduces the yield of the investor.
Worse, the financial product may instead by risky. The investor could lose a large part of the investment.
Here are some recent examples:
a) The retail investors in the preference shares and perpetual securities could stand to lose nearly 90% of their investment in what was perceived to be a safe investment in a national strategic asset (i.e. desalination plant).
b) Many retail investors bought dual currency investments recommended by bank officers. Some have lost all of their investment - due to leverage, i.e. borrowing money to increase the investment.
What can retail investors invest in safely?
I suggest the following:
a) Buy government bonds and be prepared to accept a yield of around 2%
b) Keep the money in the CPF special account and earn 4% (but the money is locked up for retirement)
c) Invest in the index fund for the long term - and do not worry about the market fluctuation. The risk is reduced through diversification.
To understand more about investing in the index fund, join FISCA as a member and attend the talk on financial planning.
Tan Kin Lian
https://fisca.sg/ArticleDisplay.aspx?ID=630
1 comment:
For the new investor, also invest in the mother share of stock exchanges,
like the SGX, the Bursa, when market in correction mood.
Easier to monitor your investment, easier to average out too.
Better stay out individual stocks, you can't beat the big boys, notice the SGX stocks are largely not worth investing, very few high quality stocks left, as compared to Bursa and Hongkong.
Also stay out of the Dow Jones now, beating record indexes dun mean investors are piling in, the stocks are all pushed up by listed Corporations, flushed with cash from lower taxes last year, so they have huge share buy backs for their own Companies, thanks to Trump.
The Dow is in its 10th year bull run since 2008, not worth the risk to take chances.
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