How Much Money Do You Really Need To Start Investing?


Investing is considered a turning point in one's life. After all, few of us would have considered investing for ourselves unless we had gone to business school or taken finance lessons.

Investing is often seen as a costly endeavour. Many of those who don't invest but wish to, said they don't invest because they don't have S$10,000 in savings.

PHOTO SOURCE: Dollars & Sense

To be honest, you don't need much to begin investing. But, since investing is a long-term commitment, and we want you to invest wisely, here are some things you should have before you begin:

  1. An emergency fund;
  2. Insurance plan(s) in place; and
  3. You have a firm hold on your debt.

According to the Chinese proverb, "a thousand miles starts with a single move." Take, for example, the legendary investor Warren Buffett. He is now said to be worth US$84 billion, but his first investment was reportedly just US$228!

Warren Buffett is said to have lost a third of his money just days after making his first investment. When it recovered, he sold the stock for $2 each and profited. The stock went on to grow to US$162 – much to his dismay. As a result, he learned to buy well, buy cheap, and hold.

And so we see, that you don't need a lot of money to start investing. You can start off with as little as $1000, or even $100. Here we give you some tips to help you get started.

1. Make regular, small investments

Normal, small investments have the advantage of not requiring you to time the market. Dollar-cost averaging is a disciplined investment strategy that averages out the cost of shares purchased over time.

More specifically, rather than “timing the market,” you are depending on “time in market.” This is significant because, while good quality stocks have had their ups and downs in the past, their values have proven to trend higher over time. The "time in market" aspect is achieved by remaining invested for a longer period of time.

Timing the market, on the other hand, is a daunting challenge because it entails attempting to predict when stock prices will be at their lowest point. It's impossible for even highly educated practitioners to do this on a regular basis.

2. Use Your CPF

That "excess" can be invested if you have more than S$20,000 in your CPF Ordinary Account (OA). CPF-Special Account (SA) funds may also be invested, but the minimum contribution amount is S$40,000.

Before you invest, make sure you're looking for a higher return than the CPF's guaranteed interest rates of:

- 2.5% for your CPF-OA;
- 4% for your CPF-SA;
- and 1% bonus interest on the first S$60,000 in your CPF account

Always choose the OA over the SA when determining whether to invest with your CPF-OA or CPF-SA. This is because the CPF-OA pays a lower interest rate of 2.5 percent, resulting in a lower return level to "beat."

Open a CPF investment account with an authorised CPF Investment Scheme (CPFIS) agent to begin investing with your CPF funds. You can invest in stocks, unit trusts, and bonds with this account, among other items.

Stocks can account for up to 35% of your "investible savings," while gold can account for up to 10%. The term "investible assets" applies to the contents of your CPF-OA as well as the sum of CPF you've withdrawn for investment and education.

3. Use Your Bonuses

When you get your bonus, you might feel the urge to splurge – there's so much money and so many things to get!

However, if you can avoid the temptation to spend your bonuses on lavish watches or vacations, you can use that money to increase your existing savings and investments.

4. Start Building Your Portfolio As Early On As Possible

Even on a beginner's salary, you will begin to create a diversified, multi-asset class portfolio. That can start with as little as S$1,000, with some help from ad-hoc amounts when you get your bonus or top-up your SRS account.

Your portfolio can include:

- Stocks

- REITs (Real Estate Investment Trusts)

- SSBs (Singapore Savings Bonds)

- ETFs

- Unit Trusts

Apex EP is an authorised group of Financial Adviser representatives from Professional Investment Advisory Services Pte Ltd.