The best investment options for beginners in Singapore

Are you a new or potential new investor debating whether to take your first steps into the stock market? Investing is a critical component of personal finance, and it’s essential to start early to make the most of the power of compounding. 

However, for beginners in Singapore, it can be daunting to choose the right investment options. With a wide range of investment products available, selecting the ones that provide the best returns while minimising risks can be extremely challenging amidst the upcoming recession. 

You do not need a lot to start investing. In fact, you can simply allocate $1,000 to kickstart your investment journey. In this blog post, we will discuss the best investment options for beginners in Singapore in more detail and provide tips on how to get started. 

Singapore Savings Bonds (SSBs)

Singapore Savings Bonds (SSBs) are issued by the Singapore government and offer a low-risk investment option with stable returns. SSBs provide a risk-free return that is higher than that of savings accounts, making them an attractive option for beginners who want to start investing without taking on too much risk. Bonds are better suited for risk-averse investors. For most investors, diversifying portfolios with a combination of stocks and bonds is the best path toward achieving risk-mitigated investment returns.

SSBs have a minimum investment amount of SGD 500, and you can purchase SSBs through Automated Teller Machine (ATM) or online banking platforms such as DBS, OCBC, or UOB. The bonds have a fixed interest rate, and the longer you hold them, the higher the interest rate becomes. SSBs are also highly liquid, which means you can redeem them at any time without any penalty. 

As a young adult in Singapore, I do not invest in SSBs. I find that bonds do not deliver competitive returns as compared to other investment instruments. For long-term investors and beginners, I would highly recommend SSBs as they lower overall risk and volatility.

Exchange Traded Funds (ETFs)

Exchange Traded Funds (ETFs) are a type of investment that allows you to buy shares of an entire market or index, such as the Straits Times Index (STI). Essentially, it is a basket of securities which gives you exposure to large market sectors without stock picking. ETFs are a cost-effective way to diversify your portfolio and spread your risk across different stocks or sectors.

One of the benefits of ETFs is that they are traded on stock exchanges like individual stocks, which means you can buy and sell them throughout the day. ETFs are also relatively easy to understand, making them an excellent option for beginners who are just starting to invest.

However, it’s essential to choose an ETF that aligns with your investment goals and risk tolerance. Some ETFs may have higher risks than others, so it’s essential to research and understand the ETFs you are considering investing in. 

I am a huge lover of ETFs. In fact, if I could redo my entire investment journey, I would definitely start off with buying an ETF. To a beginner, buying an ETF gives me exposure to the entire market such as S&P 500. When the S&P 500 market performs well, it enables me with competitive returns without the hassle of buying different individual stocks. 

Robo-advisors

Robo-advisors are online platforms that use algorithms to create and manage investment portfolios for their clients. They offer a convenient and affordable way for beginners to invest in the stock market without having to do extensive research or manage their investments actively.

Robo-advisors typically ask clients to complete a questionnaire to determine their risk tolerance, investment goals, and investment horizon. Based on this information, the robo-advisor creates a diversified investment portfolio tailored to the client’s needs.

Some popular robo-advisor platforms in Singapore include StashAway, Syfe, and Kristal.AI. 

However, it’s essential to research the fees and investment strategies of the different robo-advisors to choose the one that best suits your investment goals and risk tolerance.

Having invested in both StashAway and Syfe, I would highly recommend them to a beginner. The simplistic design and mechanism allows the everyday beginner in Singapore to get started in investment almost instantly. Most robo-advisor platforms also share additional investment resources to help beginners get familiar with the investment world. 

Blue Chip Stocks

Blue chip stocks are shares of companies with a reputation for stable earnings and high-quality management. These companies are usually market leaders in their industries and have a long history of paying dividends to their shareholders. Some examples of blue chip stocks are IBM Corp, Coca-Cola Co and McDonald’s Corp.

Investing in blue chip stocks can be a good way to generate long-term returns and build a diversified portfolio. While a blue chip company may have weathered several challenges and market cycles, making it a safe investment, this is not always the case. Silicon Valley Bank, a well capitalised institution, collapsed within 48 hours. Even the best company may struggle during times of extreme stress. It’s essential to conduct thorough research on the companies you want to invest in and understand the risks involved. 

Tips for Investing as a Beginner

• Start small and diversify your portfolio: Diversification is key to reducing risks and maximising returns. It’s advisable to start with a small amount and gradually increase your investment over time.
• Be patient and stay invested for the long-term: Investing is a long-term game, and it’s essential to stay invested through market ups and downs to reap the benefits of compounding.
• Educate yourself and stay up-to-date on market trends: Keep yourself informed about the latest investment

In conclusion, investing can be a great way to grow your wealth and achieve your financial goals. By choosing the right investment options and following the tips outlined in this post, beginners in Singapore can start investing with confidence and build a strong foundation for their financial future.