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How do I start investing?

I have written articles to cover basic investment topics and to my best attempt to help more beginners to get their feet wet in investing. However, I still get questions about the articles being slightly too complex and abstract to understand.

Therefore, to simplify matters, I will be explaining how to go about in starting your investment journey step by step.

How do I really get started in investing?

1) Set up your brokerage and CDP accounts.

The very first step you should take is to set up your brokerage account and a Central Depository account (CDP).

To set up a brokerage account suitable for your needs, compare their features such as commission fees, availability of customer support etc. Lucky for you, I have done the extensive research for sharing here. Take a look at which kind of brokerage account you would like to set up, fill up a simple form and the trading representative will get in touch with you very soon.

 

2) Time to structure your finances.

If you haven’t had the time to look at your finances, this is a great time. You need to first ask yourself what are your current financial commitments before you decide how much you need to put into investments. This will include your emergency funds, monthly expenses and insurance.

I do believe that by rule of thumb, we should put a percentage equivalent to our age into safe investments and the rest of it into risky investments. For example, you are 20 years old, you should put 20% of your entire assets into safe investments like fixed deposit, insurance and bonds etc, while 80% will go to riskier investments like stocks, REITs etc. This is to simplify asset allocation for your wealth. By using your age as a gauge, you are therefore encouraged to take more risks when you are young and protect your asset as you get older. That being said, you should still structure your finances to what you are comfortable with and according to your goals.

For beginners, you could start with exchange traded funds (ETFs). It is one of the easiest investment tools to monitor and start your investment journey with such as the Straits Times Index (STI). STI is a capitalization weighted basket of the top 30 companies listed on the Singapore Exchange and generally has smaller fluctuations. Therefore, it does not require that much monitoring compared to that of a stock.

 

To decide which kind of investor you are, you could consider:

– How much time could you spend researching about investment ideas, new opportunities etc?

– How much experience or knowledge do you have about investments?

– How much risk are you willing to take? (Do remember high risk, high returns, high losses and vice versa)

Take this quiz to find out which investment style suits you.

 

3) The Learning Journey of Investing

As beginners, the learning curve tends to be steep initially as there are so many techniques, jargon and calculations to understand. But do press on as the journey will get smoother as you accumulate more experienced.

Decide which style you like better.

Fundamental Analysis (FA) – looking at companies’ background, calculating valuations, reading news etc

Technical Analysis (TA) – looking at chart patterns, recognizing trends etc

Personally, a combination of both styles works the best for me. I would recognize an undervalued company then apply technical analysis to determine when is the best time to enter the market.

There are many resources out there which educates you on how to go about learning fundamental analysis and technical analysis. Here are some of the resources I have previously used while getting my hands dirty with investments:

Technical Analysis

http://www.investopedia.com/university/technical/

http://stockcharts.com/school/doku.php?id=chart_school

 

Fundamental Analysis

http://www.investopedia.com/university/value-investing/value-investing3.asp

beginnerhow to start investinginvesting

FP • September 30, 2017


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