Stock market investment is a reliable tool to increase your income. You can do it quickly alongside your fixed monthly income, but you may also face some hiccups.
Unfortunately, there’s a fine line between booming success and huge losses.
So, to avoid wasting your money, read more about the stock market. In this article, we’ll discuss the pros and cons, plus how to start investing.
Stock Market Investment: Advantages
Most people would invest in the Singapore stock market or the US stock market. Let’s start with the good things about stock market investment in Singapore.
1. Considerable Returns
The stock market is the fastest way to get ahold of considerable returns compared to other investments. It’s as easy as putting a small-moderate amount of money in a fast-growing business, then selling those stocks when their price increases.
However, you have to understand how companies work. Some seem glorious because they are; others are just like supernovas: brilliant because they’re facing their deaths.
Of course, you don’t have to sell stocks the same day you’ve bought them. You can wait a while until you’re most satisfied you’re making a good trade.
2. High Liquidity
It’s always best to have quick liquidity because emergencies happen and mess with your life. So, it’s not wise to tie all of your money into real estate or fixed deposits.
That’s the good news with stocks:
You can sell them at any time to get quick cash for urgent personal problems. If you have an online account, all you have to do is click the “sell” button. If you need money urgently,get a fast cash loan from Credit 21, you can also the top licensed moneylender in Singapore.
3. Easy Purchase
It’s easy to start purchasing your stocks. We’ll tell you more about it below, but the bottom line is that you need to create a stock trading account where you pick and purchase the stocks you want.
That takes just a few minutes. Although, these few minutes are based on hours of research. So what’s the alternative if you don’t know how to start.
Contact a broker or a financial planner. Most have low rates so that you can invest in the stock market relatively safely and affordably through them.
Make sure to have your savings plan and emergency funds in place before you embark on your stock investment journey!
4. Perpetual Ownership
The stock market offers perpetual ownership, which means you’re the owner until that company disappears or until you decide to sell your stocks.
Why is that important?
The advantage here is that nobody hurries you; you decide what sort of investor you want to be. Some people prefer buying stocks and selling them quickly for fast profits. Others think this strategy is too risky, so they prefer to invest in slow-growing but sure stocks they’ll keep for decades.
That means you have long-term opportunities for things like retirement or helping your kids through college.
5. Easy Diversification
Diversification is crucial if you want to keep your risks low. If you have more funds and are younger, you will likely follow a high or medium-risk strategy. However, you’re more likely to prefer a low-risk investment strategy if you’re budget-conscious and past your prime.
Or at least those are the official statistics.
Anyway, most financial experts advise clients to minimise their risks, even if they have a higher risk appetite. Luckily, the stock market is very diverse. For example, some investors will put some of their assets in gold investment.
That means you need just one trading account to purchase stocks from different industries and sectors. Plus, you’ve no limit other than your capital when you decide to invest in the Singapore stock market.
Cons Of Stock Market Disadvantages
Now that you’ve seen the pros of stock market investment, you should be prepared for the dangers as well.
1. Lengthy Research
You need hours – or maybe even tens of hours – of research before you start investing. Sure, some people have a sixth sense when it comes to stock market investments. However, those people are highly literate, so they can subconsciously anticipate trends even at first glance.
So it’s less about luck than it is about expertise in related fields.
If you’re a newbie, you have to dedicate your time comparing companies, finding out more about their backgrounds, and analysing their past trajectories. You also have to read a lot of finance and history to make the proper evaluations.
Take the COVID-19 crisis, for example. Experts anticipated a significant health crisis for years, but just a handful of people were prepared to tackle it. Even so, few people knew how to invest wisely in the stock market weeks or months into this crisis.
Those people who knew where to place their money have one advantage: They see opportunity at every step, and they read a lot.
2. Prepare For Loss
There is no foolproof plan.
As a beginner, you’ll make many mistakes. That’s what beginners do, regardless of their area of work, and you have to accept that.
For example, you’ll:
- Choose the wrong sectors or businesses
- Focus on unprofitable industries
- Buy too high
- Sell too low
- Miss profits because you didn’t stay updated to the stock market fluctuations
- Give in to FOMO
So, to minimise the effects of your mistakes, follow these two principles:
- Diversify your portfolio as much as possible.
- Never invest more in the stock market than you’re willing – and able – to lose.
At the same time, be wary of investment scams. Millions have been lost to these scams since investments became a trend.
How Do You Invest In The Singapore Stock Market?
If you want to start investing in the Singapore stock market, SGX is an excellent place to start, providing you with plenty of resources.
So, here are the steps you’ll have to take:
1. Consider Different Investment Products
- You earn a profit when you receive dividends.
- You can sell these stocks when the price of your shares increases.
- Shareholders have voting rights.
- Shareholders have limited liability.
- They’re very stable and sure.
- They don’t grow fast, but they offer significant dividends.
- Singaporean blue chips include companies like Singtel, Keppel, and DBS.
- They’re best for rapid diversification because each investment already contains a widely diversified portfolio.
- It’s cheaper to invest in ETFs than actively managed funds.
- You can access a wide range of markets and asset classes.
- In Singapore, the safest bets include Strait Times Index ETF and ABF Singapore Bond Index Fund.
Real Estate Investment Trust (REIT)
- These are professionally managed.
- You get regular revenues from rent.
- REITs are particularly diversified.
- These investments have high liquidity.
2. Get Started
Now that you’ve decided how to start investing in the stock market, it’s time to take action. It all begins with these two mandatory accounts:
- The CDP Account: This is where you’ll keep your stocks. Read how you can open a CDP account in Singapore here.
- The Trading Account: Choose a brokerage and open a trading account. This account allows you to buy and sell the stocks you want. Of course, you can open several such Trading Accounts with different brokerage agencies in Singapore.
To open these accounts, you’ll need:
- Be at least 18 years old
- Not be an undischarged bankrupt
- Proof of identity: ID card/ passport
- Proof of address: bank statement/ utility bill
If you’re a Singaporean living in another country, you can open a CDP account online.
Of course, you have to choose our brokers first:
- Broker-assisted services are best for newbie investors because you’ll receive a lot of expert assistance and will answer all of your questions.
- Online trading platforms are best if you want to research by yourself and so make your own trades.
The factors to consider before choosing a brokerage or broker include:
- Your age: although the minimum age for stock market investments is 18, some brokerage may impose a minimum age of 21 years old.
- The broker’s location: Location is vital if you want to meet with that broker or participate in their firm’s seminars.
- Online/ mobile platforms: These platforms allow you to do your transactions and if that’s what you want, check your broker’s platform. This website must be user-friendly, especially if you’re a beginner, so ask your broker to show you how it works. Online/ mobile platforms allow you to sell and buy stocks even while commuting to work or travelling, so ensure the platform features a convenient app and timely alerts.
- Access to products: Make sure your broker has all the products you’re interested in.
- Research and resources: If you want to narrow down your investment opportunities, ensure your broker has access to research reports. Alternatively, if financial education is essential for you, check if that broker offers seminars or workshops.
- Customer service: Depending on how hands-on you want your broker to be, check if their schedule fits your demands. Also, read other customer reviews online to see if the broker is user-friendly.
3. Fund Your Account
To start trading, you’ll need to add money to your trading account. Some brokerages may require a minimum sum, so make sure you have that.
Brokers in Singapore allow you to fund your account with:
- Internet banking
- Abroad remittance, through services such as TransferWise
4. Buy Your Shares
If you decide which shares to buy, investing in the stock market will take you about two whole minutes now. If not, here are two strategies to consider:
- Dollar-cost averaging: Invest in a generic ETF like the STI. This ETF is very steady and safe, so all you need is to invest a small sum monthly. This strategy is best for beginners because it forms an investing habit.
- Diversify your portfolio: Make a selection of the securities we’ve discussed in the first section, but make sure your portfolio is relatively safe if you’re a beginner. Of course, make sure you’re getting a reasonable price.
So, investing in the stock market is a relatively safe and quick way of obtaining more cash. The problem is you need to have enough funds to start trading.
Remember to clear your credit card debts before you dive into investments. Credit card debts are lethal in the long run due to their high interest rates. If you need a loan to clear your credit card debt, you can get one at low interest rates and flexible loan tenures with Credit 21!