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Saturday, January 17, 2015

Reasons To Start Investing In 2015



1. Start Young


When it comes to investing, i cannot stress the importance of starting young. With time on your side, the tolerance for risk is generally more acceptable. Unfortunately, many Singaporeans tend to do the exact opposite. During the latter years of their lives, instead of adopting a lower risk profile, many people are investing heavily into the stock markets or into investment products that are riskier. Instead of making up for lost time, some people make hasty mistakes and lose a good portion of the money which was meant for retirement!

The simple fact is that if you start saving early, you will likely be able to save more and even reinvest your gains for further income (link). If you dream to have a million dollars by retirement, you're much more likely to reach that goal if you have been consistently adding to your investment over 20 years as compared to a period of 5 years.


2. Lower Lot Sizes


Come January 19th 2015, SGX will be implementing lot sizes of 100. What this means is that investors would be able to buy shares of a company from as little as 100 shares (per lot). The consequence would be that large capitalized companies would now be more 'affordable' to the investors on the street. 

With the new rules, the average investor can now afford to buy shares in Blue-Chip stocks like UOB or DBS with as little as 3000$. 

For Example: Investing in one lot of UOB shares would have cost you about $23,000 (United Overseas Bank Ltd (U11.SI)16th JAN). From Jan 19th, with a minimum lot size of 100, you could easily invest in UOB with as little as $2,300. This allows you to accumulate a variety of stocks in your portfolio, which was previously unaffordable.

3. Costs Of Living (Inflation)




Starting a family is one of the major decisions that young adults like myself would have to face. The costs of living related to future expenses such as baby products, childcare and university education can seriously impair your retirement plans.


Whilst i won't go into the details regarding the costs to raise a child (Here is an interesting article by MoneySmart for reference). Raising a child in Singapore is by no means an easy feat. If we were to include the costs of tuition and extra-curricular activities such as piano lessons, the costs can easily balloon upwards of 300,000$.


Just imagine these costs increasing based on the average 2-3% inflation rate in Singapore each year. Without a proper investment portfolio or financial planning, our savings will simply be eroded!




Summary

The benefits of starting to save and invest early are simply astounding. Having time on your side and investing your savings in a smart manner is the basic recipe for financial success. 

By investing, you are essentially putting the spare cash to work. Whether you invest in Stocks, Bonds, Real Estate Investment Trusts, or any combination thereof, the objective is the same: to make investments that will generate more cash for you in the future. 

Whether your goal is to send your children to university or to retire in the Bahamas (or Bali), investing early is essential to achieving your financial objectives.