Before You Invest in Stocks, Consider These First

Here are four things to note before investing your money in stocks.

Investing your money in the stock market can be a great way to grow your wealth over time.

On average, the US stock market has returned around 9% per annum. Really enticing, amirite?

However, before you start putting your hard-earned money into stocks, here are four things you should take note of.

1. Pay off all your high-interest debt

First, it is important to pay off high-interest debt, such as credit card debt, which can compound over time and accumulate interest rates as high as 24% per year.

It is financially prudent to clear any loans with interest rates above what the stock market can potentially yield.

Investing in stocks without first paying off high-interest debt can result in a “loss” due to the difference in interest we have to pay on loans and the investment returns we get from stocks.

2. Get adequate insurance coverage

Secondly, insurance coverage is important to safeguard against unexpected life-altering events such as hospitalisation and critical illness.

Without sufficient insurance protection, we could be forced to liquidate our investments to pay off any hospital bills or other unforeseen expenses, delaying our financial goals.

It is advisable to consult a trusted financial advisor to ensure adequate insurance coverage throughout various life stages.

3. Build up your emergency fund

Thirdly, it is recommended to save at least three to six months of our monthly expenses as an emergency fund. This fund would be useful during unforeseen circumstances such as a job loss.

Those who don’t have a steady income may want to set aside a larger amount than full-time employees.

However, we should avoid stashing too much away into our emergency fund as the “extra” money can be put to better use to get higher returns than a savings account.

4. Have a long-term horizon

Investing in the stock market requires a long-term perspective (and of course, relevant knowledge). Anything less than five years is considered short term in my opinion.

While the stock market rises over the long term (if history is anything to go by), there is too much uncertainty and volatility in stocks in the short run. A drop of 10% or more in any given year would be considered normal.

If you need the money in the next couple of years, it’s better to place it in low-risk instruments like a savings account or Singapore Savings Bonds.

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Investing Course Launch: The Ultimate Singaporean Guide To Stock Market Investing

Everything you need to know to get started investing in 30 minutes or less.

I’ve launched my first investing course 🚀

It’s something I’ve been thinking of doing for a long time.

In just 30 minutes, you will get all the essentials you need to know to start investing in a simple way.

I even touch on the current market condition and how to think about it.

Plain investing knowledge distilled just for you so that you can spend your precious time on things that matter.

Here’s what you will learn from the course: 

✅ Why you need to invest

✅ What investing is not about

✅ Why now is the best time to invest

✅ How to create your winning personal finance system

✅ How to set yourself up for success with your current salary

As a launch special for the first 3 days only…

Grab hold of the course at an insanely low price of just $19.99 with the discount code “Launch60off”.

Which is 60% off the $49.99 normal price.

How to Begin Your Investment Journey?

A handy guide to starting investing in Singapore.

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Investing is a journey, not a day trip, so we need to prepare ourselves for the long haul.

In our previous article, ‘What are REITs? Are they just for retirees?’, we covered some key characteristics of a REIT.

In this article, we will be sharing how to start investing. Here are some questions individuals should ask themselves before investing:

  • Have I already set aside a rainy-day fund? (About six months‘ worth of living expenses is a good gauge.)
  • Am I making my money work hard enough for me to beat inflation?
  • What is my investment horizon; can I set aside some money to invest?

Investing should not be a daunting affair or complex matter. In this article, we want to provide some easy steps on how to start investing.

Open either a CDP account or custodian account

If you are located in Singapore, you need either a Central Depository (CDP) account or Custodian account before you can invest.

A CDP account, which is operated by the Singapore Exchange (SGX), acts as a safe for all your stocks and bonds purchased. Every time you invest in stocks and bonds, they are deposited into your personal CDP account. The advantage of going for a CDP account is that you are the legal owner of the stock you purchase and will enjoy direct interaction with the company (e.g., receiving invites to the annual general meetings, entitlement to voting rights, etc). However, the CDP clearing fee and SGX trading fee are slightly higher compared to custodian fees.

Setting up a CDP account:

  • Ensure you have a bank account with a local bank.
  • Apply for your CDP account here. If you have these information and supporting documents ready on hand, the process will just take approximately 15 minutes.
  • Once you have opened your CDP account, you can log in to the SGX Investor Portal via SingPass to view your stock portfolio and account statements.

Conversely, if you want to invest in overseas stocks, you will have to go for a custodian account instead, as the option of storing investments in CDP accounts is only applicable for Singapore-listed securities. Custodian fees tend to be lower than CDP and SGX clearing and trading fees, and custodians will help to pass on communication from the company to investors while representing them at AGMs and other investor meetings.

A number of brokerages today operate on a custodial basis. This means that the broker will own the shares on behalf of investors. Some examples of such brokers include moomoo, Tiger Brokers, Interactive Brokers, Saxo, Standard Chartered and FSMOne.

Open Your Brokerage Account

A brokerage account allows you to buy and sell investment products such as stocks, REITs, exchange-traded funds (ETFs) and certain bonds.

When selecting your brokerage, consider the following:

  • Market access

Does it allow you to invest in foreign exchanges? If you are looking to invest in overseas stocks, this would be a key factor of consideration.

  • Trading/Commission fees

How do they compare in terms of minimum fees and trading fees? Here is a helpful comparison of brokerage fees compiled by SingSaver. Also consider which brokerage type would suit your needs best – cash accounts, pre-funded accounts, or broker-assisted trading accounts?

Other factors to consider when choosing your brokerage account include the user-friendliness of the web/mobile app interface, availability of useful charting tools, speed of live information, and access to analyst reports and other investor education resources.

There is no limit to how many brokerage accounts you can have with different brokerage houses, so it is possible to test several before settling on one as your primary account.

In the next article, we will discuss the importance of portfolio diversification, and how you can go about doing so.


This article first ran on Manulife US REIT’s thought leadership column, Viewpoints, which publishes regular content on the U.S. economy and the office sector. The article has been re-published here with permission.

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