Got $50? Here are 3 easy investments to start growing your money and 1 to avoid

Investing needn’t be expensive or difficult. Here’s how you can start investing in Singapore below $100 a month.

SingSaver’s recently concluded survey uncovered some interesting findings. It turns out that Singaporeans of the millennial generation, and their even younger successors (Gen Z), actually pay a great deal of attention to saving and investing.

Across a total of 1,000 responses, 85 per cent of Gen Zs (18 – 23) and 41 per cent of Millennials (24 – 39) reported starting saving as early as age 22.

Even more encouragingly, a whopping 80 per cent reported that they have investments, even if 6 out of 10 respondents professed to having very little knowledge or experience.

Clearly, you young ones are invested in your future (pardon the pun)!

We hear you, and we’re here to help. Here’s a quick-start guide on how you can start investing with as little as $50 a month, covering three easy and popular investments to try – and one you might want to leave to the experts (or until you become one).

Investing is simple, but not necessarily easy

But before we dive in, let’s set the stage.

In itself, investing is simple; you put your money in, the market works its magic, you get back even more money. Rinse, repeat and profit. This works almost universally because in our capitalistic system everything is interconnected in some way or another.

However, because of the complex and obscure nature of some investment products out there, even seasoned veterans and professional traders can get caught off guard and be smacked with unexpected losses (remember the sub-prime mortgage crisis and the resulting 2008 stock-market crash?)

And it’s not just greedy, unchecked Wall Street executives we have to worry about. Sometimes, something pops up out of the blue (like Covid-19) and upends entire market sectors, wiping billions and billions of dollars off the books.

But investing can have good, even great outcomes

The lesson to heed is this: Investing is simple, but success may not come easily. You should never take any investment as a guaranteed win or a done deal. If anyone should tell you this, blue-tick them and run.

ALSO READ: How to buy US stocks in Singapore (2020): 3 best investment brokerages

Having said that, investing is still a good practice, especially if you have a lot of spare cash sitting around, have adequate emergency savings, and very little to no high-interest debt.

At the very least, investing can help you keep pace with inflation, which prevents your money from dwindling in value. More commonly, many people invest to build retirement funds, or to obtain a supplementary income stream.

Easy investments you can start with $50 – $100

#1 Regular premium investment-linked policy (ILP) or endowment plan

ILPs and endowment funds (or plans) are insurance products that may have been marketed as easy ways to invest and grow your money.

Insurance agents who push these plans usually present rows of impressive-looking figures (anything starts to look good if you add enough zeros) with the promise that that could be your bank balance if you sign up.

Emphasis on could be.

What they don’t explicitly tell you is the various admin charges and fees you’re subjected to. (You can – and should – ask for the info directly.) That’s why ILPs and endowments have been heavily criticised for providing poor returns.

Also, you should know what they show you is simply a forecast. There’s no guarantee that your policy will hit those lofty numbers.

More importantly, you’ll need to commit to a long lock-in period (typically 15 years or more) before your policy grows sufficiently in cash value for you to see any real profits. And there are heavy penalties for surrendering the plan early, especially during the initial few years.

Well, then, should I just keep that $50 – $100 spare cash in my wallet?

But that’s not to say that ILPs and endowments are all bad; it’s just that you shouldn’t put your entire investment budget into them. They do, however, have their place in a well-rounded portfolio.

Consider that these are the only types of investments that provide you with insurance cover. Also, the convenience; as they are managed by your insurer, the only action required on your part is to pay your premiums on time.

Ultimately, ILPs and endowments can be cheap and easy ways to start investing, if you are committed to the long term, and could do with the accompanying insurance cover during your investment tenure.

#2 Regular shares savings plans

A Regular Shares Savings Plan (RSSP) is a subscription-type investment plan where you invest a fixed amount into various investments, such as blue-chip shares, ETFs (exchange-traded funds), Unit Trusts or other managed portfolios.

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They are recommended for beginners because they can be started cheaply, from as low as $50 per month.

Other advantages include letting investors invest in the market without having to put up large upfront amounts (stocks and shares typically trade in lots of 100), no lock-in period, and lower management fees.

Also, RSSPs don’t require a CDP securities account, which is needed if you want to start trading stocks and shares on your own.

Currently, there are 4 RSSPs available in Singapore. See below for a summary.

RSSP	Investment amount	Fees and charges
DBS/POSB Invest-Saver	From $100 per month	Monthly sales charge: 0.50 per cent to 0.82 per cent
OCBC Blue Chip Investment Plan	From $100 per month	New customers below 30: 0.88 per cent per transaction (initial $500 per counter) All other customers: 0.3 per cent or $5 per transaction, whichever is higher
FSM One Regular Savings Plan	From $50 per month	0.08 per cent or $1 per transaction
POEMS Share Builders Plan	From $100 per month	$6 (2 or less counters) or $10 (3 or more counters)

#3 Robo-advisors

Another avenue to start investing easily is through robo-advisors, which are investment platforms that are very similar to RSSPs, discussed above. You can choose, too, to invest in Unit Trusts, ETFs, stocks or a combination.

The difference is that with robo-advisers, your investment decisions are guided by a series of algorithms that take into account your goals, preferences and risk appetites.

Also, rather than a per transaction charge, robo-advisors tend to charge a flat yearly management fee, based on the total value of your portfolio.

In this way, robo-advisors offer passive investing via a customised portfolio, combined with the freedom and flexibility to pause, alter or withdraw your investments anytime you choose.

 There are 11 robo-advisors registered in Singapore, but we will only focus on 4 that offer low enough minimum starting amounts. See the below table for a summary.

Robo-advisor	Investment amount	Fees and charges
Syfe	No minimum	$1 to $19,999 – 0.65 per cent p.a.$20,000 to $99,999 – 0.5 per cent p.a.$100,000 onwards – 0.4 per cent p.a.
StashAway	No minimum	0.2 per cent to 0.8 per cent p.a.
UOBAM Invest	$1	$25,000 and below – 0.8 per cent p.a.Above $25,000 – 0.6 per cent p.a.
MoneyOwl	From $50 per month	First $10,000 – 0 per cent p.a.$10,001 to $100,000 – 0.6 per cent p.a.$100,001 onwards – 0.5 per cent p.a.

Penny stocks (approach with caution)

Just like their regular cousin, penny stocks are shares of companies. However, the difference between regular stocks and penny stocks is the size of the company they are based on.

Unlike, say, blue-chip stocks (which are stocks of established, marketing-leading companies), penny stocks have very low market capitalisation (a measure of the total dollar market value of the issued shares).

Correspondingly, penny stocks cost you pennies – literally – from as low as maybe $0.20 per stock.

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Now, as a budding investor with a modest budget, you may think penny stocks are ideal for penniless beginners like you. With their low prices, you could snap up many more shares of a penny stock, where you could hardly afford half a lot of, say, Apple Inc.

But that’s where you would be wrong.

You see, the problem with penny stocks is that because the companies they are attached to are small, there’s greater risk of the company failing. This gives rise to uncertainty, which translates to high volatility.

Now, you should only want volatility in your action movies, but none in your investments. As volatile investments mean while you could make $1 today, you could lose $2 tomorrow.

Yikes, best leave this one to the experienced daredevils with money to burn.

This article was first published in SingSaver.com.sg.