In this recap series of The Future Is Female conference 2017, we delve into one of the panels, Investing 101: Starting Your Investments
“I grew up with parents who constantly drilled in the importance of saving, and I did just that when I started working, habitually putting aside part of my salary in the bank. At age 30, I started to wonder if there was a better way to grow my money since the interest rate in saving accounts is quite small. I realised then, that I was not as financially literate as I thought I was!” shared Michelle Katics, CEO & Founder of Portfolio Quest and moderator of the session.
“If any of you in the audience find yourself in the same spot as I was then, this panel will help you learn how to create a comfortable future without having to sacrifice or do too much,” she continued before directing the floor to Dr Koh Noi Eng, Director of the Centre for Financial Literacy at the National Institute of Education (NIE) and Nanyang Technological University (NTU).
Dr Koh started the discussion on first investment with three acronyms – SMS.
Save, Manage and Share
“Save habitually, Manage wisely, Share,” she explained. “You need to understand why you are saving. How are you going to do it, and what are you going to do with the money you’ve saved? If you are like how Michelle was and have been saving habitually, the next step is to learn how to manage your finances wisely. After which, when you’ve successfully learnt and taken good steps to grow your savings, I encourage you to share. Share your investments with your family, share your knowledge with your friends.”
She stressed that having a personal reason to save habitually is important because it will play a role in goal setting and financial management. Women often work hard to care for their family and provide a comfortable lifestyle. Thus, this goal will serve as a great motivator when sacrifices are called for.
Research to Form Your Own Opinions
Many panellists including Dr Koh emphasised the importance of research and developing one’s own opinions when it comes to money management.
“You are going to hear a lot from panellists, and you are going to read a lot on the internet. Be very clear of your goals when you form your research so that when you are ready to invest, you can make firm decisions. That way you can have a peace of mind as you watch your hard-earned savings grow.” -Dr Koh Noi Eng
Andy Lim of JL Family Law was quick to joke, “Don’t worry about what the investment managers tell you. They don’t really know anything at all!”
He recalled his recent experience in calling out the predicted currency rate by investment managers between the US dollar to Japanese Yen back in 2015. At that point of time, his investment managers, who were also his friends, had predicted a weakened exchange rate of 1USD to 1.30 Yen. Instead of weakening as predicted, the yen strengthened and his skepticism was right. His friends later claimed that the fundamentals had changed since their last prediction so the claim was invalid.
Invest for Long-term Goals
Cedric Chehab, Head of Asia Research at BMI Research took the opportunity to set perspectives right. He cautioned that investing is not the way to make a quick buck.
“As a retail investor (anyone who invests independently), you are bound to make a few mistakes. Know your comfort label before you start to invest. Like Dr Koh has mentioned, save habitually. Some of them can go into cash savings, some can go into equities, and some can go into bonds. Invest in the general stuff that you are comfortable in. Obviously, there will be volatility, but a dollar averaging what you’re investing, provided it is in blue chips and exchange-traded funds (national companies, banks and large multinational companies that have proven to be able to survive through financial storms), over a few years will be compounded to produce an average of 8% in earnings per year. Remember, investing is not a get rich quick scheme.”
Andy expanded on Cedric’s point by sharing the example of his wife who knew very little about investments. With the knowledge of real estate gleaned from him and his family, coupled together with her own research, she gained the confidence to invest in some real estate (REITs). By investing a steady amount every quarter regardless of dividends, she managed to gain about 150% of what she has since invested!
“She didn’t put too much effort into her investment. She made sure to keep her knowledge of the real estate companies she invested in up to date, checked the stock every couple of days and read up on the trends within the real estate investment scene. With these simple steps, she has grown her savings beyond what the ordinary bank savings account offers. So you see, investing is not complicated. Just don’t go too crazy.”
Furthermore, Dr Koh likened the experience of investing to shopping.
“A good rule of thumb when shopping for stocks is to go for the 80-20 rule. Invest 80% strategically – in reliable blue chips, exchange-traded funds and bonds. The other 20% can be invested in an initial public offering (IPO). When you hear or read that the market is down, do some shopping. Check the stock market occasionally to see if your investment is growing. Just like how we purchase items that make us happy, invest in what you’re comfortable with so you can sleep at night,” she suggested.
Michelle zeroed in on the one question that was on everybody’s mind.
“So how do we start to invest?”
How to Start Investing
“The worst thing is to invest blindly. A couple of years later you might not know where your money is and your returns are negligible. First, assess your comfort level. How much are you willing to put aside to invest monthly, and how much can you afford to lose?” -Keir, CEO and Founder of Smartly.
“If you’ve done your research and you’ve assessed your comfort level, the next step is to decide how you would like to go about investing. Do you want to be an active or passive investor?” he continued.
An active investor is one who invests directly with no middle man. He or she should regularly observe the stock market and decide to continue to buy or to sell volatile stocks. A passive investor can either approach the banks or an investment manager to discuss his or her interests before engaging their services.
When it comes to passive investing, Keir warned that it is the investor’s job to ask the right questions.
“When sitting down with a potential investment manager, ask these questions – how much are you going to gain in dividends? How fast can you start to see your money growing? Do you have to pay anything upfront? Are there any sales charges? Can you trust your investor? Are you comfortable with him or her enough to afford the monthly commission?”
It is time to start investing when you have all the questions answered and researched thoroughly.
Keir described investing as an exercise routine.
“It’s hard work, but it gets you the results if you do it right and consistently. Always keep updated and check the stock trading index (STI). Do not be complacent and leave it to your investment manager to update you. Just like how you regularly exercise to achieve a better physic, you do the same check-ins for your investment to ensure positive returns in the future.”
At the end of the discussion, Andy summed up the panel with one question:
“What’s your market edge? A good way is to focus on the industry you’ve build a career in, or the activities you love to do. Do your own research online and physically where possible. Once you’re confident, go ahead.”
Edited by Joanne Ng
She was nominated and selected for FORTUNE Most Powerful Women conference in 2016 (Asia) and 2015 (San Francisco, Next Gen).
Anna has 10 years of experience in the financial sector and is currently a Director in Tera Capital. Her previous work experience includes positions at Citigroup, United Overseas Bank, a regional role in Business Monitor and a boutique private equity firm based in Shanghai. She graduated from Singapore Management University (Finance and Quantitative Finance).