In this recap series of The Future Is Female conference 2017, we delve into one of the panels, Investing In Equities
“There are two ways to manage your investments as a retail investor – passively or actively. It all boils down to the amount of time and the confidence you have, and the hours you’re willing to put into your research.”- Jason Low, Senior Investment Strategist, DBS Bank
A good knowledge of the sector and country that you are planning to invest can help to boost your confidence regardless of your stand as an investor.
For the passive investors, they are likely to choose a comfortable stock to invest such as the Exchange-Traded Funds (ETFs). You may also consider the mutual funds if you can afford to engage an investment manager. This manager is useful when you need someone to help you identify undervalued stocks and manage your portfolio.
‘The attraction of ETFs and mutual funds is the capital gains and dividends,’ added Lynn Gaspar, Senior Vice President and Head of Intermediaries and Retail Clients at SGX.
‘The capital gains are dependent on the fluctuations of the price associated with the shares and because ETFs try to match the market trade index, the fluctuations are more stable and predictable. Additionally, many companies often pay out dividends, which means that you get a certain percentage of the stocks you’ve purchased either quarterly or annually. So although being a passive retail investor will not be as exciting and bring in high returns, it is stable and still enables you to significantly grow your savings as compared to keeping your hard-earned savings in an ordinary savings account!”
On the other hand, active investors prefer to invest in single stocks where they have complete control of what they invest in. It can be lucrative as these investors can control the timing to buy or sell to maximise their gains or minimise their losses. Moreover, active investors only need to pay a fee when they buy or sell their stocks. Through this way, they save on portfolio management fees and they can break even with the transaction costs when they hold on to the stocks for longer periods of time.
Single stocks require ample research, close monitoring of the industry and economic trends, and close tracking of the stock trade index. You need to make your own judgement on the best decisions to grow your stock without falling prey to your own emotions. Hence, active investment on single stocks is ideal for those who can afford the time.
Bernard Lim, the Executive Director of Columbia Threadneedle Investments also suggested that investors should adopt a macro view to evaluate the companies in the chosen sector especially if they are thinking of being a passive investor.
“Investment is both a science and an art. Information is abundant on the internet, but do note that there are other ways to research. Annual financial reports of large companies can easily be accessed but it leaves out the emotional factor.”
Bernard gave the example of investing in real estate companies with a strong focus on shopping malls. It is crucial to go beyond information from the internet and venture into these malls to get a feel of how good the businesses are.
“Have coffee, sit and watch the foot traffic. Are there many patrons during the weekdays? What about the weekends? Do most leave the mall with a purchase, or do many leave empty handed? What kind of shops do they focus in – is there a good mix of high end and affordable fashion stores and cafes? How long have most of the tenants been in the mall despite the downturn in the economy now – do the tenants change often? Such knowledge adds value to your research and will influence the ETFs you invest in.”
“You also need to be clear on why you want to invest,” reminded Nels Friets, Vice Chairman of tryb Capital.
“If you would like to invest for your next holiday, then buying shares is not the way to go. You need to look towards a larger want, like aiming to purchase your own condominium. Remember that investment is a long-term commitment. When you invest at a young age, you will have better capital gains as Lynn has shared. In turn, you can afford the lifestyle that you desire in the future.”
Should I Buy Now or Should I Buy Later?
Contrary to popular belief, timing plays a very small role in investment. In fact, studies have shown that timing the market is a terrible idea.
“Instead, focus on time in the market rather than timing the market,” emphasised Gillian Kwek, Portfolio Manager at Fidelity International.
“In fact, timing the market will require you to make two correct decisions – buying and selling decisions. Both decisions have to be correct, making it very near impossible to find the perfect time. We are also very emotional beings and prefer to buy stocks cheaper than our aunt, relatives, or friends and it is very hard to get rid of the emotional bias when you try time the market!”- Gillian Kwek
The best way to ensure you have sufficient time in the market is to invest steadily and start from a young age. Let your investments compound. This is important as you are likely to investing in companies with dividends and are growing. You have the time to let these companies grow and reap from their businesses.
For those who are risk averse, Gillian assured that such investments are less likely to make a loss over time. In Singapore, if you hold your account for ten years of more, the chances of making a loss is less than twenty percent. This percentage decreases further with time. She suggested to the audience that new investors should avoid timing the market. Instead, they should choose the right stock after a thorough research.
Regular Shares Savings Programme
The Regular Shares Savings Programme is a good way for you to start investing. Provided by the major banks in Singapore, the programme allows you to start investing with as little as $100 a month. Your shares account is set up by linking it to your savings account. You can decide what stocks to buy and the banks would usually offer mutual stocks and ETFs of blue chip companies that you are familiar with. An automated investment will be made on your behalf monthly from your account until you decide otherwise.
‘The advantage of the programme,’ shared Lynn, ‘is that you’re setting aside a dollar amount and not a number of shares. Today, if you buy a hundred shares in DBS, you would need at least $1900. If you buy a $100 worth of DBS shares, it would be about 5 shares. The beauty of the Regular Shares Savings Programme is that you get to invest in blue chips depending on the dollar value you put in without having to invest a large amount, a rule applied to individual retail investors.”
Don’t Get Too Hasty
“When a relative or someone you are close to tells you to buy a certain stock because they’ve made significant gains, don’t. Remember, that’s when the stock prices are high, and your capital gains will never be as much as the person who advised you,” Bernard warned.
The other panellists also reminded the audience that every single investment tip needs to be researched before they act on them.
‘There are many companies to invest in. You don’t have to limit yourself on what the majority is investing in. Good websites like Moneydigest provides concise information that can act as your base. If you like to travel and go café-hopping, look up travel websites on what the best food places. You might want to invest in these companies too!” Gillian concluded.
Edited by Joanne Ng
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