Background: I am Sandeep , a 20-year old undergraduate at the National University of Singapore. I am from India but have shifted to Singapore for my education. Coming to the point, as an ardent follower of Youngmoney.com, I thought I could get some help from you as am planning to start investing.
Q: Should I invest in my home country India or should I invest in Singapore? The conversion rate is something like 1 SGD = 34 INR.
A: No matter where you invest, you’ll be subject to currency risk. Trying to predict where currency exchange rates will go is not recommended unless you’re an expert. Before you invest in either country make sure you fully understand the risks involved. This may mean you should not invest in either country, but I cannot make that decision for you. If you decide to invest in India or Singapore, make sure you are able to view your investments online or receive monthly paper statements.
Q: From what I have read, I believe that investing in stocks is a bit risky and I may need another 2 years to take that risk. So, what are the best investment plans for me?
A: Unless you have 10 years to leave your investments in the stock market, you’re right, you may be best to avoid the stock market because of the risks involved. In the mean time you can invest in money market funds, CDs, and highly rated corporate and municipal bonds. There are many suitable alternatives to stocks but it will depend on your specific investment needs.
Q: Should I invest in bulk or is it advisable to save a small amount every month and invest it? Mutual funds or unit trusts?
A: In general it’s best to dollar-cost average into your chosen investment by investing equal dollar amounts each month or each quarter so you will buy more shares when prices are low and less shares when prices are high. Mutual funds are a collection of stocks, but your earlier question mentioned you plan to stay out of the stock market. Make sure you understand that if you invest in mutual funds that is the same as investing in the stock market.
Q: How much money should I have for starters. Presently, I can invest around 50SGD per month. Should I invest more?
A: I can’t tell you how much to invest per month. But I can tell you, that every bit counts even if it’s only a small amount. Whatever amount you decide to invest, remember that a little is better than nothing and try to dollar-cost average into the market if possible. As a rough estimate, you will need about 25 times your annual living expenses by the time you plan to retire. You mention you are 20 years old so you have plenty of time left before retirement, but you should start saving today to let your investments compound.
Matthew Brandeburg, CFP® has six years of financial planning experience and runs his own business, Bridgeway Financial Group, LLC, based in Columbus, OH.