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Getting Started To Investing? Read This!

By Fundsupermart

Getting Started To Investing? Read This!

Getting Started To Investing? Read This!

As new investors learning the ropes of investing successfully, it can be quite intimidating at times. In this article, we point out 3 steps an investor can take when first starting to invest.

Step 1: Figure Out Your Investor Profile

The old adage that there is no free lunch in markets is probably true. In order to produce investment returns, one essentially needs to take some form of risk. However, before we start investing and taking risks with our capital, we would need to know our own risk tolerance. Examining your own behaviour and risk appetite is thus the first step required before pulling the trigger.  Investors just starting out could therefore ask themselves how much they are willing to risk and what kind of volatility they are willing to accept in order to stay vested. For instance, people with relatively high risk tolerance would probably accept volatility levels that are characteristic of those seen in equities. However, if high volatility levels make you uncomfortable to stay vested, perhaps you are more inclined to be risk averse, and gunning for lower risk assets like high quality fixed income would be more appropriate.

Discovering your risk tolerance is the first step in understanding your investor profile. Once you have figured out your risk tolerance, the next thing would be to determine your financial goals and situation. This is where an investor has to decide what his purpose of investing is and how he or she may thus choose the appropriate investments or instruments to achieve his or her goals.

Some factors to consider would be your liquidity needs: how much cash do you need in the future and when do you need the cash by? Most of us have bills and student or mortgage loans to service, and figuring out all your requirements is a crucial step; it allows you to thus plan for what you need and how much you can set aside to invest. On the other hand, it may also allow you to decide to pursue an appropriate investment plan in order to meet those needs or goals. If on the other hand, you do not have any short term commitments or financial obligations, but you have the desire to build some capital and are willing to take some risks with the expectation of higher potential returns, then you could plan out your capital that you are willing to commit and invest. If however you are a retiree, and require a regular stream of income to support your retirement days, then perhaps a lower risk investment plan would be more suitable as you may not be able to afford the risks of capital loss.

Step 2: Decide On The Appropriate Asset Allocation

Once you know your risk appetite and investment goals, choosing your instruments and your asset allocation is the next step. At Fundsupermart, we have 2 main asset classes (bonds and equities) for investors to choose from and to construct their portfolios.

Given the fact that equities are riskier than bonds, investors with a higher risk tolerance and the ability to take more risks would favour a more aggressive portfolio consisting of more equity funds, while investors who are more risk averse may prefer to invest in a more conservative portfolio with more bond funds. For investors who perhaps possess a medium risk tolerance profile, having an equal exposure to both bonds and equities is a viable course of action. They could also opt for balanced funds, which offer a proportionate amount of equities and bonds, helping to strike a better balance between the 2 main asset classes. They may also be good simple one-stop solutions for inexperienced or investors just starting out who are unfamiliar with asset allocation strategies, delegating the task to the investment managers and professionals!

Our FSM recommended portfolios are available on our website, and serves as possible guidelines or blueprints for asset allocation for investors who are just starting out on their investment journey. The conservative portfolio consists of an allocation of 80% of its assets to fixed income, while 20% is committed to equities. The balanced (50% fixed income, 50% equities), and aggressive (20% fixed income, 80% equities) has more exposure to equity funds.

Step 3: Decide On The Exact Fund(s) To Invest In And Keep Updated - Tools And Support Available

After choosing your desired asset allocation, you would next need to choose the funds needed to fulfil those allocations.

With regards to the various kinds of funds available on Fundsupermart, fund information such as prospectuses and factsheets are available for investors to download and carry out the necessary ‘homework’ before investing. Additionally, investors may also like to consider funds in the Recommended Funds List which have been spotted to have stronger performances and better consistency in their investment strategy compared to peer funds. The list also serves as a starting point for investors to choose an appropriate fund for their portfolio, given that investors just starting out may not know where to begin given the entire plethora of funds we offer.

Additionally, our in-house Research team monitors and constantly provides updates on the various markets under our coverage. Star ratings provide our take on the relative attractiveness of those markets, helping investors to see which markets sport the most attractive potential upside. Investors can also review articles listed in the Fund house depository section which provides insights as to what investment professionals are thinking about the investment landscape or their thoughts regarding the various market segments or market-related events.

For comparison of similar funds, the funds selector acts as a screener for funds by asset management groups, risk ratings, asset class categories, specialist sectors, and other useful filters. For better comparison, the chart centre provides a graphical comparison of the performances of FSM indices and funds on our platform.

Should you be unsure of the risks and commitments involved in any one investment product, the Investment Advisory team are readily contactable for advice!

To learn more valuable advice on various asset classes, including equities and other beneficial investment products such as mutual funds, bonds and insurance, come and join us at the upcoming largest investment event ever organized by Fundsupermart, FSM INVEST Expo 2016!

FSM INVEST Expo 2016
When: Saturday, 11 June 2016
Time: 10am to 7pm
Venue: Suntec Convention Centre Hall 404 (Level 4)

Register today, and stand to win fabulous prizes at our bi-hourly lucky draw!

Fundsupermart is the online unit trust distribution arm of iFAST Financial Pte Ltd. It carries the Capital Markets Services (CMS) License and Financial Adviser (FA) License issued by the Monetary Authority of Singapore (MAS), and is also an appointed Central Provident Board (CPF) Investment Administrator.

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