Knowledge is power when investing: Tap online resources, learn from experts
TODAY file photo
For many people, learning how to invest can seem complex and daunting. The reality, though, is that you can learn to make good investment decisions fairly easily, and investing can be fascinating.
The first step is to learn about investing.
One way is to take courses. It takes a relatively short time to learn the basics, and you may learn in a class, online, or by watching videos.
The SGX Academy run by the Singapore Exchange (SGX) has courses such as The Basics of Investing, which includes topics on setting your investment goals and how to select investment products such as stocks, exchange-traded funds (ETFs) or real estate investment trusts (REITs).
If you prefer online learning, Managing My Investments at FutureLearn is one of many free courses that help you gain the skills to manage your investments, analyse portfolio risk and plan for your retirement.
Another option is to read books. While there are plenty of complex tomes available, and Benjamin Graham’s insightful yet formidable The Intelligent Investor is a classic, new investors may prefer books that are easier to read.
Andrew Hallam, a former teacher in Singapore and author of Millionaire Teacher, recommends The New Coffeehouse Investor by Bill Schultheis, which he says breaks down the complexities of investing into three simple principles: “Don’t put all your eggs in one basket; there’s no such thing as a free lunch; and save for a rainy day.”
One Up on Wall Street by renowned investor Peter Lynch is an easy-to-read book that offers advice about selecting stocks based on what you know, how to review a company’s financial statements and which numbers really count.
There are a variety of videos as well, both short and long. The Khan Academy’s website, for example, offers everything from a single Introduction to Stocks to a 24-part series in a segment called “Investment Vehicles, Insurance, and Retirement”.
Among the many videos on YouTube is a short one by renowned investment manager Bill Ackman called Everything You Need to Know about Finance and Investing in under an Hour.
Whether you read or take a course or watch videos, you can learn the fundamentals of investing.
PRACTISE WHAT YOU LEARNT
The next step is to put that learning into practice.
To begin, figure out your current financial situation and your goals. Start by developing a budget and making sure you have enough insurance and savings for emergencies.
Then, decide how long you want to save for, how much risk you are willing to take, and what you want to achieve, whether it is a vacation next year or retirement that is decades away.
Next, open a Central Depository (CDP) account with SGX. You will need it to invest in shares, bonds, ETFs or REITS. Complete the form on the SGX Central Depository page and mail it with a copy of your identity card and a bank statement.
Then, open an account at a brokerage house. You may compare factors such as fees and firms’ websites on comparison sites such as Seedly, WeInvest or Yahoo Finance.
Finally, it’s time to invest. Learning is one thing, and investing is another. Since investing does entail risk, it may be better to ease your way in gradually by reading about companies to invest in and buying their shares or bonds slowly.
You can get ideas for companies to invest in from sources including seminars or online recommendations at brokerage firms, seminars at SGX or Securities Investors Association (Singapore), or reputable investment newsletters.
The key is making sure you select credible sources rather than relying on rumours, or tips from acquaintances with little knowledge.
Once you have some companies to consider, you can analyse them by reading the annual report, checking information on news sites such as Bloomberg and Reuters, and using brokerage house information to look at the financial health of the company.
NEW DEVELOPMENTS
Reading about the companies can be fascinating. You may learn about how Singapore’s defence and engineering conglomerate ST Engineering is developing electro-optics sensors for counter-terrorism initiatives, for instance, and how telecommunications firm SingTel supports reaching 150 million people per day with Snap Ads.
You may select shares in blue chip, small cap, growth or other types of companies.
It is important to diversify into at least a dozen or so different investments, so that you are less susceptible to the volatility of any one company. Alternatively, you may select ETFs that invest in a balanced portfolio of shares or bonds.
While staying invested in companies for the longer term is preferable, you will still need to monitor the shares to make sure there haven’t been unexpected changes such as a factory explosion or allegations of fraud. Set alerts or watchlists using the SGX mobile application, for example, or use alerts from your brokerage house or Bloomberg.
While it might seem that investing is complex, approaching it like you would any other task can give you knowledge relatively quickly.
Just like how you can take lessons to play the piano or cook gourmet meals, you can learn to invest in the same way, too. That knowledge will give you the power to secure your financial future.
