Tuesday, 1 November 2016

3 Ways to Invest With Limited Capital in Singapore

I believe many of you have heard of this phrase: "let your money work for you". However, a substantial amount of capital is often hard to come by, especially for young adults that have just entered the workforce not long ago. Personally, I have experienced the difficulties faced by an investor with limited capital when I began working. More often than not, after factoring living expenses, there is not much left in the bank for investment purposes. Further, the minimum brokerage fee charged by most brokerages in Singapore makes the cost of entry prohibitive for investors looking to invest a small amount or perform dollar cost averaging (DCA). In this post, I recommend 3 ways how you could invest with limited capital in Singapore.

1. Previously, Standard Chartered Bank (SCB) online equity trading account was the de facto number one for investors with limited capital. There was no minimum brokerage fee and you could invest any amount you desire. It was fantastic for DCA and a great tool for investors with limited capital. Regrettably, as of August 2016, SCB will charge a minimum brokerage of $10 for Singapore stocks and minimum brokerage fees apply for foreign stocks as well. Nonetheless at $10, SCB is, without doubt, still one of the lowest cost brokerage available in Singapore. For investors looking to invest less than $5,000 and have access to a wide range of financial products (such as stocks and REITS listed on various stock exchange around the world), SCB online equity trading is definitely one you could not pass up on.

2. Passive investor looking to build a relatively risk-averse portfolio by buying index funds and bonds funds, should consider the POSB Invest-Saver  The sales charge for Nikko AM Singapore STI ETF is 1%, while it is 0.5% for ABF Singapore Bond Index Fund. You can start investing from just $100 per month. Following the principles of portfolio allocation in this book Millionaire Teacher by Andrew Hallam, you can build a strong portfolio by allocating a certain amount to the STI ETF and Bond Index Fund depending on your risk appetite. In reality, low cost index fund outperform most actively managed fund in the long run. Therefore, this is an excellent place to start for investors with limited capital. 

3. Investors that absolutely have to do stock picking but wish to do it at a lower cost than the minimum $10 brokerage fee could consider OCBC Blue Chip Investment Plan (BCIP). With OCBC BCIP, the difference is you can invest with both cash and SRS (read more about how you can work your money harder with your SRS account). This is excellent for investors that make contributions to their SRS account religiously. You can choose to invest from 19 stocks that are known as Blue Chips in the Singapore stock market. the minimum fee is 0.30% or $5 per counter (whichever is higher). It would be wise to invest at least $500 to reduce the fees of your investments. 

I hope the 3 ways highlighted in this post could motivate you to start investing. It is alright to start small, but you have to start somewhere. Investment is a skill that you have to master to combat rising costs due to inflation.  


1 comment:

  1. Feel free to share if you have any other tips on how to invest with limited capital!


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Financial freedom = Passive Income > Expenses. Always remember that there are two sides to the equation of financial freedom. Beside working on how to improve our passive income through investing, we should never neglect the expenses portion. By striving to improve both side of the equation, we can achieve our financial goals and win in the game of money.

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