Saturday, 5 May 2018

22 Years Old, Stepping Into The Field Of Investing

Hey there,

I'm XX, ladyyoucanbefree introduced me to you when we have a quick chat. I have look across your blog and it was very impressive and eye opening for a guy at your age to have such planning on future.

I'm 22 this year, and would like to step into the field of investing. I'm currently working full time and studying part time now, and as what you quoted, I'm definitely not interested to be sticking at my office for more than half of my life. I'm very new to this game, and if you don't mind, can you guide me through how to start off in this journey? 

Side note, just curious, how much are you putting in for invest per month?

Thanks and hope to hear from you soon!

Hi XX,
First and foremost, a warm welcome to my blog. I'm really glad to know another young adult that is interested in taking the path towards financial freedom. A big thumbs up to you for the courage to venture into the field of investing. 

Ladyyoucanbefree is a very wise and experienced senior in our local financial blogosphere. Personally, I enjoy her post really much and have learned much from her. 

I've to first say that I'm in no position to provide any financial advice and I'm still learning along the way too :)  

Nonetheless, I'm more than glad to share my journey and thoughts with you.

To start off, let me answer your question on 'how much are you putting in for invest per month' - I do not have a fixed amount that I invest every month. As I'm previously studying full time and engaged in different part-time jobs, my income fluctuates pretty much around. I follow more closely to a fixed % rather than fixed amount. This % is a variable and you may tune it to your own comfort :)
Do note that this war chest is used strictly for investment only. In another word, funds for investment. The funds here will be used to purchase different investment vehicle such as stocks, bonds etc. 

The war chest is only used when I see opportunity in investment. Else, that funds will be inside, waiting for Mr Market to turn moody. When my income is lower, my war chest will have a lower amount and the opposite when my income is higher. 

In that sense, I understand that higher earnings in important, and that I will be able to live comfortably when my income is not that high for a particular month. 

1. Emergency Funds & Understanding your risk appetite:
For your case, I believe having a full-time job, your income is pretty much stable and fixed and it will be much easier for you to follow a fixed % if you should. Discipline is important for us and we must remember to set aside an adequate amount of emergency funds (based on your 6-12 month's monthly expenses).  This emergency funds will have to come in first before any investment so that in any case that an emergency comes, such as job-loss (loss of income) etc. you will not be suffocating from paying your day-to-day expenses. Having that said, your war-chest will not be utilized in an emergency for non-investment related activities. When your funds in war chest are used for non-invested related activities, this defeats the purpose of having one.
Some might be fine without emergency funds, some prefer more, some prefer less. 

This ultimately voices down to your risk appetite and level of comfort.

It is very important to first know yourself to determine this and certainly to choosing your investment gameplay/vehicle.

You may wish to refer to this post of mine for some a little more clues about my various accounts: 
How many accounts does 19-year-old student have?

2. Decide your investment vehicle (eg. Stocks, Bonds, FOREX, Precious Metals, Commodities, Cryptocurrency etc.) and Gameplay:
Next up, it's also important to differentiate and choose your gameplay in the market. Eg. Investor or Trader as both of their game works differently. An investor buys shares and keeps them for a really long-term whereas a trader trades for profit.

After choosing your gameplay, this is when you will need to identify the tool you will be using to "amplify" your wealth. It does not make perfect sense for me to invest in precious metal for dividend as they are non-income generating assets. 'Investors' of such asset classes typically buy into such asset in an attempt/believe for its value to appreciate. This is when they sell it to realize the capital gain/profit.

In that aspect, it may probably sound better to trade them as traders "earn" by the difference in price between buying and selling.

If you're into investing, there are another 4 routes for you to choose - Growth investors, Income investors, Passive Investors or certainly Speculative Investors and the common vehicle used here is the equities market (shares).

Growth investors or even value investors buy into things where that they see a growth/value in. Do not be confused by them although both growth and value investors sound pretty similar. In that aspect, they are looking into the fundamental of the company they are buying into and would tend to hold for a really long time.

rowth stocks receive returns from future capital appreciation (the difference between the amount paid for a stock and its current value), rather than dividends while Value stocks are those that tend to trade at a lower price relative to their fundamentals (including dividends, earnings, and sales).
For a simple analogy, it's just like buying a condominium at 800k when it's worth 1m.
For this condominium, there are future developments like MRT that are currently under construction and in an area near town. Hence, when the developments are completed, the value of this condominium is likely to fetch a higher price. The owner can then chooses to sell the property or certainly rent it for a higher price.

Income investors invest primarily in equities for the regular dividend. Eg. REITs or Business Trust. Likewise, we have to also understand the fundamental well for the REIT we are buying into and not a value trap. For a simple analogy, it's just like buying a house and renting the house out for rental income.

Speculative investors are more commonly seen around where they will buy into a particular investment vehicle with no homework is done or purely based on what they hear.
For example - John and Brock are good friends. Brock recommended Creative to John when Creative is trading at $10 after surging from $1 in 2 weeks. John, after hearing this piece of news, eagerly cashed in $10,000 and went in to buy stocks from Creative at $10. He then speculates that Creative will continue to surge past the $20 mark. However, the price is seen tumbling to $5.86 today. The question now is - Is Brock to be blamed? 

There's also another type of investors - the Passive Investor which invest in ETFs and maybe even robo advisor. Some common methods that they employ are the DCA (Dollar Cost Averaging) and Buy-and-Hold approach. Passive investors aim to maximize returns over the long run by keeping the amount of buying and selling to a minimum. The idea is to avoid the fees and the drag on performance that potentially occur from frequent trading. Passive investing is not aimed at making quick gains or at getting rich with one great bet, but rather on building slow, steady wealth over time.
This long-run could easily stretch over decades and several market cycle.

Read more: Passive Investing - Investopedia 

Related post:
Is Investment Really So Difficult?
Transaction cost - Are You a Trader or Investor

3. Setting up the required accounts for your gameplay:
I'd first have to admit that I'm more of an equities investor than a trader. Hence, I believe that my knowledge in the other field is inadequate.

Let's say you've decided to go along with investor and have chosen equities (stocks) to be the vehicle you would like to use, the next step for one to be engaged in Singapore equities will be to have a brokerage and CDP account.
The brokers will act as an agent for which you buy and sell your securities from and CDP account will act as an account for which your shares and bonds are deposited into/withdrawn from. There are many brokers available around and personally, I do own 2 different brokerage account - POEMS PCMA and DBS Vickers Cash Upfront. I have been using more of the latter recently due to the attractive commission they're charging for the moment.  

CDP account can be easily created when you register with your brokers and this is a one-time thing. When you decide to change your brokers, simply link your CDP account to your new brokerage account.  

Now, this is easy and it will only involve some waiting time and probably a visit to the broker.

For passive investing, one could use certain tools like OCBC BCIP, POSB Invest-Saver, POEMS share builder or Maybank MIP to purchase some shares or ETFs.

4. Preparing for the fight
Now next step is to do some homework. This can come by performing Fundamental Analysis (FA) to look into the fundamentals of the company you're buying into. FA will equip you with the necessary knowledge on how the company is currently priced at, their earnings, financial situation, cash flow etc. For this, you will look into the balance sheet, income statement, cash flow statement, financial report and annual report for more clue. 

Another approach most commonly used by traders is Technical Analysis (TA). This is a tool which will tell us the probability of the price movement in the shorter term. We will also be able to identify if the counter is overbought, oversold, resistance level, support level, divergence etc. This can be used along together with FA for a possibly 'better' entry price.  

I will point you to some of my different post I've written previously and you may wish to take a look for some clue. 

Unfortunately, with my tiny capital and insufficient knowledge, I'm not a successful investor like what many would see around and I still have much to learn along the way. 

There are many bloggers around which have really insightful and comprehensive analysis around. Similarly, do take note that this is not a buying/selling call and take them with a pinch of salt!   

There's many senior, wise and very experienced blogger around the local blogosphere which I would recommend for different insights and learnings as well.
5. STE's Stock Investing Journey

You may also wish to drop by
TFS is basically a blog aggregator for the local financial blogs and you will be able to find many other bloggers around :)

Having that said, I hope that I've answered your queries and that you find the information above useful for you.

Do feel free to get back to me anytime, I'm more than glad to be of your service and will reply at my very first availability.



  1. Great guide! This gentlemen was lamenting that his friends within his age group are typically not into investing. So I thought you two may become great buddies to bounce investing ideas. Hope you don't mind. :-).

    1. Hi Lady,

      I'm really glad to know another peer with similar interest! :) I do agree with this gentleman up there on the fact that my peers are not interested in investing or personal finance as well..

      I believe what I've written up there is only sufficient to be bad influence for one to pound into the stock market, but nothing about being a great investor.

      I don't think that I'm one and do not dare to pass off anything about that, which is why I decided to include a few "Lao jiaos" that I learnt from for future readers and this gentleman to learn

  2. Hi SD,

    Not sure why we didn't ask, want to exchange blog link?

    1. Hi Frowns,

      I've added you into my blog roll on the side :)

  3. Hi Sleepydevil,

    Nice ,will return the favor!