Yahoo Finance 
Millennial Money: How to invest? What do I even invest in?
SINGAPORE — For many millennials, the top priority is to grow their wealth, yet 42 per cent of them don’t know the best way to do so, according to OCBC’s Financial Wellness Survey 2020. There’s no denying that investing has always been a stressful topic, but yet it’s also increasingly becoming a trend for young people in recent years.
This is the third part of a series where Yahoo Finance Singapore will share about the whys and hows of investing. In this instalment, we hear the opinions of several financial experts on how and what young adults should invest in.
Different investments instruments
According to brokerage firm Tiger Brokers, 45% of their Gen Z investors prefer long-term stocks like Apple, Boeing, and Carnival. Other data from the OCBC Financial Wellness Survey also find that about every four in 10 millennials who invest admitted that they speculated excessively in the hope of making a quick buck.
But financial experts have cautioned that it is important to recognise that there are many other ways of investing. In fact, stocks are just one of the many asset classes to consider, which should be mixed and matched to suit one’s needs and risk tolerance.
“Investing should be seen as being a variety of modes of transport for people to reach their goals. Each mode offers certain benefits and incurs certain costs,” said Asheesh Chanda, CEO of Kristal.AI, a digital-first private wealth platform in Singapore.
For example, if you can only afford to invest a small sum every month, then investing in exchange-traded funds (ETF) is the way to go as it is low-cost and an effective way of accessing markets.
Other types of investment instruments include equities, index funds, government bonds, futures, warrants, Callable Bull/Bear Contract (CBBC) and commodities trading.
With such a wide variety of investment instruments available, this means that an investor typically needs a brokerage account to invest in publicly traded securities and unit trusts. But what is the best way to go about doing it?
CEO of Tiger Brokers Singapore, Eng Thiam Choon, recommends young investors to try out paper trading accounts first before jumping onto the actual trading platform. This is why only those aged 18 and above are allowed to start trading at trading counters.
“Of course, the decision is based on individual preference, but I think it is better to try out paper trading accounts as it minimises the hassle and error rate of information being submitted,” suggested Eng.
Fresh graduate Stephanie Leong, 24, who has never seriously considered investing, is intending to invest in an actual trading platform in 2021.
“I have zero financial knowledge but I do think that it is important to think about growing my wealth too, whatever little I have,” shared Leong, who added that most of her friends have also dabbled in some form of financial investment, and that she would seek their advice as well.
Well-diversified portfolio: pro or con?
Another key factor to take note of before you invest is that Gen Z investors tend to gear towards creating a globally diverse investment portfolio.
Tiger Brokers has seen a year-on-year increase of youths investing on their Tiger Trade platform since 2015. Investors would have access to various stock exchanges like Singapore, Hong Kong, China and Australia which would give youths the necessary options to venture out and diversify their portfolio.
“We always recommend youth investors to diversify their portfolio, and not place all eggs in one basket,” said Eng. “By diversifying, it keeps any part of the invested assets from being too heavily weighted against a particular type of investment instrument, or sector, which ultimately reduces both risk and volatility.”
Echoing a similar tune, Gregory Van, Founding Partner of Endowus, a Singapore-based financial technology company, added: “A well-diversified portfolio consisting of low-cost, passive vehicles will deliver better returns over a longer time horizon.”
However, for some, a well-diversified portfolio might seem slightly ambitious.
Fresh university graduate Gideon Lai, who has been investing under the POSB Invest Saver Regular Savings Plan for the last 2 years, does not intend to invest through any other instrument.
“It is one thing to see your returns grow, but another to be greedy. I think it is important to draw a balance especially if you don’t really have solid financial knowledge”, said Lai, who started investing after thinking of how to gain further cash on top of his part time job as a tuition teacher.
How would you invest S$1000?
Yahoo Finance Singapore asked our financial expert interviewees: Assuming a young investor had S$1000 to invest, how should the person go about investing it?
First and foremost, it is important to ask yourself certain questions.
“When making an investment, holding power is important. How long can you afford to set aside that $1000 for? Will you need to use it in a month, or will you be fine not touching it for 10 years?”, advised Chanda.
Chanda advises that the next thing you need to ask yourself is: Will you be comfortable seeing the value of your investment fluctuate — sometimes wildly — over a period of time? Will you become overly worried or overly confident depending on its performance, or will you be able to hold steady?
Following which, then can you start choosing the type of investment that suits your profile.
There was a general consensus that it is important to research and understand what type of investments one would like to invest in, as different investment instruments have varying levels of risk, depending on their volatility.
For example, if you can set this amount aside for three to five years and will not be flustered by its volatility, then you can consider investing it into a medium to high-risk equity ETF.
“There are many digital platforms that can help you make these choices by posing the questions you need to ask yourself and suggesting the investment options that best correspond to your investing profile,” explained Chanda.
Similarly, Van advised: “It is crucial to think about your investing goals and how soon you’ll need to use the funds. Then find a reputable investment advisor who can help you match these goals to investment options that are suitable for you.”
Related stories:
Millennial Money: Why should young people invest?
