How to invest - Part 3

Now that I have gotten your interest to invest, what are the types of investment products out there that I can choose to buy?

What can I invest in?

Do you know there are myriads of investment products out there for you to invest in? As a retail investor, you can choose between, individual stocks, bonds, REITs, and many more. For those who have a higher risk appetite can also venture into forex, cryptocurrencies, and P2P lending.

So which should you choose? Well you have to ask yourself what are you comfortable with and how well do you understand that product you are investing in.

In my opinion, you should choose a selected few investment products and master it rather than trying to learn all of it. Ever heard of the saying ' jacks of all trade but master of none'? In the investing arena, it is better to be a master of one investment product than to be an amateur of all investing products as you will be competing with other experts in the field

Below I have listed the types of investment products available

1) Stocks 

Stocks are the most common product retail investor buys. When you buy a stock of a company, you are essentially the stakeholder of the company and you own part of it (Though a very small percentage). For example, if I were to buy DBS shares (SGX: D05), I will now own a part of the company and would be able to vote for resolutions in Annual General Meetings. Of course, trying to find the best stock is not as easy as it sounds.

• Penny stocks (Cheap, volatile, and high growth potential)
• Mid-cap (Solid growth and lower risk)
• Blue Chips (Larger, strong track record, stable, higher cost to purchase)
• Growth stock (High-profit growth company)
• Income stock (Stable profit with stable dividend yield) 

2) Bonds

When a company requires funding, they can choose to issue bonds for you to buy. As such, if you were to buy a bond, you are lending money to the company. In return, the company will give you a fixed return over the duration of the loan till it reached maturity and you will get back your principal amount. In general, bonds are less risky than stocks as companies are obliged to pay bondholders first before stockholder in the event of bankruptcy. Some bond you can consider is the Singapore Savings Bonds and Singapore Securities Bills

3) Exchange Traded Funds (ETFs)

If you feel uneasy buying individual stocks, you can consider looking into ETFs. ETFs are a basket of individual stocks. Meaning to say, if you were to buy ETFs from the market, you would essentially own shares of multiple companies. This form of investment is much safer than individual stocks as it allows you to diversify into different companies. One example would be the S&P500 which collectively owns shares in 500 companies. These companies include popular ones like Apple, Microsoft, and Amazon 

• ETFs are like unit trust but better as ETFs are traded on the stock exchange so you can buy and sell anytime.
• Usually has lower fees than unit trust as it is not actively managed
• ETFs also tracks bonds which is a good thing for small investors as bonds are hard to invest in since you required a couple of hundreds while some are not listed on SGX. Owning a bond ETF lets you buy bonds from good issuers like HDB, LTA, and big names like Apple which was initially impossible without ETFs.
• ETFs has low chance or going bankrupt due to the diversification

4) Real Estate Investment Trust (REITs)

Singaporeans love to invest in property. Watching the property market surge in the early years sure draws a lot of investor attention. While the days where properties would appreciate so much are gone, they still attract lots of attention as a way to generate rental income. And you can do so by owning a REIT which is basically a portfolio of properties that are rented out to businesses for rental income. REITs are getting more and more popular as it is highly accessible to investors with limited funds while also providing regular passive income.

5) RoboAdvisor

RoboAdvisors are digital platforms that used artificial intelligent and algorithm-driven investment styles to help retail investor invest their money with little interference by humans. RoboAdvisors are usually cheaper compared to unit trust since it is managed by machines instead of a human. In addition, it requires as low as $1 for one to start investing in it. Some notable names in this industry include StashAway, Syfe, and AutoWealth.

 6) Unit trust

A unit trust is a portfolio of financial product where money from investors is pool together and managed by fund managers

7) Other investment product

Money Market Fund

P2P lending Platforms

Business Trust

Fixed Deposit

Endowment Policy

Commodities

Learned something? This is a 4-part series article so do look at other parts on how to invest to further improve your finance knowledge. 

• How to invest - Part 1
• How to invest - Part 2
• How to invest - Part 3
• How to invest - Part 4