Investment 101 for Working Adults

By Deanna Bonaparte Fortunately (or unfortunately), personal finance was not a requisite module for everyone back in school, and some of us might be clueless as to how to manage our financial assets. And when you consider the fact that retirement planning is an important part of being able to enjoy your golden years in Singapore, placing your financial eggs in different baskets to hatch your golden plan is actually a sound proposition. It's not as bad as it sounds; all it takes is the continuous effort to read up and learn. You don't have to purchase a biography of Warren Buffet (although that might help greatly), and you don't even need to be particularly good at Math. The Rise of Property Price Property was once the holy grail of investment in Singapore as property prices do not fluctuate as readily as the other asset classes (e.g. stocks, bonds) do. Most Singaporeans would invest in property on the premise of the following: portfolio diversification, capital appreciation, rental income and as a hedge against inflation. But with capital appreciation, comes an increased demand for land - and inevitably the rise of property prices. With an average yield of about seven per cent a year and prices for HDB resale flats reaching seven figures (along with the government's property cooling measures), the average young adult can count on only owning one (if any) investment property - thus, the need for other sources of investment. A Biz-Vestment A 2009 article in USA Today cited research that "self-employed businesspersons were four times more likely to be millionaires than those in traditional employer-employee roles". Although that sounds extremely enticing, you have to remember that starting a business (for instance, your own cafe) is filled with much uncertainty and risk. It takes time before the business starts earning revenue for you to bring home a legit paycheck. In addition, you also need quite a hefty amount of capital to start a business in the first place. When you consider the statistics that nine out of ten businesses fail in the first five years, you can see why it isn't exactly a safety net for your golden plan. However, as cruel as those statistics may be, one golden investment rule is this: With high risk comes high return. Understanding Stocks Last but not least, we have stocks and bonds. The financial industry uses many terms to categorise their stocks, two of which are: • Blue-chip stocks - Like their status in the game of poker, blue-chip stocks are worth the most! These stocks comprise large household names like McDonalds and Starbucks, companies of which have proven their ability to survive through the good times and the bad. This makes blue-chip stocks considerably safe (and expensive to purchase), and not to mention the fact that they usually have a low investment yield. • Penny stocks - These are low-priced stocks that trade anywhere from a fraction of a cent to a few dollars. Penny stocks can be very risky, considering they are generally new to the market and have no reputation or history to fall back on. However, they do often offer high dividends and can be a golden opportunity for investors to benefit from the incredibly low share price, with potential for an enormous overturn. Common Cents One financial mantra that's oft-repeated is: 'save, save, save'. With that said, don't just hide that money under your mattress; split your extra money each month. Channel part of it to your emergency fund (which should ideally contain three to six months of living expenses) and part of it to your investment fund. Remember that with experience and lots of humble learning, your golden investment plan will hatch in good time. After all, even Warren Buffet had to start from scratch! Do you have other tips for financial investment? Share with us in the comment box below! The JobsCentral Group, a CareerBuilder company, is the owner of JobsCentral.com.sg, one of Singapore's largest job and learning portals. Get a free career personality test and more career- and education-related articles at JobsCentral and JobsCentral Community. Alternatively, Like us on JobsCentral Facebook Page or Follow JobsCentral on Twitter for more career-centric content!