Investing tips for women - How to get started

Investing tips for women - How to get started

If you’ve only got a minute,

  • Women are generally better savers than men, but they tend to invest less of their funds.
  • Women are more likely to hold a higher proportion of their assets in cash or low-yield deposit accounts than in more productive investments.
  • One of the ways they can diversify risk and reduce cost is by taking a core-satellite approach to building their investment portfolio.

Always wanted to get started in investing but not quite sure where to start? Busy playing the multiple roles in your life and haven’t found the time to make your money work harder? Don’t worry – here’s help for you, the modern woman to get started in investing; and the good news is it isn’t difficult.

Women are generally better savers than men, but they tend to invest less of their savings. In addition, women who invest are likely to be conservative, preferring to go for less risky options than men. This may result in them missing out on opportunities which can offer potentially good returns. As such, women are more likely to hold a higher proportion of their assets in cash or low-yield deposit accounts than in more productive investments.

Investing tips for women - How to get started

Do note that by upgrading your financial knowledge and having better understanding of investing and your risk profile, you will be more confident in making suitable investments that can generate higher returns.

How much to invest

It is a misconception that you need a large sum of money to start investing. After setting aside an emergency cash fund of at least three to six months’ worth of expenses, you can start investing from as little as $100 a month. You can also invest consistently on a monthly basis if you prefer not to put in a large lump sum.

To gauge if your money is working hard for you, divide your invested assets by your net worth (assets minus liabilities). A ratio of at least 50% is healthy to ensure you are investing enough. If the ratio is less than 50%, do consider investing your idle cash to grow your wealth.

What to invest in

There are literally hundreds of ways you can invest – buying single stocks, exchange-traded funds (ETFs), using a hybrid robo-advisor like digiPortfolio or buying a retirement income plan.  The key is to do your own research, understand the products and stick to the plan.

Core-satellite investment approach

One of the ways you can diversify risk and reduce cost is by taking a core-satellite approach to building your investment portfolio.

• Components of the core-satellite investment approach

Investing tips for women - How to get started

The allocation of investible funds to the “core” of the portfolio is likely to be different for each investor. It may range from 50-70% of the investment portfolio depending on your risk tolerance as well as your financial planning goals.

Taking a 50% allocation to the “core” as an example, an investor could invest all of those funds in index ETFs and unit trusts.

Investing tips for women - How to get started

*The above table illustrates examples of what investors can do to build an investment portfolio. This should not be relied on as investment advice. Investors should do their own due diligence.

Meanwhile, the remaining 50% can be allocated to the “satellite” where funds can be invested in long-term structural trends and themes. This can potentially garner better than normal market returns and can be done though individual stock picking or though actively managed ETFs and unit trusts.

Investments that form the “satellite” of the portfolio is more short-to-medium-term in nature. Taking the GameStop short squeeze in early-2021 as an example, an investor wishing to take a punt on the stock could have allocated a small proportion of investable funds here. This would minimise overall losses if the “bet” did not play out but sizeable gains if it did.

Investing tips for women - How to get started

*The above table illustrates examples of what investors can do to build an investment portfolio. This should not be relied on as investment advice. Investors should do their own due diligence.

5 tips to keep in mind before investing

1. Know what you are buying

With the array of investment products available and complex jargon related to product information, it can get overwhelming for new investors. However, it is extremely important to understand what you are exactly buying.

Some information you should seek out before putting in your money includes:

  • All charges and fees related
  • Investment horizon
  • Whether your money is locked in for a fixed period
  • Potential returns as well as losses
  • Is the issuer of the product licensed?

If you still find it hard to understand the product, you might want to seek out a licensed financial advisor such as our DBS Wealth Planning Manager for advice.

2. Have clear objectives

There are many reasons for investing - preparing for retirement, beating inflation, meeting certain financial goals…etc. Do you know that your objectives can affect the type of investment you choose?

In fact, having a clear investment objective can help you to streamline the products that are suitable for you. For instance, Amy who is 40 this year, would like to grow her retirement funds through an insurance plan to supplement her CPF LIFE payouts during her golden years. A retirement plan like RetireSavvy could be suitable for her where she gets to customise her retirement insurance plan in line with her financial and retirement needs.

With RetireSavvy, she can make a premium top-up, choose a later retirement age, adjust her income payout period and select her preferred combination of lump sum retirement payment and monthly retirement income by adjusting your retirement income rate.

Having a clear investment objective can thus give you clarity on which products to choose and help you manage your expectations of potential returns.

3. You can always start small

It is a common misconception that you need a large sum of money to start investing. Do you know that you can start investing with a small sum of $100 per month and build up your investment from there? You can do this via a Regular Savings Plan (RSP), where you set aside a fixed amount of money per month to invest on a regular basis.

This way of investing is also known as Dollar-cost Averaging,  where you can potentially lower the cost of your investment over time. This investment approach is a long-term approach and has several advantages, especially for new investors.

For one, it takes the emotion put of investing since you will not be tempted to buy and sell anytime the market moves. Dollar-cost averaging smooths out fluctuations and volatility as you buy more shares when prices fall and fewer shares when they rise. This is the strategy’s cost-averaging effect.

Of course, you can always choose to take the lump-sum approach if you have a large sum of money on hand.

4. Put your emotions out of the way

It may sound funny, but investing can be an emotional roller coaster ride! Even experienced investors could panic and make hasty decisions when their investments make a larger than expected move either way. If the price runs too high you might be tempted to sell too soon, and when the price dips you might try to cut loss too early. Therefore, it is important to take the emotions out of investing.

Being aware of investor biases, carrying out due diligence and adopting a diversified investment approach can help you to make better investment decisions.

5. Be wary of products that promise too much

There are many investment scams these days and even experienced and educated professionals fall prey to them. It can sometimes be tough to identify potential investment scams but if the potential returns sound too good to be true, it probably is.

Higher returns in investment often mean higher risks involved and there is no such thing as a high profit investment with low or no risk involved.

Similarly, be wary of investment schemes that claim to be capital-guaranteed while promising attractive returns. Verify how the scheme can generate such high profits and find out what the risk is like of investments with similar returns. If you are doubtful, do not rush into investing. Always ask, check and confirm if you have doubts.

Ready to start?

Speak to the Wealth Planning Manager today for a financial health check and how you can better plan your finances.

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Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.

All investments come with risks and you can lose money on your investment. Invest only if you understand and can monitor your investment. Diversify your investments and avoid investing a large portion of your money in a single product issuer.

Disclaimer for Investment and Life Insurance Products

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