Investing is like going on a trip. You decide where you want to be. You set a budget. You make a checklist of what you would want to do. Then you look at the resources you would need to make the trip happen. It takes time, planning, and of course, prudent use of money.
However, you do not need a lot to get started. In fact, you’d be surprised how little you need to get started to explore the world of investing. Here are four ways you can start investing at a low cost:
Putting together and managing your own portfolio is like taking complete control of your own vacation. You enjoy the freedom to chart your own path, and are prepared to spend time researching, planning, comparing, and picking what works for you.
Gaining access to US-based investments may involve setting up special accounts or changing your trading account settings. Buffer in additional time to handle these.
You will also need to plan within the allocated budget, which can limit how much you can diversify your portfolio. For instance, you can only purchase stocks in the Singapore Exchange in groups (also known as lots) of 100. If purchasing one blue-chip stock costs S$10,000, purchasing a few could take up a large chunk of your budget.
If convenience is a major factor, investing in exchange-traded funds (ETFs) and funds is like joining package tours.
Similar to guided tours, both ETFs and Unit Trusts are managed by professional managers who pool money from many investors. The pooled monies are deployed in a mix of stocks, bonds, and other assets. This makes them an affordable way to attain a measure of diversification, since you can start investing with as little as S$1,000.
There are also a wide variety that caters to different preferences. Whether you want to ski in Hokkaido or dive in the Maldives, you can easily find a tour package that fits. Similarly, you can easily find ETFs and funds that focus on specific markets.
Such focus leaves your investments open to sociopolitical events. For instance, the Brexit referendum in June 2016 when British people voted to leave the European Union. In the next six months, droves of investors sold their investments in a major UK ETF – a net US$44.7 million flowed out of iShares MSCI United Kingdom ETF (EWU), the largest UK-focused ETF available in the United States.
This concentration risk highlights the importance of constructing a portfolio.
Just as you can create and book trips on apps, you can leave the creation and management of your investment portfolio to robo-advisors.
Powered by a set of rules, these automated investing systems behave like human financial advisors, yet function with minimal human intervention. They recommend pre-designed portfolios that are diversified and suit your risk profile. They also manage the buying and selling for you, to maintain the desired asset allocation ratio, for instance a 60/40 mix of stocks and bonds.
These pre-set rules provide efficiency. However, it also leaves them less able to anticipate and respond to unexpected events compared to human advisors.
Some of the best travel experiences happen with tips from the locals – and it can all happen digitally even before you fly. Hybrid advisors offer a similarly unique experience as they are designed to give you the best of robo-technology and human portfolio management.
With digiPortfolio for instance, skilled human advisors make strategic decisions and robo-technology executes the day-to-day tasks.
The DBS Investment Team select the choicest funds to create portfolios that cater to investors with different risk appetites. Meanwhile, robo-technology brings speed, scale, and efficiencies when it comes to the buying and selling.
When global developments change, experience honed through years of trading and research allows human portfolio managers to anticipate the impact on your portfolio and respond accordingly.
(View how the DBS Investment Team’s portfolios have fared so far.)
| Portfolio Manager | Hybrid Advisor | Robo-advisor | |
|---|---|---|---|
| Cost | Min investment $250,000 - $500,000 Annual fee: 1% - 5% of total assets | Min investment $1,000 Annual fee: 0.75% - 0.85% | Min investment: $0 - $3000 Annual fee: 0.2 - 1% |
| Who crafts my portfolio? Portfolio construction | Portfolios designed by financial advisors to suit your financial needs. E.g. estate planning | Pick from pre-set low- to high-risk portfolios crafted by financial advisors. | Pick from pre-set low- to high-risk portfolios crafted by robo-advisors |
| Who manages my portfolio? | Financial advisor | Analysis by financial advisor, transaction execution by algorithms | Automated portfolio management by robo-advisors using algorithms and pre-set rules |
Embark on your investments journey
It takes as little as S$1,000 to invest in an expertly managed global portfolio. All that remains is for you to take the first step.
Learn how to grow your wealth with digiPortfolio
Or get in touch for specialist advice on smart wealth solutions.
Disclaimers and Important Notices
This article is for information only and should not be relied upon as financial advice. Any views, opinions or recommendation expressed in this article does not take into account the specific investment objectives, financial situation or particular needs of any particular person. 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. This article is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.
