A Starter Guide To Investing

Investing Starter Guide New page 0001

Last updated on June 6th, 2021

The stock market is really intriguing. With prices fluctuating every second, it can be really thrilling to watch.

An entire industry has just been created around the stock market. There are news sites, blogs, YouTube videos and shows that just monitor the markets.

YouTube Stock Market Analysis
Source: YouTube

However, did you know that investing does not just mean placing money in the stock market? There are many other instruments out there as well!

Investing can seem really scary, especially if you’re not sure about what you’re doing.

Here are 7 things you should know before diving into the world of investing.

What does investing mean?

For those of you who studied Economics, investing is a term that you’ve come across before. But what does it really mean?

Investing is the act of placing money into an instrument, with the expectation that the value of the instrument increases over time.

In simpler terms, you’re using your money to make money (definition from Investopedia).

Instead of spending this amount of money or saving it, you’re placing it somewhere that will bring a future benefit to you. Also, you’re expecting to earn a return on investment (ROI).

Why should I invest?

For every financial plan, there are 2 main components:

  1. Wealth accumulation
  2. Wealth protection

Investing is the wealth accumulation portion, while insurance focuses on wealth protection.

By investing your money, you are able to accumulate your wealth much faster. The returns of investing will be much higher than a meagre 0.05% interest rate.

A 0.05% interest rate is what most banks will offer you for a basic savings account.

Assuming an inflation rate of 1.9%, the rate of growth of your money in a bank account is 38 times slower than the inflation rate!

This means that the money you put in your bank account will decrease in value over time!

Let’s assume that you have $10k in the bank. The amount of things that you’re able to buy with that $10k a fews years later will be much lesser than the amount you can purchase now.

With investing, it is very possible to hit a rate of return of 1.9%. It is also very possible that your rate of return is much higher. This will allow you to beat inflation and allow your wealth to grow.

What’s more, your ROI will be compounded which helps you to grow your money even faster!

What is compound interest?

Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it.

Albert Einstein

It’s been debated whether Albert Einstein actually said the above statement. But the fact still remains true. Compound interest is really the 8th wonder of the world!

In secondary school, most of you would have learnt about interest in Elementary Maths.

Interest has 2 main types:

  1. Simple Interest
  2. Compound Interest

Let’s assume that you have a 2% annual return on your principal of $1000. Simple interest just gives you a 2% return ($20 each year) based on your principal.

However, compound interest gives you a 2% return on both your principal and the interest you’ve already accumulated.

Compound interest is sometimes termed as “interest on interest“.

The difference in returns may not seem much in the short term. But over time, the difference can be extremely significant.

Simple Compound Interest

Now, let’s compare this 2% return with the 0.05% return of a savings account.

Invest vs BankAccount

I hope you’re convinced that you should start investing!

What is the Rule of 72?

The rule of 72 is a simple way to estimate an investment’s doubling time.

Assuming you have a fixed annual rate of compounded returns, you are able to calculate how long you need to double your money.

Years to Double = 72 / Annual Interest Rate

If you invest in an instrument that gives a 6% annual return, you will be expecting to double the money you’ve invested after (72 / 6) = 12 years.

This is a quick and simple estimation to determine if the instrument you’re investing in is able to help you to achieve your financial goals.

What are the returns of investment?

For some assets, the returns are usually presented as an annual rate of return. However, this is a simplified estimate of your ROI.

There are 2 main ways that you can earn a return on your investment:

  1. Capital Appreciation
  2. Dividends

Capital Appreciation

Capital appreciation is a rise in the value of an asset over time.

This is how most investing instruments allow you to earn a return.

Let’s say you buy a stock today for $50. If it increases in price to $55 and you sell it, you are earning an ROI of $5.

If you choose to continue holding onto the stock, there is a chance that the price may increase further. This allows you to earn even greater returns!

There is also a possibility that the price of your asset may decrease too.

This example can be applied to any other investing instrument, and not just stocks.


A dividend is a sum of money paid regularly by a company to its shareholders out of its profits.

Oxford Dictionary

Dividends are something that are unique to stocks.

When a company earns a profit, they can choose to use their profits in 3 ways:

  1. Reinvest in the company to improve growth
  2. Store it in their cash reserves
  3. Distribute it to shareholders as dividends

If you own a stock and the company chooses the third option, you will be able to receive a payout based on the number of shares that you own.

If a company decides to give a dividend of $0.05 and you own 30 shares of the company, you’ll get $1.50 just by owning their shares!

It is important to note that dividends are not compulsory. You should not expect a company to give you a dividend just because you own their shares.

Dividends may also increase or decrease over time. If a company is consistently doing well, they may choose to increase their dividends.

However, the company might realise that their dividend policy is unsustainable due to lower profits. This may lead them to slash their dividends.

Dividends may be decreased at any time

During the COVID-19 pandemic, many companies have cut their dividends. Huge companies like BP have decreased their dividends for the first time in many years.

As such, solely relying on dividends may not be the best strategy . You are at the mercy of the company’s policy, and that’s a huge risk to take.

Despite this, dividends are a great way to earn some returns as well.

To calculate the total returns on a stock, you’ll need to consider both capital appreciation and the dividends received.

What is the difference between realised and unrealised gains?

For any investment that you make, any returns you make before selling are considered as unrealised gains. These are also known as paper gains.

The gains are only realised when you decide to sell that asset.

Even though the stock you own continues to rise in price, you will only obtain realised gains when you sell it.

This is because the price fluctuates all the time. You may not receive such a return if you decide to sell the stock at a later time. This is due to the possibility that the price of the asset may be lower.

What is a realistic return of investment?

A good way to estimate the ROI of an asset is to look at the annualised total return.

An annualised return is the average return of an asset each year over a given time period.

This gives you an average return you can expect each year that you’ve invested in the asset.

For some years, the returns may be higher. Other years may have a lower return.

After investing in the asset for a long period of time, you will ultimately receive the annualised return.

Annualised Return

However, it is important to note that:

Past returns cannot predict future returns.

The annualised return should only be used as a gauge. You shouldn’t expect to have the same amount of returns going forward.

What should I do before I invest?

After learning about how returns are generated, you may be tempted to start investing immediately.

However, here are 9 steps you’ll need to do before starting:

  1. Set up an emergency fund
  2. Research to understand the different assets
  3. Understand your risk profile
  4. Decide on your financial goal
  5. Determine your time horizon
  6. Decide on what you want to invest
  7. Decide on your portfolio
  8. Decide between investing a lump sum or dollar-cost averaging
  9. Determine the frequency that you should check your investments’ performance

Set up an emergency fund

Emergency funds should be the first thing that you have before starting to invest.

You have to be willing to lose all the money that you’ve invested.

Investing is risky. There is always the possibility that you’ll lose all of your capital, if things go horribly wrong. No matter how small, the possibility is still there.

As such, having an emergency fund is crucial as it helps you to hedge against such risks.

Even if you lose all of your money from investing, you’ll still have your emergency fund to fall back on.

Depending on your financial situation, you may need to save between 3-24 months of your monthly expenses.

You can read the article I have written to find out more about emergency funds.

Research to understand the different assets

After setting up your funds, it’s highly recommended to read up on the different investing instruments out there.

By understanding how they work, you’ll discover which ones are best for you.

There are many different resources that you can use, ranging from books to podcasts. You can find out which is the best way for you to learn, and start to build up your investment knowledge from there.

undraw researching 22gp

Decide on your financial goal

When you are investing, what financial goal are you planning to achieve?

Here are the 2 main goals that you’ll normally have:

Short Term Goals– These are planned purchases that you intend to make in the near future (within 1-5 years)
– Examples include a new phone, a house or a car
– You are recommended to invest in less riskier assets
Long Term Goals– These are a certain amount of money that you wish to accumulate over a long time (> 10 years)
– Examples include retirement and saving for your child’s college tuition
– You are able to invest in riskier assets

By determining the goal you’re trying to attain, it’ll help you to determine:

  1. The amount of money you need to save
  2. The time you’ll need to save that amount of money

Determine your time horizon

After deciding on your goal, you’ll need to decide how long you wish to take to attain that sum of money.

For example, if you are 40 years old, and plan to retire when you’re 60 years old, you have a time horizon of 20 years.

The time horizon that you have is usually associated with your financial goals.

Short Term Goal1-5 Years
Long-Term Goal> 10 Years

Usually, the longer time you have to attain that goal, the more risk you’re able to take.

And usually, the more risk you take, the greater the potential returns you’ll make!

With a long time horizon, you can ride out the short term fluctuations in price that your asset may have. You are able to spend more time in the market to realise greater returns.

Take the stock market for example. For this scenario, I’ll be referring to the performance of the S&P500.

The S&P500 is an index that tracks the top 500 companies in the United States.

During the short period between Feb-Apr 2020, the markets crashed.

The losses that you made during that period may seem really huge.

SP500 Feb Apr
Source: Yahoo Finance

However, if you zoom out to the bigger picture, you’ll realise that the market has actually gone up over time!

SP500 Full
Source: Yahoo Finance

The Feb-Apr 2020 period is just a short term volatility. Within a few months, the prices have recovered as well.

The markets will always go up, but only in the long term.

If you have a short time horizon of 1-5 years, investing in the stock market may not be right for you.

There is just too much risk that you’re taking. You may not have enough time to recover from a market crash as well.

Here’s an example:

You’ve decided to invest the money you’ve set aside for your wedding.

A few days before you require to sell your assets, the markets plunged.

All of the gains that you’ve earned are wiped out. You could potentially be making a loss as well.

Are you able to take these kind of risks, especially for such important milestones in your life?

It would be best to invest in assets with lower risks. You may not be earning great returns, but at least you’re still achieving a return.

Also, I would strongly suggest not to check the price of your investments constantly. This is especially if you’re investing for the long term.

Emotions play a huge part in investing.

If you see the prices of your assets plunge, you may be tempted to sell them at that point of time.

This makes your paper loss become an actual loss! (This is similar to the concept of realised and unrealised gains.)

Investing is not risky. Not being in control is risky.

Robert Kiyosaki (Rich Dad’s Guide to Investing)

As such, checking the prices of your assets all the time would not do you any good. In fact, it may greatly affect the progress you’re making to achieve a certain goal!

Understand your risk profile

All investments are risky. But some are more risky than others.

The more risk you take, the greater your potential returns. However, your losses may be greater as well.

There are different types of investments that cater to each risk profile.

You’ll need to find your perfect balance of risk and rewards. By understanding your risk profile, you can choose the instrument best suited for you.

In general terms, there are 3 different kinds of risk profiles:

Risk ProfileCharacteristics
Conservative– You want to preserve your capital
– You want to have guaranteed returns
– You have a short time horizon (min. 2 years)
Balanced– You are willing to take more risk, but still want some protection for your capital
– You want to earn a moderate to high return
– You have a longer time horizon (min. 5 years)
Aggressive– You are willing to take on the highest volatility to maximise your investment’s performance
– You want to receive the highest returns possible
– You have a long time horizon (min. 10 years)

One question you should ask yourself is:

Are you able to sleep well at night without having to worry about your investments?

If you are able to stomach the volatility of your investments, you are choosing the right asset to invest in.

Decide on what you want to invest

Now that you’ve considered all the factors above, it’s time to decide on an asset you wish to invest in.

Besides stocks, there are other asset classes to invest in!

Here’s a summary of what your asset should have:

  1. It is able to provide a rate of return that allows you to reach your financial goal
  2. You have a suitable time horizon to maximise the returns of the asset
  3. The risk of the asset suits your risk profile

If the asset you choose fits all this criteria, then it’s something that you should start investing in!

Decide on your portfolio

To truly diversify your risk, you may decide to invest in different asset classes.

Or you may decide to just invest in a certain asset class like stocks, and have many different stocks.

Either way, you’ll need to decide on your investment portfolio.

Your portfolio includes all the different assets that you’ve invested in.

For example, if you’re investing in different asset classes, your portfolio may look something like this.

Investing Portfolio Asset Class

Or if you’re concentrated in just one asset type, you might buy the same type of asset but from different countries.

Investing Portfolio Asset

Either way, you’ll need to decide on your investing portfolio.

This helps you to plan the amount of money you wish to invest into each asset.

Decide between investing a lump sum or dollar-cost averaging

Here are the 2 scenarios you’ll most likely be in when you start investing:

  1. You have accumulated a sum that you want to start investing
  2. You plan to allocate a portion of your salary to investing each month

Having a large sum of money at the start gives you more options. You can choose to:

  1. Invest the entire sum at one shot (lump sum investing)
  2. Invest the entire sum over a few months (dollar cost averaging)
  3. Invest part of the sum at one shot, and invest the remainder over a few months.

By doing a lump sum investment, you tend to save on transaction fees.

However, you risk losing a lot of money if the market plunges the next day.

Are you able to control your emotions if such a scenario happens?

If you think you can’t, I’ll suggest dollar cost averaging (DCA) instead.

DCA is an investment strategy where an investor divides the total amount to be invested across fixed periodic purchases of an asset.

This helps to reduce the impact of volatility on the overall purchase (i.e. your entire sum that you’re investing).


In simpler terms, when you are putting a fixed amount into the asset each time. Usually, most people DCA by placing a fixed sum each month.

For each month, you are buying different number of units of the asset. If the price is high, you will buy less units of the asset.

However, if the price of the asset is low, you’ll be able to buy more units of the asset.

This will result in you having an average price for a certain amount of units for that asset.

Here’s a very simplified illustration of a DCA strategy.

MonthStock Price

Some months you’ll buy the asset at a higher price. For other months, you’ll buy at a lower price.

Ultimately, it will average out to a price that is in between the highest and lowest prices.

DCA is a great strategy if you are more risk averse. By averaging out your investments each month, you don’t have to worry about timing the market.

Determine the frequency that you should check your investments’ performance

Even if you are using a DCA strategy, you may still be prone to emotional investing. This is especially when you’re checking your stocks everyday!

Investment apps such as StocksCafe have made it really easy to track your portfolio on the go.

Checking your investments periodically is good as you can ensure that you’re on track to reaching your financial goal.

However, if you check too frequently, you may risk making the wrong decisions. You may be overwhelmed by the amount of information out there too!

So the most important thing is to decide on a frequency that you wish to check your investments.

After that, all you need to do is stick to your plan.

As a long-term investor, you only need to check your stocks from time to time!

You may want to read more in my article that suggests the recommended frequency that you should check your investments.

What types of asset can I invest in?

You should be investing in an asset that fits your:

  1. Financial goal
  2. Time horizon
  3. Risk profile

There is a wide variety of assets to choose from. Ultimately, there should be one that can fit your criteria.

Traditional Investments

  1. Stocks
  2. Bonds
  3. Real Estate
  4. Commodities
  5. Money Market Funds


Stocks are the asset that most people are familiar with.

Basically, you are buying a portion of a company. This allows you to own a proportion of the company’s assets.

If the company does well, the price will usually rise and you get to benefit from it as well.

bank note

However, if the company does poorly, the price will plunge and you may lose money.

Stocks are the riskiest of all the traditional investments. Depending on your risk profile, it may or may not be the best asset for you to invest in.


Bonds are usually seen as the ‘risk-free’ component of your portfolio.

Most people would recommend you to allocate certain amounts into stocks and bonds, based on your risk profile.

The more risk you’re willing to take, the higher proportion of your money should be in stocks. If you’re more risk averse, investing a higher portion into bonds is usually recommended.

So what exactly are bonds?

Bonds are a fixed income instrument that represents a loan made by an investor to a borrower.

The borrower is typically a corporation or a government.


By investing in a bond, you are lending your money to a company or government. The borrower usually pays you an interest rate. (This is also known as a coupon rate.)

The bond issuer borrows this money from you to carry out projects or grow their business.

Bonds usually have a maturity date. This is the date when the borrower must repay the principal of the bond back to the investor.

The borrower pays you a coupon rate at fixed intervals, up till the maturity date.

Once the bond matures, the issuer no longer needs to pay you any interest rate. You’ll get back your principal as well.

You may have heard of Singapore Savings Bonds (SSBs). These are bonds that are issued by the Singapore government.

SSB August 1
Source: MAS

The Singapore government has an AAA credit rating. This makes the SSBs one of the safest investments that you can possibly invest in.

Due to this fixed income that bonds provide, they are thought to be a safe asset to invest in.

However, there are many different factors to consider. Here are some of them:

  1. The borrower’s credit rating
  2. Coupon rate
  3. Maturity date
  4. The default risk of the borrower (i.e. the borrower is unable to pay back your principal)

There are many complexities when deciding if a bond is ideal to invest in.

To be honest, I am still confused about how bonds work, and how I can purchase them.

I strongly encourage you to read up and understand this instrument first before you invest in it.

If you have been investing in SSBs, you may be disheartened by its low interest rates in 2020. You may want to consider investing in MoneyOwl’s WiseSaver instead.

Real Estate

Real estate has been thriving since the 60s. You may have heard of people buying multiple properties in Singapore and renting them out.

undraw houses3 xwf7

The common ways of earning a return from real estate are:

  1. Renting out your property
  2. Selling your property when its value increases (even better when it’s an en bloc!)

As with bonds, there are a lot of things to consider when investing in real estate.

Reading up on real estate investing is strongly recommended to understand it better.


Gold, silver and oil are all considered as commodities. But what is a commodity exactly?

A commodity is a basic good used in commerce that is interchangeable with other goods of the same type.


You can choose to purchase the commodity itself. There are other options that allow you to be invested in commodities too:

  1. Futures contracts
  2. Options
  3. Exchange-Traded Funds (ETFs)

Commodities are heavily affected by the demand and supply for it. The market can be really unpredictable, and this may affect the value of the commodity.

You can consider investing in commodities as a way to hedge against the risks of investing in stocks. Commodities are risky, but may not be as risky as certain stocks.

Money Market Funds

Money market funds (MMFs) are becoming increasingly popular. With local banks slashing the interest rates on their savings accounts, many are looking to MMFs as an alternative.

A money market fund is a mutual fund that invests in highly liquid instruments such as cash, cash equivalent securities, and high credit rating debt-based securities with a short-term maturity.

These funds offer high liquidity with a very low level of risk.


MMFs usually offer very low risk. However, their returns are usually rather low as well.

MMFs may offer an alternative for you to place your savings in, instead of bank accounts.

You can invest in a variety of Money Market Funds using certain cash management portfolios in Singapore. This includes:

  1. MoneyOwl WiseSaver
  2. Endowus Cash Smart
  3. FSMOne Auto-Sweep
  4. POEMS Smart Park

Alternative Investments

Besides the traditional investments, there are other assets you can invest in. These include:

  1. Cryptocurrency
  2. Art
  3. Crowdfunding


You may have heard of Bitcoin. However, did you know that there are over 6,000 different kinds of cryptocurrencies?

In just one day that I’ve checked the site, the number of crypto had increased from 6,460 to 6,484!

The cryptocurrency market is booming and there is a huge potential for future growth. However, cryptocurrencies are not regulated by the Monetary Authority of Singapore.

They remain as speculative investments at this point of time.

Cryptocurrencies are extremely risky, possibly more risky than stocks.


There are many ways that you can buy crypto. You can even earn some interest on your crypto when you lend it out through programmes like Crypto Earn.

Having a bit of crypto in your portfolio may be advisable. However, due to its huge risks, it is not advisable to place all of your money into it.


Art can actually be an investment too!

Wouldn’t it be great if you could purchase an art piece, hold it for a while, and then sell it at a much higher price?

undraw art lover yjfr

Art investing is rather complicated, and the barriers to entry can be rather high as well.

Here are 2 courses that you can start off with:

  1. Sotheby’s Institute of Art
  2. Christie’s Education


Crowdfunding mainly gained popularity with Kickstarter.

For a new company, it can be hard to receive funding for their projects.

Crowdfunding allows companies to pitch ideas to the public. If there are people who believe in the company’s idea, they can contribute a certain sum of money to fund the project.

If the funding goal is met, the company receives the funding. Those who funded the company may receive some benefit in return.

These include:

  1. Interest rate
  2. Rewards e.g. products / services
  3. Equity

The interest rates are usually higher compared to banks. This is because the default risk is much higher.

One such platform you can use is Funding Societies.

You can view my comparison of Funding Societies against a robo-advisor like StashAway.

Receiving equity is something that’s really interesting. If you choose the right company to fund, the company might boom in the future. As such, your stake in the company will be much more valuable in the future.

If you have a keen business acumen, this may be the way to invest for you.

There are 2 such platforms you can use in Singapore:

  1. FundedHere
  2. Fundnel

Funding these companies can be quite exciting, as most are early-stage startups. However, you should research the companies carefully before you decide to fund them.

How can I start to invest?

After deciding on the asset to invest in, you’ll need a platform to purchase these assets.

Here are some of the common platforms you can invest in:

  1. Broker
  2. Regular Savings Plan
  3. Financial Advisor
  4. Robo-Advisor
  5. Insurance Policies
  6. Leveraging


Brokers is the most common of investing platforms. These are usually firms that help you to buy or sell your assets.

There are many online brokers that you can use in Singapore. Some examples are:

  1. Saxo Markets
  2. UOB Kay Hian
  3. TD Ameritrade
  4. Standard Chartered Online trading
  5. FSMOne

There are many different platforms, each with their pros and cons.

These platforms may charge different fees for different assets. You may choose to use different platforms that are more cost effective for a certain asset.

The common assets that you can invest using an investment platform are:

  1. Stocks
  2. Bonds
  3. Mutual Funds

Regular Savings Plan

If you have a smaller capital, regular savings plans may be the answer for you.

These plans help you to employ the dollar-cost averaging strategy. Most plans usually allow you to invest from as little as $100 a month into different assets.

Here are 5 examples of RSPs:

  1. OCBC Blue Chip Investment Plan
  2. FSMOne Regular Savings Plan
  3. POEMs Share Builders Plan
  4. DBS / POSB Invest Saver
  5. Saxo Regular Savings Plan

Financial Advisor

If you wish to leave the investing to the experts, you may decide to go with a financial advisor instead.

These advisors will first try to understand your financial background and goals. After that, they will determine the best investment portfolio for you.

However, most advisors may charge higher fees. You may want to consider how these fees eat into your returns, as doing DIY investing may be a cheaper option.


If you don’t wish to hire a human advisor, a digital one may be more suitable for you.

artifical inteligence

These digital wealth planners use algorithms to determine the best portfolio for you. Without having to use a lot of resource, this allows them to charge lower fees.

However, there is not much flexibility when using them. Based on your risk profile, they will help you to invest in a certain portfolio. You cannot customise it and have to go with the portfolio they suggest.

Ultimately, robo-advisors are a great way for a beginner to start investing. You are able to invest in a portfolio that will tries to optimise your returns based on your risk profile.

After learning more about investing, you may decide to do DIY investing with a broker in the future.

Do you have any doubts about investing with a robo-advisor? Here are my answers to 13 questions you might have about them.

Insurance Policies

Did you know that some of your insurance policies may include an investment component?

There are 2 main policies that have this component:

  1. Investment-linked policies (ILPs)
  2. Whole-life (participating) policies

Both of these policies will invest your money into certain funds selected by the insurance company.

A whole-life (participating) policy will have a guaranteed return. Depending on the funds’ performance, you may receive better returns if the fund performs well.

In contrast, ILPs do not have a guaranteed return. They are considered higher risk, but may be able to give you much higher returns.

There are many things you would need to consider before you get one of these plans. Here’s a question you might want to ask:

Should I mix my insurance with my investments, even though they are trying to achieve conflicting goals?

You need to consider the risk and benefits extremely carefully if you decide to commit to such an insurance policy.

You may be incurring a lot of added costs when you invest with an insurance company. These costs may potentially eat into the returns you receive.


Leveraging is possibly the riskiest way of investing.

Simply put, you are borrowing money to make an investment.

Returns – Interest Owed = Net Gain or Loss

You are trying to achieve a return of investment, which is higher than the interest rate you owe. As a result, you will receive a net gain.

However, the risks are really high.

You’ll most likely invest in stocks as they have the highest potential return. However, stocks can rise or drop at any time.

When it’s time for you to return what you owe, you may be looking at a potential loss!

Investing via leveraging is extremely risky. It is not a recommended way of investing, unless you are absolutely sure that you are able to profit from it.

What is the cost of investing?

Most returns being stated usually don’t take into account the fees you incur.

After placing fees into the equation, your returns may be lower than expected!

It is extremely important to ensure your fees remain low.

Here are 5 types of fees that you might incur while investing:

  1. Transaction Fees
  2. Management Fees
  3. Dividend Withholding Tax
  4. Estate Tax
  5. Foreign Currency Risk

Transaction Fees

To carry out a buy / sell order on a brokerage platform, they will usually charge a transaction fee.

Most transaction fees are a percent of your total investment. However, most platforms charge a minimum fee as well.

For example, here are the fees that FSMOne charges.

FSMOne Fees
Source: FSMOne

By doing the calculations, it may not be worth to invest in a broker if you only have a small sum.

Investment AmountFeeFee Proportion

If you invest between $2k-$12k, the transaction fee is still $10.

If you invest a smaller sum, your transaction fee takes up a larger proportion. As such, it would always be best to invest a larger sum for platforms charging a transaction fee.

Advisory Fees

Advisory fees are usually charged by:

  1. Robo-advisors
  2. ETFs
  3. Mutual Funds
  4. Financial Advisors

These fees are based on your Asset Under Management (AUM).

AUM is the total market value of investments that the firm manages on your behalf.


Based on the value of your assets, you will be charged an annual fee. This fee is usually deducted monthly or annually.

One thing to note is that no matter how your assets perform, you will still need to pay this fee. This is even when your assets aren’t doing well!

Such fees can eat into your returns.

For example, you are earning a 5% annual return, but you have to pay 1% in fees annually.

This actually results in you only receiving a 4% annual return!

This is in contrast to a transaction fee which is a one-off fee.

Financial advisors are known to charge a higher fee for their services.

It is important to decide for yourself if the fees being charged are worth it.

If the performance of 2 different advisors are similar, it may make sense to choose the one that offers lower fees.

Dividend Withholding Tax

Some stocks may issue dividends from time to time.

Depending on the market you invest in, you may be subjected to a dividend withholding tax.

A dividend withholding tax is a tax on the dividends that you receive.

United States has the heftiest dividend withholding tax (30%).

It is important to consider this tax when you invest in foreign markets. If you are not careful, it can greatly affect your returns.

In markets that charge such a tax, it has been suggested that you choose to invest in growth stocks instead of dividend stocks. That way, you incur lesser fees since you are not investing in stocks that issue dividends.

Estate (Inheritance) Tax

Another important consideration is the estate (or inheritance) tax.

An estate (inheritance) tax is a tax on the transfer of assets from a deceased person to another person.

Estate tax normally applies when you pass on, and you have a certain amount of assets in other markets.

If another person wishes to have your assets transferred to them, they may incur an estate tax.

Again, the United States charges a pretty hefty tax for nonresidents.

It can be quite confusing to understand what the IRS website is trying to say.

This PDF uploaded by Deloitte helps to make things clearer. As long as your US assets are more than $60k, you are subject to the estate tax.

If your assets are less than $60k, you are exempted from this tax.

Screenshot 2020 08 16 at 17.14.25
Source: Deloitte

Based on the total value of your assets after $60k, you are subject to a tax between 18-40%!

Screenshot 2020 08 16 at 17.11.06
Source: Deloitte

That is an extremely hefty fee!

With both the high dividend withholding tax and estate tax, investing in US markets may incur a lot of costs.

It is extremely important to consider these fees before you invest in the US market.

Foreign Currency Risk

When you invest in other markets besides Singapore, you can only invest in the market’s local currency.

As such, you are exposed to foreign currency risk.

Your investments in a foreign market may be doing well. However, the exchange rate may be poor at the point in time you decide to sell your asset. After selling your asset and converting the value back to SGD, there may be some loss in value.

Foreign currency risk is an important factor to consider when investing in foreign markets.

Should I invest now or wait?

I would strongly encourage everyone to start investing now.

By investing now, you will have more time in the markets which helps you to earn greater returns in the future.

This is because you have a longer time horizon compared to if you decide to invest at a later time.

With the rise of robo-advisors, you are able to invest even with a small amount of money. Advisors like Syfe and StashAway have no minimum sum to get started. This means you can invest how much money you can afford to.

Investing is so easy now, there’s really no excuse not to start!

However, you need to be absolutely sure that you understand the asset you’ve chosen before diving in.

You may be pressured by others to start investing now, especially in times when the markets are down.

However, you should only invest in assets that you’re comfortable with.

Investing is not a race. You are not in competition with anyone else.

People who compete usually have huge ups and downs in their financial life. […]

All you need to do to make more money is simply focus on becoming a better investor.

If you focus on improving your experience and education as an investor, you will gain tremendous wealth.

Robert Kiyosaki (Rich Dad’s Guide to Investing)


After reading this comprehensive review, I hope you’ll be more familiar with how investing works.

Investing is an extremely complicated subject. However, by learning how they work, you are able to achieve great returns. By understanding the fundamentals better, I hope you’ll be encouraged to kickstart your investing journey!

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