Special Writeup - Especially for Aspiring or Beginner Investors

I recently have been asked by a few close friends on why to invest, what to invest and how to invest. Alot of times we may take our easy access to financial markets for granted as probably investing is second nature to us. However, I realised that for many folks out there who are either not working in the financial industry or are not versed yet in all things investing, they may find it difficult to understand how to start investing and for that matter doing it right. Thus, I'm writing this for their benefit.

To keep it simple, I will categorise markets into 3 broad forms. There is the equity or stock market, fixed income or bond market and alternatives such as FX, real estate, gold, etc.
I shall elaborate with the commonest, which is the stock market (but if there are requests to understand the other markets do post your comments and I shall blog about them). 

In Singapore, we are blessed with the SGX stock market. What is even more cool is that we are able to buy smaller lot sizes (100 shares) which makes accessing the market even easier. Basically, to access the stock market there are 2 main ways: Actively or Passively. Both have their pros and cons and I shall elaborate a little further below.

1. Active Participation in Stock Market
- This is the most traditional way to be involved in the stock market. Just buy the shares of the company. To do this, you would need to open a brokerage account with any of the local brokerage houses. This is where alot of beginner investors stump and get alittle lazy. If you wish to invest, you need to get moving!
- Honestly, buying stocks directly is not as daunting as it seems, as long as you understand what you invest in. My suggestion is to start off with blue chips, look at the 30 stocks listed on the STI Index and figure out which companies and their respective businesses that you like. And just buy into them and hold them for the long term. It is that simple for a start.
Of course as you get more experienced you will study alot more information like fundamentals, valuation metrics, etc. However, for a start just buy a few lots of businesses that you are familiar with. I use Mapletree Commercial Trust (REIT) as an example. They own Vivocity and I love shopping there and am impressed with the locality of the mall. So I bought the shares of the REIT. It really is as simple as that!

2. Passive Participation in Stock Market
- There is another way to begin your stock journey albeit in a more passive manner. You may not yet have the confidence to choose the stocks that you like but you would still want to participate in the stock market. This is where an Exchange Traded Fund (ETF) is most useful. This is a passive investment vehicle whereby it purchases and replicates the stocks on the Stock Index. What you need to do is just to purchase units of this ETF to get a broad based exposure of the overall stock market. As this is not meant to be a sponsored post I shall not mention which ETF or product is most suitable. Nevertheless, a quick google on "Singapore Equity ETF" will definitely help provide you more information.

- Another passive option is through Unit Trusts that invest in the equity markets. Tip would be to identify funds that are able to consistently provide superior alpha returns (ie returns above what is expected of the market). This is not an easy task but one that can potentially reap superior rewards if done well. Do note the slightly higher costs and fees that are involved with unit trusts that are in exchange for professional investment management and stock picking.

Sincerely hope that the above sharing has helped. As can be seen, accessing the stock market is not as daunting as it seems. It's all about starting somewhere and increasing your exposure and understanding of the financial markets that will eventually empower you to be a better and wiser investor.

Signing Off
Transitioning Stock Investor