03 January 2016

Investing your first $20,000

This morning, I downloaded a copy of the e-book written by Singapore top finance bloggers on how they would invest on their first $20k. I was impressed by the idea of Alvin Chow from BigFatPurse to request from top finance bloggers in Singapore to advise beginners like me on how they would invest their first $20k.

My takeaways after reading the e-book. Most of the bloggers advise on Index Investing, ie the Exchange Traded Fund (ETF). It’s a proven, time-efficient and effective way of investing. Even Warren Buffett once said that the majority of investors should invest in indexes because that’s the easiest way to beat even professional money managers. However, it is a boring approach in investing. You do not need to research as you are investing in a diversified portfolio which give you a peace of mind and a handsome return if you will to invest in long term.

Now, I shall also share on how I would invest on my first $20k. As you can see, my portfolio is not yet $20k, I certainly would hit $20k by the end of 2016. First of all, this $20k should be a sum that you can afford to lose or you do not need this money to pay for your children fee, house renovation or wedding packages before we can safely say you can use the money to invest.

For me, I do not really like Index Investing. I prefer to invest on my own to create my mini STI constituent components. So my approach is to invest on 3 stocks using $5k each and left $5k as warchest should the economy turn southwards, you can still catch the falling knives. Beside this $20k, there must also be a saving plan to keep on saving from your primary income and to reinvest on the market to generate more passive income. A rule of thumb is to diversify your portfolio into not more than 20 stocks and also keep a warchest ready to deploy when the economy turn southwards.

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