10 Jul Investing tips for women: How to start today and keep going
You work and play hard. You might even be saving hard, mindful that you should be squirrelling away some funds for the proverbial rainy day.
But do you invest hard?
Not a lot of people do. And it’s mostly because of the perception that investing is complicated and that we don’t know enough.
There’s also the misconception that you need a lot of money to start investing in the first place – some feel they’ve not set aside enough funds to take the first step.
These were the findings from a survey that United Overseas Bank (UOB) did last year of 500 Singaporeans aged 21 to 45 years.
And the barriers are real. Speak to your friends and you’re likely to hear any of these reasons for them not putting their hard-earned money into instruments that would help their money grow faster and better.
And that includes women. Jacquelyn Tan, the bank’s Head of Group Personal Financial Services, said that while three out of five customers who purchased unit trusts in 2020 were women, many of their peers still hesitate.
“Our research showed that a greater proportion of women than men admit to procrastinating when it comes to investing, even though women are more likely to place an emphasis on it,” she said.
Yes, there is a plethora of investment products out there, from “traditional” ones like stocks, property and bonds, to alternatives like commodities, cryptocurrency and collectibles like watches and antiques.
And yes, it can feel overly complicated and terribly daunting.
And yes too, we seem to end up with information overload when we start our research, watch those how-to-invest videos on YouTube, or listen to well-meaning friends and relatives.
But it really doesn’t have to be that way. Tell yourself this (and often): Investing isn’t hard. And investing is necessary.
CNA Lifestyle asked investment experts for tips on how a woman can navigate the world of investing, whether you’re a complete noob, have already dipped a toe in and are ready to dive deeper, or are an experienced investor.
KNOW WHAT YOU’RE BUYING
Before you put your hard-earned money into any investment, do your research on the product to fully understand what you are buying.
“We should spend as much time as we need to fully understand the product and be comfortable with the risks involved,” said Mary Koh, Associate Trainer at the Institute for Financial Literacy (IFL), which is a collaboration between Singapore’s national financial education programme MoneySense, and Singapore Polytechnic Enterprise.
Koh advocates the “Ask, Check and Confirm” method.
“Ask as many questions as you can,” she said. For example, how much do I need to invest? How long do I need to be committed? How easy is it for me to exit this investment? What are the fees and charges involved? What is the worst-case scenario?
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After that, check and confirm the information that has been provided and do not rely on verbal promises, she said.
If you need to check whether an investment advisor is licensed, you can go to the Monetary Authority of Singapore website. It’s also a good idea to go to the National Crime Prevention Council website to check for scam alerts, including investment scams.
The MoneySense website also contains helpful investment information and you can improve your financial literacy at the same time, by signing up for seminars and workshops on financial topics, such as those conducted for free by the IFL.
KEEP AN OPEN MIND BUT ALSO BE WARY
Koh noted that while she personally prefers traditional investments like equities and bonds, you can still keep an open mind about products you are unfamiliar with, albeit cautiously.
“Be wary of high promised returns. Especially if they tell you it’s low risk. Always remember there is a risk-return trade-off. Ask lots of questions, speak to people who are for and against the product so you get to hear both the pros and cons,” she said. Risk-return trade-off refers to a higher risk associated with higher potential returns, and vice versa.
Although non-traditional products do tend to come with higher risk, you can still identify value and earn a return on investment with the right information, said Stephen Lee, Senior Research Analyst at consumer research firm ValueChampion.
“The danger is when retail investors follow the hype behind certain investment products without doing their homework. This becomes more like gambling than a sound investment with a reasonable expectation of return,” he said.
“At the end of the day, you should do enough research to feel comfortable with buying something where you understand the risk you are taking on versus the return you could reasonably expect.”
YOU DON’T HAVE TO START BIG OR BE TECH SAVVY
Some women may feel they need a large amount of capital or be digitally savvy to start investing but this is not necessarily the case.
Technology has sprouted convenient financial tools like robo advisors and easy-to-use trading platforms. Coupled with low minimum-deposit requirements, the barriers to entry for the securities market are relatively low, financial experts said.
For instance, the SimpleInvest feature in UOB Mighty, its all-in-one banking app, allows customers to start investing from as little as S$100. It also draws on the expertise of asset managers, including Fidelity International, JPMorgan Asset Management and UBS Asset Management, which means you do not have be an expert to invest or have to track your investment 24/7.
“(Investors) do not have to research the entire universe of investments to decide where to put their money,” said UOB’s Tan about SimpleInvest. “They will also have experts watching over and managing the risk in their investments, as well as making adjustments when market conditions change.”
“We believe that investing should be for everyone, regardless of how much they know about investing, how much time they have to keep track of their investments or even how much money they have set aside to invest,” she added.
IT HELPS TO HAVE GOALS
Everything starts with a goal, doesn’t it? It should be the same when you invest. These goals could include wanting to receive a regular stream of passive income to support your lifestyle or wanting to maximise the potential of growing your capital over the long term.
Your goal and risk appetite will affect your investment plan: The type of products to invest in, the capital to put in and the investment duration.
For instance, if your goal is to build an education fund for your child, you might consider lower-risk investments that help you attain the required funds by a specific date, like an endowment plan with a maturity date that matches the age of your child when he or she starts university.
Or, if you do not have as specific a goal as planning for retirement or a big-ticket purchase but something more generic, like making as much money as you can to supplement your current income, then investments that provide regular passive income might be the way to go. These include Real Estate Investment Trusts (REITs) – dividend-paying trust funds that invest in real estate assets – and blue-chip stocks with good dividend pay-outs.
“However, you should always know the lines you are not willing to cross,” said ValueChampion’s Lee. “For example, it might be okay for a 25-year-old to lose $5,000 of their savings, but not for a 45-year-old parent investing for their kid’s college education.”
SET ASIDE YOUR EMOTIONS
Investing guru Warren Buffett once said: “If you cannot control your emotions, you cannot control your money.” Ideally, we should base our investing decisions on logic and reason rather than emotions, but this may be easier said than done.
To avoid investing based on your emotions, there are two strategies you can employ. Dollar-cost averaging and diversification when investing in the securities market.
Dollar-cost averaging simply means that you put a fixed amount of money into an investment at regular intervals, helping to even out the cost of your investment over time.
When securities markets rise and fall, one may decide to buy more of or sell their investments due to over-eagerness or anxiety. Dollar-cost averaging can prevent such knee-jerk reactions, said Dharmo Soejanto, Head of Investment Partnerships and Solutions at UOB Asset Management.
The diversification strategy is about not putting all your eggs in one basket, and you can do this by investing across various sectors, geographies and asset classes. Diversification can help to reduce volatility in your investment portfolio, and hence anxiety level, noted Soejanto.
To keep emotions out of your investing decision, IFL’s Koh advises writing down what you like about the investment, what the risks involved are, and what your exit strategy would be.
“This can be a simple one-page note that highlights the gist of your investment plan. When emotions run high, relook your notes,” she said “Has the situation changed? Are there new risks that have emerged? If the situation has not changed, then you should follow the original investment plan.”
BE PATIENT, HONE YOUR SKILLS
ValueChampion’s Lee highlights the need for patience, whether it is to see one’s investment returns or to build one’s skills in investment.
“If you are letting your emotions and impatience dictate your investment strategy, then you are probably treading on some dangerous ground,” he said. “Inconsistent decision-making will prevent you from figuring out why you made or lost money, and you won’t be able to learn how to repeat success and avoid mistakes.
“Be realistic with your expectations for portfolio growth and the investment strategy you’ve implemented, and hone your investment skills and strategy over time with patience.”
Soejanto added that while the returns of money market instruments and short-term bonds are “probably fairly predictable”, it is “almost impossible” to predict returns on equity investments in the short term.
He gives the same advice: Be patient, and stay invested while keeping focused on your long-term investment goals. “Instead of looking to ‘time the market’ to try capturing quick returns, you should consider a ‘time in the market’ approach and to invest a fixed amount on a regular basis.”