#RecessionReady (3/4) — Should You Even Consider Investing When Markets Are Volatile?

You don’t need to be a seasoned investor to know that the Covid-19 pandemic has resulted in market volatility, fear and uncertainty.

In March 2020, the Dow Jones industrial average ended its 11-year bull market, closing with a loss of nearly 6%. Singapore’s stock market also went into a steep slide in March, with the benchmark Straits Times Index falling as much as 6.3% during intraday trading.

In addition, the US Federal Reserve slashed its rates, which caused the Singapore Interbank Offered Rate (SIBOR) to start dipping as well.

Strangely, markets started rallying in May only to come down again soon after — hence it’s prudent to exercise caution given that some analysts warn of a bear market rally and another stock market crash.

However, we can still invest and grow our money. But we need to do it carefully and wisely, without taking on too much risk.

 

 

Why still invest at all?

Investing is important for us to grow our savings; to make our money work harder so that we have more for our future needs.

By growing our wealth, we can ensure that we have enough for our retirement — so that there’s no need to rely on others or continue to work instead of enjoying our golden years. If we start investing early, we can have our desired lifestyle when we retire.

In addition to building our nest egg, we can also invest to hedge against inflation. There’s no point keeping our savings stashed away in a biscuit tin under our bed at 0% p.a., when the inflation rate coupled with higher living standards come up to about 3% p.a. As such, the value of our savings would keep diminishing each year.

Continuing to grow our money can provide some financial buffer, especially during tough times such as the ongoing Covid-19 pandemic.

 

I’m totally new to investing, how do I start?

Investing isn’t necessarily a huge decision that could break the bank. Beginner investors can get their feet wet by starting small and investing in straightforward financial products. There’s no need to pump in thousands of dollars of your savings from the get-go.

However, investing can be a life-changing decision — for good reason. By deciding to embark on your investment journey, you are actively trying to grow your money instead of letting it stagnate and decrease in value over the years due to inflation.

Even investing $100/month at 4% p.a. can have a “snowball effect” say, 20 years later.

Year	Total Deposits	Total interest	Balance
1	$1,200	$25.84	$1,225.84
2	$2,400	$100.72	$2,500.72
3	$3,600	$226.60	$3,826.60
4	$4,800	$405.50	$5,205.50
5	$6,000	$639.57	$6,639.57
10	$12,000	$2,717.62	$14,717.62
15	$18,000	$6,545.80	$24,545.80
20	$24,000	$12,503.29	$36,503.29

For illustration purposes only. Doesn’t take into consideration sales charges and fees.

After 20 years, this investment of just $100/month with 4% p.a. returns could yield a total interest that is about half of the capital you’ve put in. Imagine how your money could grow if you’re able to invest $500/month or more?

One such product that allows you to try this form of investing — AKA a regular savings plan (RSP) — is POSB Invest-Saver.

By using a concept called dollar-cost averaging (DCA), there’s no need to time the market — you simply use the same amount of money each month to buy either more shares (when the market is down and prices are lower) or fewer shares (when the market is up and prices are higher).

In addition, as markets now are lower than a year ago, it’s a favourable time to enter markets with a DCA approach, if you have the cash to spare. Do note that DCA is a balanced approach where slow and steady wins the race, and not a get-rich-quick scheme (we should be wary of those). After all, investing is a marathon, not a sprint. So, adopting a long-term investing view will augur well.

Graphic: POSB

With POSB Invest-Saver, you don’t need a lump sum to start your investment journey. Plus, you don’t need to stress over market fluctuations so there’s much less emotional involvement in an already emotional time (fear, loneliness, worry, and so on).

Strengthen your investment portfolio

Even for intermediate or advanced investors, an RSP like POSB Invest-Saver is a good addition to your portfolio.

As they say, don’t put all your eggs in one basket, and diversify your investments. And from just $100/month, this slow and steady balanced approach can add more strength and stability to your existing investments.

Most of us have a POSB or DBS account anyway, so when we log in to our digibank, we can easily check on how our Invest-Saver is doing.

Other ways of investing

Investing via robo-advisory platforms, such as digiPortfolio, has grown in popularity in recent years, These are digital platforms that provide automated, algorithm-driven financial planning services.

The robo-advisor will usually collect some information about you in order to find out more about your financial situation and risk appetite. It will use this data to provide and recommend a portfolio most suited to your profile. 

Other ways of investing include trading in stocks especially when the share prices of stable and reputable companies have fallen below fair value. In a bear market, accumulating such stocks could be a good long-term strategy. 

If stock-picking is not for you, you can always choose to buy into index funds that are made up of a basket of shares.

Whether you are a new investor or looking out for investment opportunities in the current bear market, be sure to only invest your idle savings after setting aside your emergency funds.

 

How to get started with POSB Invest-Saver

Investors of all levels enjoy these features of POSB Invest-Saver:

• Invest in Exchange Traded Funds (ETFs) or Unit Trusts (UTs) from just $100/month
• No trading or CDP account is needed
• No need to perform manual transactions as DCA is used
• No lock-in period, investors have the flexibility to top up their investment amount, terminate their plan or redeem their holdings at any time via digibank
• Accessible 24/7
• If you have a DBS/POSB Multiplier account, getting the POSB Invest-Saver can net you bonus interest

Setting up your POSB Invest-Saver account is easy and takes just 5 steps:

For Exchange Traded Funds:

1. Log in to your digibank
2. From the menu, click on Invest > More Investment Services
3. Choose “Set Up Exchange Traded Fund Regular Savings Plan (RSP)”
4. Select Cash in the “Invest Using…” field, then search and select your desired fund (you can view the fund’s detailed overview, including performance, before buying)
5. Make sure you read all the necessary important notices before proceeding

For Unit Trusts:

1. Log in to your digibank
2. From the menu, click on Invest > More Investment Services
3. Choose “Set Up or Update Unit Trust Regular Savings Plan (RSP)”
4. Select Cash in the “Invest Using…” field, then key in the Fund Name or search using Fund House, Currency, Asset Class, Risk Profile, Geography/Theme and select your desired fund (you can view the fund’s detailed overview, including performance, before buying). You will also need to complete the Customer Knowledge Assessment.
5. Make sure you read all the necessary important notices before proceeding

Upon successful setup, POSB will send you an email confirmation. There’ll also be notification of every subsequent transaction by mail or eAdvice. Your ETF or UT units purchased via Invest-Saver will be held in the custody of POSB Bank.

To start your investment journey with POSB Invest-Saver, click here to find out more.

Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. 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. All investments come with risks and you can lose money on your investment. Invest only if you understand and can monitor your investment. Diversify your investments and avoid investing a large portion of your money in a single product issuer. This advertisement has not been reviewed by the Monetary Authority of Singapore.
The material and information contained herein is for general circulation only and does not have regard to specific objectives, financial situation and particular needs of any specific investor individual and/or entity (collectively referred to as investor), wherever situated. The material and information contained herein does not constitute an offer, invitation, recommendation or solicitation of any action based upon it and should not be viewed as identifying or suggesting all risks, direct or indirect, that may be associated with any investment decision. Prospective investors should seek advice from a financial adviser regarding the suitability of the product before making a commitment to purchase the product. In the event that the prospective investor chooses not to seek such advice, he/she/they should carefully consider whether an investment in the said securities is suitable for them in light of their own circumstances, financial resources and entire investment programme.