The whole world has suffered from the economic impact of the COVID-19 pandemic, and Singapore is no exception. According to the Trade and Industry Ministry, the economy shrank by 5.8% in total in 2020. While this is still lower than the government’s anticipated contraction of up to 6.5%, it still indicates the level of hardship that Singaporeans have had to face mostly in terms of loss of jobs due to dampened tourism, decreased consumer spending, and halted manufacturing lines due to disrupted demand.
The unexpected economic consequences of the pandemic has underlined, more than ever, the need for financial preparedness of individuals and families. As financial experts have long advised, it is wise to keep an emergency fund of at least six months to a year’s worth of your salary. Surely, many of us have balked at one time or another upon hearing this counsel, but with our experiences during the pandemic, this has truly become a lesson to learn in personal finance.
Indeed, the fortunate ones who are able to survive the pandemic are those with ample savings not only to spend for daily needs but perhaps even to invest, as another tenet of financial gurus is that during economic downturns, it is precisely the perfect time to swoop in on assets and investments that can be had for a bargain. Just what are these types of investments and how can you get in on them? If you have never learned about these things and you feel you are missing out on valuable opportunities to create wealth, don’t feel bad as it is never too late to start.
Here is a quick guide on the different types of financial investments that can help you grow your money in Singapore:
This is perhaps one of the most common investments you often hear about from other people. A share is a piece of ownership that a company offers to raise funding for further growth and development of the business. Thus, when you purchase a share of stock in a company, in effect you become a part owner of the business. These shares are listed in a public exchange called the stock market, such as the Singapore Exchange (SGX).
Holding a share gives you the right to attend stockholders’ meetings and to receive a portion of the company’s assets in case it is closed up. Investing in shares allows you to grow your money primarily through dividends, which is a portion of the profits of the company, or by selling your shares in the market at a higher price than when you acquired them. If you are keen on learning more about how to buy stocks in Singapore, the best way is to talk to a stock broker who can help guide you on requirements such as opening the required central depositary (CDP) account where to place your shares.
A bond is issued by a company or by the government to borrow money from the public to raise funds for their use. When you purchase a bond, you are essentially lending your money for a specific period of time with the promise of interest being paid on the principal amount, which is indicated by the coupon rate.
Once bonds mature, they are redeemed by the borrowing entity and you get back the whole amount of money that you lent. As such, you are able to grow your money in this type of investment through the interest payments the company or government makes. Similar to shares, you may also profit by selling your bonds at a higher price than what you got them for. You might want to look into Singapore Savings Bonds (SSB) that the government offers as one of the safest types of investments that you can make.
There are individuals or companies who may pool your money with others and invest it strategically in a portfolio of assets. It may be placed in securities or bonds, or a mix of both, along with other types of investments, depending on the investment objectives. This is called a fund, and you may invest in it by way of purchasing units. This is a good way to invest with the help of a trusted financial asset manager or management company. You grow your money with the increase in the NAVPU or net asset value per unit of the fund you bought into. A real estate investment trust or REIT is an example of a fund where money is invested in property assets.
As mentioned, if you are a newbie to all these things, don’t worry because growing your money through investments will become much easier once you get the hang of them. The key is to continuously build your financial smarts through reputable resources and trusted financial experts. Investing is a time-tested strategy to build your wealth and to fortify yourself against financial challenges.