Personal Finance Archives | Page 57 of 148

Stocks 101: A Guide For Newbies

Tackle your busy life while earning money on the side by investing your money. Let your money work for you to achieve the future you have always dreamed of. Renowned investor Warren Buffett defines investing as the “the process of laying out money now to receive more money in the future.”

(Image credit: Fortune Live Media, via Flickr)

To start investing, you must know what is a stock is first.

WHAT IS A STOCK?

Whether you call it security or equity, a share of stock is a legal ownership in a business. Businesses or corporations issue stocks to gain money. It comes in two varieties – preferred and common. Preferred stock comes with a predetermined dividend payment. While, the common stock allows the stockholder an access to a proportionate share of a company’a profits or losses. It is to you to choose whichever suits you best.

HOW DO YOU MAKE MONEY WITH STOCKS?

There are two ways to make money from owning and investing in stocks. You can make money by reaping the increase in stock price or dividends. Because these two accumulate over time, just one year’s investment in a premium can yield a solid return in the next couple of decades. You can look up blue chip companies such as Coca-Cola and Disney.

The Father of Value Investing, Benjamin Graham, once said:

“The real money in investing will have to be made—as most of it has been in the past—not out of buying and selling, but out of owning and holding securities, receiving interest and dividends, and benefiting from their long-term increase in value.”

WHY SHOULD YOU INVEST?

The stock market provides high returns. You should invest to grow your wealth. However, I cannot guarantee how your stocks will perform. You need to understand that strategy application and diversification aids in growing your wealth. Diversifying your investments by including stocks along with your bonds and assets can help protect you from the inherent volatility of the financial markets.

WHAT IS DIVERSIFICATION?

To provide cushion from the risks that come with the stock market, one can apply diversification. Think of it as not putting all your eggs in one basket. In order to diversify your stocks portfolio, you may need a significant amount of money to invest. It is nearly impossible to create a well-diversified portfolio with S$1,000 alone.

This is where mutual funds come into play. Mutual funds tend to have a large number of stocks and other investments whereby it is controlled by a portfolio manager. It is more diversified than a single stock in one company. This is something that you must think about.

Sources: 1 & 2

4 Money Moves To Take On Your 20s

On your 20s, you will encounter a myriad of firsts. From earning your first full-time job to surviving your first failure, your early experiences shape who you become in the future. Your major accomplishments and significant failures are your best teachers.

You will become more independent and responsible as time passed. You will begin to live on your own, to solve your own problems, and to budget your own finances. Hence, it is important to take the following money moves as early as now.

MONEY MOVES #1: MAKING QUALITY PURCHASES

Living in the modern generation where everything is handed with significant convenience, you can buy anything you want with a few taps or clicks. It is tempting to bite into every online promotions or group deals available. However, you need to survive these temptations to make good decisions.

Identify your financial goals and work towards it. You may succumb to your wants from time to time, but you are the only one who can recognize what is important. Invest on things that have a greater value in the future.

MONEY MOVES #2: CREATING A BUDGET

As a young adult, it may be your first time to dissociate yourself financially from your parents. Your independence comes with the responsibility to understand what comes in and what comes out from your pockets. You can either go the old-school route through journalling or the digital route through Excel or budgeting tools. Do whichever feels more comfortable to you. Leave some money for your unexpected and recreational expenses.

What if you are romantically involved with someone? With love and care comes the acts of service. You may choose to spend money for your beloved and that will open another expense category. It is up to you to allocate how much you want for your dating budget.

MONEY MOVES #3: SAVING AND INVESTING

Time is of the essence. There is no perfect time to save and invest than right now. Let your budget direct you to how much you can save each month. It is recommended to save at least one-third of your income. This way, you can cushion unexpected expenses brought by sudden life changes. Do not get me started about layoffs and home repairs!

As for investing, you may consider maximizing your contributions to your CPF account. You will reap what you sow.

MONEY MOVES #4: OPEN TWO BANK ACCOUNTS

As a responsible young adult, you may open two bank accounts. One account can handle your operations and the other can handle your reserves. By operations, I am referring to the money you will spend for your everyday needs. Money from your operational account can be used to pay for your bills and daily purchases.

While, the reserve account can be used to secure your savings. It is the account that can help you reach your financial goals.

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BOTTOMLINE

When everything is said and done, you want to take advantage of the time you have now. Make smart choices as you will reap its benefits later in life. However, do not forget to live a little. You work for a reason – to a live a pleasant life. Do not forget to reward yourself for all the hard-work you have been

Sources: 1 & 2

5 Things To Consider When Switching Banks

Before you finalize your switch from one bank to another, ensure that you understand what you are signing up for. Here are five questions you need to answer before you decide.

DO YOU WANT A HIGHER SAVINGS ACCOUNT INTEREST RATE?

You get what you think you deserve. If you are earning nearly nothing in your savings account then, it is worth evaluating the alternatives. Moving your funds elsewhere makes sense only when you can earn significantly more in another account.

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For instance, switching might not be worth the trouble in this scenario. Say you only have around S$1,000 in your savings account and the extra 0.5% interest gets you about S$5 additional on your monthly total. If you are generally satisfied with your current bank, why bother?

DO YOU WANT TO SIMPLIFY YOUR FINANCES?

Some Singaporeans have accumulated multiple accounts over the years. So? Switching banks can be an opportunity to organize your finances. Organizing your finances allows you to minimize your online bank account and to move your money as quickly as possible. Have everything in one place by choosing a premium bank.

This bank must cater to all your deposit needs, offer low fees, and provide competitive interest-bearing accounts.

DO YOU PREFER TO HAVE AN UPGRADE IN ONLINE AND MOBILE BANKING?

Whether you want to acquire DBS Paylah! or UOB Mighty, most banks offer online and mobile banking tools to smoothen your transactions. You may consider all these tools as a means to weigh whether you watch to switch banks or not. Contemplate on the features you need and the ones that are available thru your chosen banks.

If you often transfer funds between a local and an overseas account. Then? You have to find an online banking app that enables you to do this. Take note of the charges that come with every deposit.

DO YOU WANT A BETTER CUSTOMER SERVICE?

How is the bank personnel treating you after you sign-up? Dissatisfied customers may receive better service in another bank. Look for online reviews and friend recommendations when reviewing a bank’s customer service prowess.

It is best to talk to someone credible to assess their issues in the bank staff and service.

DO YOU PREFER A BANK WITH BRANCHES NEARBY?

Accessibility is important when considering which bank to choose. You must survey the nearby banks and notice which ones are more accessible. You may also walk up to the teller to ask about their safe deposit box or their online banking tools.

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Who knows? Your chosen bank may allow you to transfer or deposit funds with a few swipes of the finger!

Sources: 1 & 2

What On Earth Is A Fiduciary?

DEFINE

Recently, my significant other opened the idea of discussing about whether it is worth getting a fiduciary and a financial adviser. I focused on the former. A fiduciary’s duties and responsibilities goes beyond directing the individual (i.e., beneficiary) to his or her financial goals. The fiduciary acts for or on behalf of the beneficiary in certain circumstances. This is a bond established by utmost confidence and trust.

A fiduciary is either a person or an organization who has the highest legal duty of being ethically bound to act in the beneficiary’s best interest. Fiduciary relationships include:

* Trustees (of a beneficiary);
* Directors (of a company);
* Agents (of a principal);
* Lawyers (to the client); and
* Partners (to each other).

Aside from this, the Courts may find a fiduciary relationship exists when the beneficiary is dependent on the fiduciary, when the fiduciary has the discretion to act unilaterally for the beneficiary, and when such power affects the beneficiary’s legal or practical interests.

Do you qualify for any of these? Are you a fiduciary? If so, here are your duties.

DUTIES

#1: First and foremost, the fiduciary needs to avoid conflict of interest and duty. For example, a company director must not put himself or herself in a position where personal interest will conflict with that of the company’s. Do everything in good faith.

#2: Secondly, you must avoid unauthorized profits. For example, your position as a company director may be in breach of your duty if you acquire a business opportunity (i.e., belonging to the company) for yourself.

#3: Lastly, the fiduciary must manage the assets of an individual for the benefits of the beneficiary himself or herself. You cannot benefit personally from the management of the beneficiary’s assets.

LAW

According to research, Singapore is part of the common law legal tradition. Thus, the decisions of precedent cases in the superior courts are binding on the lower courts. Moreover, the decisions in other Commonwealth jurisdictions (e.g., in UK, Australia, or Malaysia) can be persuasive in the Singapore courts.

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“When a fiduciary relationship is established in one of these cases, future cases are bound to follow what has been established before. Statutes that are passed by Parliament may also impose certain statutory duties akin to fiduciary duties between parties.”

Consult legal agents to know more.

Sources: 1 & 2

6 Financial Resolutions For Every Singaporean

As I receive my annual bank statements and credit card summaries, I realize how my financial year went by. January is a fantastic time to review your financial strengths and weaknesses. Where did you fall short? Not only is it a good way to reflect on your spending habits, but it is also a good way to craft your financial goals.

Use your year-end resources to establish your financial resolutions for the year 2020!

1: IDENTIFY YOUR FINANCIAL GOALS

Several articles from Money Digest highlighted how helpful it is to determine your financial goals. Start your journey by identifying both your short-term and your long-term financial goals. Are you hoping to earn a degree or to expand your retirement fund? Do you see yourself purchasing a new flat with your spouse? Or, do you want a to lead a different career?

To illustrate your path in a detailed manner, you may create a Financial Vision Board. Take some time to think about how to achieve your financial goals this year. Consider your outlook before your plan of attack.

2: SAVE MORE MONEY

How many times have you heard about “saving more money” as a resolution? This is a common financial resolution for many Singaporeans. However, most people do not know how to start. It is recommended to be specific to increase the chances of success. Increase the percentage of your monthly income that goes into your savings.

Save at least 15% or your monthly income and increase the percentage whenever you feel more comfortable. If you are already saving 20% of your income then, you are in good place. A person who is earning S$4,000 per month can reap the benefits of having S$9,600 by the end of the year. Raising the percentage to 30% will equate to having S$14,400 by December 2020. Saving more money gets you closer to achieving your financial goals.

3: PAY OFF YOUR DEBTS IN FULL

Two years ago, MAS estimated that there are 9 million credit cards in circulation in Singapore, with Singaporeans charging an average of S$555 per card. Imagine how much these numbers have grown since? Credit card debt is rising in the country as convenience is hard to resist.

Many credit card holders enjoy the attractive benefits or the good rewards programs of several issuers. While there is nothing wrong with paying using cashless methods, you need to be responsible with paying the hefty interest rates and balances. Commit to paying the full amount of your monthly debts this 2020!

4: GROW YOUR INVESTMENTS

Aside from increasing your savings, you can make your money work for you by investing each month. There are many ways to invest your money such as putting it in high-interest savings account. This can increase your earnings by 2% per annum.

Another approach is to sign-up for investment-linked insurance policy where a portion of your premiums will be invested in specific investment funds. Review your insurance policies and ask your financial adviser about this option.

5: GO ON A CASH-ONLY DIET

You have endured the back-to-back expenses brought by the Holiday season. Chances are, your credit card got exhausted due to the year-end sales and other Christmastime delights you spent for your beloved ones.

Cushion these expenses by going on a “cash-only” diet for a few weeks or a couple of months. Begin by allocating a monthly budget based on the money you have. Give yourself a specific cash amount per week and work your way around it. Doing this will challenge your self-control and your resourcefulness.

6: AUTOMATE YOUR SAVINGS

Transform your new year enthusiasm into something productive by automating your savings. Commit to this new habit by researching on the available services of the local bank institutions. For instance, I recently came across with the UOB Stash Account.

UOB Stash Account allows you to accumulate your savings for up up to 1% p.a. interest, simply by maintaining or increasing your previous month’s Monthly Average Balance. An initial deposit of S$1,000 is needed to open the account, which is open for all. You can apply for your Stash Account and get an approval within minutes by simply going to the website. Terms and conditions apply.

Sources: 1 & 2

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