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Top 5 Investments Business Owners Should Make

When you run a business, whether it’s a small start-up or a large corporation, you need to be confident in where you invest all company profits. Pumping a lot of the money back into the business is the place to start in order to help it grow and remain profitable. Yet there are many other areas in which you can invest as a business owner that will provide dividends to gain further profits for strengthening the firm. Here are five of the best investments for business owners to make.

Penny Stocks

Especially for start-ups, new and small businesses, penny stocks are a great place to start for any business owner making their first investments. These are companies that trade with exceptionally low share prices (usually £3 or less), which means a lot of shares can be invested in with a low amount of capital. They are a highly volatile investment but do make a great starting place for learning the basics of investing.

Forex

If you want to find a reputable way of making some extra money for your business by investing profits, then forex trading with Fx Pro is a good option. There are a number of safe currencies to invest in during times of uncertainty, or more risky choices if you’re feeling brave. For beginners or experts, it offers a good way to boost profits across international currency markets.

Equity

Buying an ownership stake or equity investment in another company can provide additional capital for your firm. Obviously, it is highly inadvisable to invest in any competitors. Finding a successful company or one that is on the rise to take an ownership stake can result in good percentage profits for your business, as long as it doesn’t perform poorly or go bankrupt.

Property

Real estate is a great way to enter an entirely new market and with house and rent prices still rising, it can be incredibly lucrative. It may be better to invest in commercial property, related more to your business though, such as buying your office rather than renting if you have the profits. This provides a useful asset and one that will hopefully grow in value.

Bonds and Mutual Funds

For long term, safe investments bonds and mutual funds are the go-to option. Government bonds are some of the safest investment options out there, while mutual funds can be found that have low risk attached to them. They provide a good place to learn about market trends without the risk of losing big in one go.

Consider these five investments if you’re a business owner looking to put your profits in a worthwhile place.

Robo-Advisors: The New Wave Of Wealth Managers

Wealth Management Services used to be exclusive to the people who are insanely rich. These people were expected to pay at least 1% of the value of their assets as fees. Many wealth managers charge more than this! This is why these services leave no room for small-time investors.

Traditional wealth managers provide tailorized advice on financial matters such as investments, retirement, taxes, and estate planning. You must keep up with your annual fees to reap these benefits. However, a new wave just hit the country! Several FinTech (i.e., Financial Technology) companies have digitalized wealth management services.

These digitalized wealth managament services make use of “robo-advisors”, which allow all sorts of clients to build a portfolio at a cheaper rate. Robo-advisors measure your risk appetite and diversify accordingly. The gradual growth of robo-advisors is seen around the globe.

Know more about robo-advisors by watching this short video:

The local FinTech companies that I mentioned above include Bambu and Smartly. Let me kick off with Bambu. Bambu chose the B2B (i.e., Business to Business) route in marketing their robo-advisory platform. This means that they offer their services to the financial institutions themselves.

Ned Philips, the brainchild and CEO of Bambu, believes that the quick rise of digital adaption will greatly benefit the consumers. He explained that it may cost his company US$1 million (S$1.45 million approximately) to acquire 3,000 customers. The low fees that robo-advisors charge make it possible for him to sustain the business.

Smartly, on the other hand, allows its clients to invest in internationally diversified portfolios. The company offers ETFs or Exchange-Traded Funds. You can invest for as low as S$50 per month. You read that right! Their fees are very affordable!

Clients or investors are mandated to provide basic information about themselves. Then, Smartly’s proprietary algorithms will suggest a personalized portfolio based on the profile. It is possible to change the allocations of the funds if the client does not agree with it. Its mere slogan will say it all: “Anyone can be an investor – an investment service built for you.”

In summary, robo-advisors allow you to create a portfolio on autopilot. The digital algorithms access your tolerance to risks and your preferred timeline. Afterwards, a portfolio will be built. It is undeniably cheaper than the traditional wealth management services. This is why it welcomes more and more small-time investors to open their accounts.

Image Credits: pixabay.com

Do you think that this will benefit the Singapore market? Well, I hope so!

Sources: 1 & 2

The Basics of Technical Analysis

A technical analyst’s best friends are charts and patterns. But to the uninitiated, these are hard to make sense of. Once you get a hang of the basics however, your new-found knowledge can be used to search for potential investment opportunities.

The Assumptions

Before we get ahead of ourselves, let’s start from the beginning. What is technical analysis anyway?

Simply put, it is a study of past price movement patterns and market data to forecast future price movement directions that is built on 3 key assumptions:

1) Key factors are accounted for
The company’s fundamentals, broader economic factors and market psychology, are all priced into the stock, removing the need to consider these factors separately.

2) Prices follow trends
After a trend has been established, prices tend to move in the same direction.

3) History tends to repeat itself
This is because market participants tend to react consistently to similar market events over time.

However, it is important to remember that past performance is not necessarily indicative of future results. New factors or market conditions may arise which deviate from past trends and patterns.

Candlesticks as Building Blocks

You can’t think about technical analysis without picturing a candlestick chart. It may surprise you to know that candlestick charts are not a modern-day invention. They have been used since the 1700s, having been introduced by Homma Munehisa, a rice merchant in Japan.

There must be something to candlesticks if they have been able to stand the test of time. And indeed, a single candlestick holds invaluable information which investors can distil at a glance:

Spotting Patterns

Individual candlesticks can be strung together to form charts which technical analysts pour over, looking for patterns which give them trading ideas. However, you will have to understand how to spot these patterns and what they mean before you can capitalise.

Here are two simple patterns to ease you into things:

Putting It Into Practice

These two patterns are just the tip of the iceberg. There are many other technical analysis patterns that you can learn about that may help you spot potential trading opportunities.

But even if you know what patterns to look out for, there is an entire universe of stocks to choose from. If you have no prior interest in any stock, it would be hard to know where to begin. It simply wouldn’t be efficient to look at charts of every single stock and find actionable patterns within.

One possible option is to use stock screeners to identify stocks that meet your own criteria. For example, a stock screener can help you find stocks like the one below that exhibited a head and shoulders pattern, during a specified period of time.

Source: Technical Insight on Maybank Kim Eng’s KE Trade platform

Technical analysis is useful for investors to understand. But like we highlighted earlier, it isn’t infallible and is built on several assumptions. Therefore, it is best to use technical analysis along with other tools in your investment toolkit, like fundamental analysis, and to practice often in order to gain a better understanding of how these strategies could help you meet your investment goals.

Disclaimer: This message is for general knowledge or information only. It is not an offer or invitation to buy or sell securities, futures or other products or services. Our products or services vary in different jurisdictions, subject to their respective terms and conditions and the licences our affiliates and us hold. This message is not an advice or recommendation for any financial planning, investment, legal, tax or other purposes and, accordingly, no responsibility or liability is assumed by us or our affiliates, whether directly or indirectly, from any person taking or not taking action

A Dividend Investing Strategy

Singapore investors love their dividend stocks. According to the Investment Trends Singapore Broking Report 2015, 75% of investors polled stated that they usually invest in dividend stocks when trading on the Singapore market. And they are spoilt for choice! Many companies that list on SGX pay dividends. But with so many dividend-paying stocks out there, which stock would you consider?

A High Dividend Yield Stock: Better than a Low Dividend Yield Stock or?

That is the question. The stock with the highest dividend yield in the industry may look attractive now, but is a stock with 10% dividend yield better than one with 3% in the long run? Does a high yield stock always outperform a low yield stock?

High dividend yield should not be taken at face value. It always pays to dig deeper and find out the real story behind certain attractive numbers before deciding to invest.

Companies with a high dividend yield compared to the market average may not necessarily equate to companies with good financial performance. The high dividend yield could be the result of declining share price due to weak fundamental such as inconsistent earnings, high debt etc. Besides, high dividend yield may not be sustainable. If earnings fall, the management may cut dividends or eliminate the pay-out altogether. Hence, investors should also look at companies with consistent dividend payouts and with the cash flows coming from actual core operations.

A Dividend Growth Strategy

If a stock with a high dividend yield is not necessarily the best choice for long-term investors, then what other strategies are there? A dividend growth strategy for one, is something you might want to learn more about.

To clarify, dividend yield is the dividend amount divided by the share price. Dividend growth meanwhile is how much the dollar-amount of dividends given out increases each year.

Take this hypothetical example which compares the performance of two investors (based on certain assumptions where indicated).

Investor A: Invests in ABC Company which pays 7% dividend yield at the outset and every year after that.

Investor B: Invests in XYZ Company which pays 3% dividend yield at the outset.

XYZ Company has a lower dividend yield because they choose to reinvest some of their earnings into the business. The business grows, and so does their dividend pay-out – to the tune of 8% every year (e.g. $0.03 dividend per share in year 1, $0.032 in year 2).

Assume that the share prices for both of these companies remain unchanged for 25 years and both investors reinvested their dividends every year. Their performance can be found in the table below.

The Results
Investor A, the high yield investor, beats Investor B during the beginning years but the dividend pay-out and portfolio value of Investor B caught up in year 16 and 22 respectively. In the end, the total dividends received by Investor B are more than 3 times that of Investor A.

So, while Investor B received low pay-outs initially, he was rewarded with future growth. This is the underlying principle of the dividend growth investing strategy. Length of the period of investment would also affect the total dividends received.

Finding Dividend Growth Stocks

That will be the next question on your mind if you want to explore using a dividend growth strategy. Stock screeners come in useful here. A stock screener allows you to choose certain criteria, and to find stocks that fit the criteria you have selected.

Here is a set of criteria that could be used to pull dividend growth stocks:

Dividend yield>3%
Market capitalisation>200 million
Dividend growth rate (5-year average)>8%.

The stock screener below, for example, has found 17 stocks that match the above criteria. This provides a good starting point for investors to do further research into these specific stocks. Try to come up with your own set of criteria and see how it works.

Source: Recognia Strategy Builder on Maybank Kim Eng’s KE Trade platform as at March 2016

Disclaimer: This message is for general knowledge or information only. It is not an offer or invitation to buy or sell securities, futures or other products or services. Our products or services vary in different jurisdictions, subject to their respective terms and conditions and the licences our affiliates and us hold. This message is not an advice or recommendation for any financial planning, investment, legal, tax or other purposes and, accordingly, no responsibility or liability is assumed by us or our affiliates, whether directly or indirectly, from any person taking or not taking action

An Investment for Property Lovers and Dividend Seekers

Singaporeans are fixated with buying property – and they don’t just stop at one.

In a report published in June 2016, Maybank Kim Eng’s research team found that approximately 1.1 million households in Singapore own the homes they occupy, but there are another 200,000 housing units are currently held as investments. This demand, coupled with land scarcity, means that property in Singapore doesn’t come cheap.

There is however, a more affordable option for those looking to invest in property: real estate investment trusts (REITs). REITs – Singapore REITs (S-REITs) in particular – have been making headlines recently for offering handsome dividends, made even more attractive by a persistent low interest rate environment. If you are a dividend investor, you may want to learn more about this asset class.

How Have Singapore REITs Fared?

According to a Bloomberg report in October 2016, the 7% yield offered by S-REITs exceeded those listed in Australia, the US and Japan. That’s been the driving force behind an approximately 9% increase in the FTSE Straits Times Real Estate Investment Trust index this year as yield-hungry investors flock to the offerings amid record-low interest rates.

Findings by SGX My Gateway published on 11 September 2016 also showed that the sector logged an indicative average dividend yield of 6.7% p.a. thus far, compared to that of the Straits Times Index (3.9% p.a.) and MSCI World REIT Index (3.9%p.a.).

Compared to fixed deposit rates? The difference is even wider. In September 2016, the 12-month fixed deposit rate – or the average rate compiled from that quoted by 10 leading banks and finance companies – was 0.35% p.a.

What is a REIT Anyway?

A REIT is a trust that owns and operates income generating real estate. The rental income or interest payment that is earned by the REIT is passed on to investors in the form of dividends.

Here are more facts about REITs and S-REITs:

There’s a reason why S-REITs pay handsome dividends. They are required to distribute at least 90% of their taxable income each year in order to enjoy tax exempt status by IRAS, subject to certain conditions.

Investing in one REIT gives you exposure to not just one, but a portfolio of properties, and at a fraction of the price that it would cost you to buy a single property.

The portfolio of properties are not limited to those in Singapore. Some REITs have international properties in their portfolio.

REITs are more liquid compared to property as they can be bought and sold on stock exchanges throughout the day just like any other stock.

What S-REITs are Out There?

There are different types of S-REITs to choose from, and they are affected by different factors.

Maybank Kim Eng’s research team believes that industrial REITs, like Ascendas REIT and Mapletree Industrial Trust, could benefit from public spending’s focus on boosting innovation and productivity. Business parks, science parks and high-spec industrial space will be in demand. So if you are wondering what type of REITs to watch out for, you could consider finding out more about industrial REITs and whether they fit the objectives of your portfolio.

Disclaimer: This message is for general knowledge or information only. It is not an offer or invitation to buy or sell securities, futures or other products or services. Our products or services vary in different jurisdictions, subject to their respective terms and conditions and the licences our affiliates and us hold. This message is not an advice or recommendation for any financial planning, investment, legal, tax or other purposes and, accordingly, no responsibility or liability is assumed by us or our affiliates, whether directly or indirectly, from any person taking or not taking action

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