Original investments for the next 10 years

Original investments for the next 10 years

Wouldn’t you want to know where to put your hard-earned money, so it can work by itself? Don’t you want a secure and profitable investment that will bring money in the long run? Well, who doesn’t? But if it was so easy, why isn’t everybody doing it. Because it isn’t that easy and the markets become increasingly unsteady. However, there are certain areas that come close to what you would want to call a safe investment.

Those are areas that are less dependent on the fluctuations of the market. For example – as the world tries to stir towards renewable energy resources, an increasing number of governments are subsidising this particular industry. Hence, the industry grows and becomes more profitable – no matter whether another financial crisis will hit or not. Although nothing is even 100% secure, certain areas of investment are very likely to create profit. Not all are in Europe and North America though.

Investing in Asian markets is nothing new. However, some markets are booming and won’t stop for another decade at least. Singapore is one these markets. This sovereign city-state has the highest concentration of millionaires in the world and therefore plenty of investment power within the country. The construction industry is already booming for over a decade and there isn’t a sign for a halt. Property agents have turned wealthy, as land is being reclaimed and developed with the speed of light.

But there isn’t only property. The government and the Singapore Economic Development Board have opened up the country for foreign investors. The economy is not limited to construction and property, but excels in trade and shipping as Singapore has the busiest port in Asia. Also other sectors, such as technology, tourism and financial services, are welcoming and prosperous. As Singapore’s government stirs the economy towards further development and growth, there isn’t any end in sight for long-term investments.

Another interesting location for investments is Qatar. With the FIFA World Cup 2022 coming up, the investments from within the country are enormous. Qatar is not only investing stadiums and infrastructure, but aims to create a wonderland for tourists, just like Dubai has done. Stocks are being predicted to rise, if not triple within a decade. Different sources recommend the Qatar investment fund. However, there is a bitter taste to the bite. The Arab country has recently been criticised for the unfavourable treatment of their foreign workers. Furthermore, the FIFA is under pressure, due to accusations of bribery during the bidding process and allegations of slave labour. Although the FIFA says a reallocation of the World Cup 2022 will not happen, one should keep it in mind when investing in the Gulf country.

Properties can be in another sense an interesting investment. As certain cities loose their population, others are becoming increasingly popular. Detroit for example has lost half of its inhabitants in forty years. However, there are other urban centres that are already experiencing a scarcity of housing. Berlin for example has a rising demand for housing for ten years straight. The German capital has once been cheap with plenty of living space. Investors have renovated entire neighbourhoods and created upscale living. As the popularity of Berlin isn’t declining, the rents have not only increased, but property has become the hottest commodity in the city. Those who have invested in property early enough have made significant financial benefits.

Similar developments can be seen in various cities around the world. Brooklyn, London, Paris and Amsterdam are only a few examples. Furthermore, due to the housing crisis and the collapse of the international market in 2008 and 2009, the prices for houses and properties broke down. Five years later the prices are slowing picking up speed with the tendency to rise rather than to fall again. An investment in inner city housing and urban property will in many cases be a profitable one.

Barcelona, Madrid, Austin and other cities are becoming increasingly attractive. As the rents there are down at the moment, these cities provide investors with interesting prospects. The prices on the international housing market were terribly bad for a couple of years. As the crisis is passing and most countries are recovering, the prices will go nowhere but up. While the market in some cities might take some time, other city markets are already starting to boom. Furthermore, the trend of urbanisation is speeding up the process. London, however, is no longer interesting, as the rents have become too expensive which minimises the profit margin dramatically.

Up and rising are also leisure and entertainment. Never before have we consumed such a quantity of entertainment. Hence, the technology sector will not just be interesting, but also offer itself as a profitable investment opportunity. Social Media brands and small start-ups, such as Facebook and Whatsapp have in an extremely short period of time generated a large amount of value and money. Many others are following the example. The technology market has grown tight links to the entertainment and leisure industry. Therefore, it will be interesting to watch what is coming.

Surely there are people that keep reminding us constantly of the bursting dotcom bubble. However, investments in technology are profitable now and in the future. The dotcom bubble was an entity in itself – complex and difficult to understand for investors at the time. Through smart phones, iPads and HD gadgets the world has become more receptive towards this kind of technology. All these devices seem to be irreplaceable already – just imagine where the industry will be in only five years.

Furthermore, it is not only leisure and entertainment, but the finance and business world that aim to catch up with the speed of the technology. Entire industries are upgrading – no matter whether medicine, manufacturing or construction. The technology industry offers a wide range of investing possibilities. Brands like Facebook, Google and Apple are one option. However, there are also special technology funds that offer themselves ideally to long-term investors. These are a perfect alternative for those who don’t want to bother with daily fluctuations.

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Investing like Warren Buffett

Investing Like Warren Buffett

The ‘Oracle of Omaha’ invests like no other – successfully. He isn’t a fierce and aggressive investor though, rather a calculative and risk-free businessmen. One might question the kind of companies he invests in, but his methods are clean, careful and even somewhat conservative. Warren Buffett ranks with currently 71.6 billion US dollar among the wealthiest individuals in the world. Born to a Congressman in Nebraska, he made his first money selling chewing gum. More than half a century later he is the CEO of Berkshire Hathaway, an American multinational conglomerate holding company.

Many young businessmen continuously seek advice and answers to how he made such a large amount of money. The answers are rather simple and surprising. Unlike the risky investors one has increasingly encountered in the last decades, he hardly ever makes a rush and not-thought-through investment. Furthermore, he isn’t bothered by the market or other investors, which is probably one of his biggest strengths.

Although he reads up to five different newspapers everyday, the daily fluctuations of the stock exchange don’t influence his decisions. His attitude towards investments is different compared to most modern investors. The daily numbers on Wall Street can often cause a frenzy of hasty buying and selling of shares. Warren Buffett considers his investments to be long-term. Romanticising his approach, one could say he is ‘old school’. When Buffet bought his first shares half a century ago, the average time for holding a share was more than a month. Nowadays, this average has dropped to scary 22 seconds. Considering that a share represents a part of company, one could say 22 seconds isn’t really an investment in anything.

He credo is to invest in what he knows. There isn’t a chance he buys shares worth millions of dollars from a company that he doesn’t entirely understand. He does his homework and buys shares as if he was buying the entire business. This investment is not based on the fluctuation of the share, but rather on long-term interests in the company. One could actually argue that Buffett’s categories are extremely conservative. When considering an investment, he questions whether the company is simple and understandable, has a positive operational history and if there is a favourable future for the business.

This strategy isn’t flexible at all, but safe and sound. Warren Buffett is known for not being irritable by the market. His holding company for example owns significant parts of Coca Cola, American Express and IBM – companies that are consistently successful.

Another strength of his is his sense of realism. He knows that it is impossible to predict the day-to-day movements of the market and therefore the direction of the economy. Most investors try to form a package of shares and investments that will be beneficial with their predicted direction of the market. However, this always includes a risk. If the prediction isn’t entirely correct, not all shares will be profitable. Buffett’s investments are outside of these predictions. He understands that he cannot, despite his vast influence and financial power, control and continuously predict the economy. He therefore only invests in businesses that are superior to these fluctuations. There are certain businesses that always will prosper and generate revenue – such as Coca Cola and IBM.

The simple principle behind Buffett’s strategies isn’t to minimise risk, but to eliminate risk in the first place. He was famously quoted saying that the stock market doesn’t really exist for him. It is only there to see if anyone offers anything foolish, he said. This exemplifies his attitude towards the daily swings of the market that most investors are influenced by – he ignores them completely.

It isn’t intelligible for him to invest in a company that he doesn’t understand and whose business isn’t transparent. Modern day trading on the stock market is mainly based on sudden impulses and spontaneous movements of the shares. Investors, buyers and traders, for the most part, no longer look at the company and its values, but rather at their day-to-day performance. As Warren Buffett tends to do long-term investments, he does exactly the opposite.

He is convinced that taking a risk with certain shares is never a good idea, as he equals a risk with not knowing. Why invest in something that you are not sure off? That is exactly his credo. No investment should be made, unless there is certainty. Once the latter is guaranteed, one can even make a heavy investment. Modern day trading is often compared to gambling at the casino. Surely, it often seems that way. False investments cannot only cause a heavy damage, but can create a ripple effect if the investment was made with borrowed money.

Warren Buffett chooses not to gamble, but place his money on the safe side. Why would you bet on black, if you know it is going to be red? Buffett might invest conservatively, but therefore only does so whenever he is sure of profit and convinced of the company itself.

One might ask, how he knows which shares and companies will be prosperous and safe. Buffett does he research. He might not be influenced by the daily fluctuations, but he does his homework concerning financial news and business developments. Once he makes an investment in a company, he usually buys a huge quantity of shares and keeps it. Many investors don’t keep shares, as the cash flow might stagnate. Warren Buffett has a certain funding, which he can easily invest without having to worry about accessibility of funds. However, also he has started small. His earnings on the market did not instantly rocket into the millions.

Warren Buffett might posses 71.7 Billion US Dollar, but also he has started small. He has made his first billion only in 1990. Considering he has then already been trading for over thirty years, one understands that consistency and persistency are part of his success. It is, however, difficult to apply all his tactics. Around 60 Billion US Dollar of cash pool allow him and his company to move quickly like no other investor, if necessary. Hence, his principles and attitude are admirable, but if one aspires to be the next Warren Buffett, one should make some time.

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How to invest in STI ETF?

How to invest in STI ETF?

The Straits Time Index (STI) is a market-weighted index that tracks the top 30 stocks in Singapore. It comprises of some of the large and well established companies in Singapore such as Singtel, DBS, UOB, and OCBC. As such, it is a general indicator of the performance of the Singapore stock market. Think of it as a basket of 30 eggs.

The STI ETF is designed to track the index and replicate the performance of the STI. There are two different fund managers managing the STI ETF, namely SPDR STI ETF (managed by State Street Global Advisors) and the Nikko AM Singapore STI ETF. Both let you trade the STI at a fraction of the cost than owning each stocks individually.

Besides the similarity of both funds tracking the STI ETF listed on SGX, there are a few differences.

SPDR STI ETF (ES3.SI) Nikko AM STI ETF (G3B.SI)
Managed by State Street Global Advisors Nikko Asset Management
Inception date 11 April 2002 24 February 2009
Expense Ratio 0.3% of NAV 0.39% of NAV
Lot Size 1000* (100 in January 2015) 100
Fund Size SGD 425.95M SGD111.14M
Tracking Error 0.07% (1y) 0.27% (3y)
Dividend Yield 2.63% 2.68%

What does these differences tell you? If you are looking to invest for a longer term, go for SPDR STI ETF as it has a lower expense ratio than Nikko AM. However, currently it is sold in lot of 1000 and could be out of reach for some. You can purchase in lot of 100 from Nikko AM, though you can buy the same from SPDR ETF in 2015.

There are different ways which you can invest in STI ETF. Let’s look at the popular ones.

OCBC BCIP POSB Invest-Saver POEMS SBP DIY using SCB
Underlying ETF Nikko AM STI ETF Nikko AM STI ETF SPDR STI ETF Both
Fees 0.3% or $5 (whichever is higher) 1% For amount less than $1,000, $6. Otherwise 0.2%/$10 (Whichever is higher) No Min Commission, 0.2%
Buying Automatic Automatic Automatic Manual
Selling Odd lot Full redemption Odd lot Odd lot
Divindend Reinvestment No No Yes No

From the table, you can see that SCB has the lowest fees, albeit having to dollar cost average manually.

If you are those who don’t have the discipline to do it manually every month, OCBC seems like a good alternative if you can set away more than $500 monthly. For amount lesser than $500, POSB Invest Saver will be more cost-efficient. Do note that, however, if you want to sell your holdings, POSB requires you to do a full redemption where you do not have the flexibility to redeem partial like the others.

POEMS Sharebuilder plan, a more costly option, reinvest your dividend automatically as compared to the rest where you have to do it manually.

In short, to decide which is the best option for you:

Step 1: Decide if you are a discipline investor who can regularly buy into the STI ETF manually

If Yes, go for the DIY option under SCB. If not, go to step 2.

Step 2: Decide the amount you can set away monthly

Less than $500: POSB Invest Saver is cheaper
$500-$3,333: OCBC BCIP
More than $3,333: POEMS SBP

Do note that, however, POEMS SBP has other charges such as a 1% net dividend charge subject to min $1 capped at $50.

Make your own decision and decide which is the best plan for you to invest in STI ETF!

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