Overcoming 3 Financial Issues That Young Singaporeans Face

We encounter several new hurdles as young adults. We no longer receive a daily allowance from our parents and we have to pay the bills. Not to mention, our financial capabilities are seemingly low at the start of our careers.

On that note, here are three financial issues that young Singaporeans face and ways to overcome each one…

ISSUE #1: LACK OF FINANCIAL KNOWLEDGE

We cannot deny the fact that personal finance is rarely taught in schools. According to Kevin Gallegos, a consumer finance expert at Freedom Financial Network, the Millennials’ crying need for more financial literacy cannot be overstated. It is never too late! Financial literacy is something you shape through conscious effort, much like learning how to write.

Image Credits: pixabay.com

Image Credits: pixabay.com

Young adults must take the initiative to educate themselves about the important topics surround money. These topics include budgeting monthly expenses, saving for retirement, and managing student loans. Following an online resource like MoneyDigest.sg or MoneySENSE.gov.sg can provide the foundation for you to learn the basics.

ISSUE #2: HAVING A LOW INCOME

Unless you are an heir to a successful company, the start of your career marks the time when your finances will be stretched. Having a low income impacts your ability to fulfill your primary needs such as food and shelter. Proper allocation of funds can help improve your situation.

Young Singaporeans shall distinguish between the needs and wants. If your income is not sufficient to address your primary needs then, you may consider taking a part-time job or freelance projects. Alternatively, you may eliminate unhealthy (and costly) lifestyle choices such as smoking. Imagine how much cash you will exhaust in a week if the price of a package of Marlboro cigarettes is about S$13!

ISSUE #3: CONFUSION BETWEEN SAVING AND INVESTING

Young adults are often experiencing a mix up between saving and investing. The idea behind it is similar, but the “mechanics” are different. Both involves the act of setting money aside for future use. The former is allocated after meeting your fixed and variable expenses. While, the latter is allocated if you want to grow your savings. Maintaining a realistic balance between these two is crucial for wealth cultivation.

Do not be afraid to read about investing as the power of compound interest works in your favor at the present time.

Image Credits: pixabay.com

Image Credits: pixabay.com

To conquer the challenges that young adults face, they must educate themselves about personal finance. This will help them manage their spending habits, repayment of student loans, and so on. This is a great start to your financial journey.

May you have the confidence to overcome each financial issue ahead!

Sources: 1 & 2

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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:

ke1

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:

ke2Putting 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

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

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Effective Ways To Teach Teens About Investing

Money gives people, of all ages, the decision-making opportunities they need. Educating your teens to make wise money decisions earlier on will affect their finances in the long run. One of the most important things you must do is to expose your daughter or son to the basics of investing. In hindsight, I wished my parents did so.

1. ENLIGHTEN THEM ABOUT YOUR FINANCES

Embedded in our Asian culture, most Singaporean parents keep their financial issues away from their children. However, the teenage years is the perfect time for you to enlighten them about the “real world” and its problems. Keeping your teens in the dark will make them think that managing money is easy and life is perfect.

Help your teenage child to transition from being a clueless kid to an informed young adult by teaching how important it is to set up future goals and a working budget. Take the effort to share your financial experiences including the ones that are related to investing. Be ready to answer countless amount of questions too!

2. PUT VALUE TO THE CURRENCY

Explaining the importance of money is easier said than done. With the idealistic minds of most teens, you must level it down to reality by giving relatable examples. Put worth or value to the currency by telling them that the money they saved and invested can be used to buy concert tickets of their favorite bands. It can also be used to buy the latest gadget that they have been eyeing on.

Make them realize that when money is invested in the right place and in the right way, they can purchase not just one but probably a couple of the things that they need and want.

3. START WITH THE BASICS

Similar to learning how to ride a bicycle, begin by attaching the training wheels. In this case the training wheels are your investing fundamentals. Explain your own investment philosophy and the way you invest. Then talk about the basics of how the stock market operates as well as the different investment options available (e.g., mutual funds and REITs). Differentiate each option by describing its rewards and risks.

Start with these simple concepts first before jumping on the other concepts such as P/E ratios and diversification. This way, you can keep your child’s interest as everything seems understandable.

4. USE TECHNOLOGY TO YOUR ADVANTAGE

Shake things up and make learning fun by introducing free investment and trading apps such as Kapitall and CASHFLOW. Kapitall allows you to assemble a portfolio worth $100,000 and track its progress easily. While CASHFLOW, patterned to a popular board-game, allows you to work at a variety of professions until you implement a successful investment strategy to become the next business mogul. These games help teens to grasp the investment concepts that they need later in life.

Image Credits: pixabay.com (CC0 Public Domain)

Image Credits: pixabay.com (CC0 Public Domain)

As teens can become careless, continue to guide them throughout the process and never leave them “investing” on their own.

Sources: 1 & 2

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Free Investment Resources Singaporeans Can Benefit From

1. BORROW BOOKS FROM THE PUBLIC LIBRARIES

The best way to fish in an unfamiliar territory is to research about it first. Know the basics in investing and trading by visiting your local or regional public library and borrowing their books. A few examples of the books you may find are “The Resilient Investor”, “Trading Options for Dummies”, and “7 Simple Strategies of Highly Effective Traders”.

The National Library Board (NLB) ensures that the information given in the public libraries are trusted, accessible, and comprehensive. Their genuine aim is to build a knowledgeable nation with generations of readers.

What is great about NLB’s website is that you can browse the availability of the book as well as find the list of libraries where it is located. This way, you do not have to go to a nearby library only to find out that what you are looking for is not there. For instance, you can find the 7 Simple Strategies of Highly Effective Traders book in 12 public libraries including Toa Payoh Public Library – our nearby library. Start searching by yourself, here.

2. ATTEND A NO-COST WORKSHOP ABOUT INCOME INVESTING

Last Tuesday, I had an opportunity to attend a workshop named: “Get Rich Slowly, The Income Investing Way”. Terence Tan led it. Terence Tan is the creator of the first Income Investing Programme in Asia-Pacific called Income Mastery Programme (IMP). Also, he is the chief investment strategist in Giants Learning Technologies as well as the founder of First Traders Network.

With a guy whose experience in stocks spans over 16 years, I thought to myself that I could certainly learn a thing or two. To get things straightened out, if you are looking for a method to get rich quickly through investing, this talk is not for you. Instead, this is for people who seek financial freedom by patiently and diligently pouring their resources for years on end.

Image Credits: facebook.com/IncomeMasteryProgramme

Image Credits: facebook.com/IncomeMasteryProgramme

What you can expect from this free 2-hour workshop is to gain a glimpse of the mindsets of some investors such as the renowned Warren Edward Buffett, to uncover the principles of income investing, and to determine the right stocks in 15 minutes or less. Furthermore, he will introduce you to his own methodology called the Income Mastery Programme. My impression of IMP after the workshop was it was a feasible yet gradual way to generate profits while in the midst of low-risk trades. By lowering down the risk, you will be confident that the stocks make money over time. If you are interested to know more, you can register for their upcoming talk on August 18, here.

3. TAKE PART IN A HUGE INVESTMENT FAIR – FOR FREE

Dating back from 2007, Invest Fair Singapore is ShareInvestor’s annual event for investors and traders alike. Enjoy the presence of world-class speakers, key stakeholders, and other experts in the financial industry by registering here.

The list of featured speakers include Marc Faber (Investment Expert and Best-Selling Author), Kathy Lien (World-renowned Currency Strategist and Best-Selling Author), Roger Monthomery (Chairman and CIO of Montgomery Investment Management), and one of Forbes’ 2014 list of Singapore’s 50 Richest men – John Lim.

The seminars start with “Simple Trading Strategies for Fast Profits” on August 15 and ends with “Portfolio Allocation” on August 16. Best of all? You can get exclusive promotions from their exhibitors and stand a chance to win prizes at their lucky draw.

Image Credits: facebook.com/ShareInvestorSG

Image Credits: facebook.com/ShareInvestorSG

 

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The Lure Of Income Investing

We have often heard of the term “Income Investing”, but what is it and why it should concern you? Income investing is essentially investing into assets that produce income for you. This could range from investing in stocks that reward investors with dividends, purchasing a residential property and renting it out, etc. I particularly want to zoom into the stocks side because that’s what I have been doing and more people can benefit from this article because owning a property requires a good amount of capital, which not everyone may have at their dispense. 

Why Income Investing?

What if I told you that your money has the capacity to grow at a “fixed” rate irregardless of market conditions. Would you be interested? I want to introduce you to dividend stocks where companies pay out dividends that could range all the way to double digit dividend yields if bought at low prices. The benefits of investing in dividend stocks is that you enjoy potential capital growth as well as get to take home some cash every year or even every 3 months. 

Picture this, you bought Stock X at $1.00 and based on past dividend history, it has consistently given off $0.05 of dividend per year. This translates to 5% dividend yield per year. What it means is that even if the stock price goes to $1.10(Scenario A) or $0.90(Scenario B), you’ll still get your $0.05 per year. If you consider in terms of returns, for Scenario A, it would mean that you made a 15% return for the year and for Scenario B, it would mean just a 5% loss (-10% + 5%). Your capital gain/loss is amplified or mitigated by your dividend yield. 

Fixed Deposit or Dividend Investing?

Some of you may be contemplating between FDs and Dividend Investing. I will leave it up to you to decide at the end of the day, but I will show a comparison between the two. 

Fixed Deposit

  1. Lump sum/Progressive capital investment with a minimum lock-in period. 
  2. Principle amount usually guaranteed. 
  3. Some allow you to take home a small sum every year while deducting it away from your principle amount. Meaning less compounding power. 
  4. Fixed but relatively low interest rates and long lock-in period with penalties for early surrender. 

Dividend Stocks (Increase risk, increase return)

  1. Increased risk, although not necessarily high if due diligence is conducted. 
  2. Potential capital gains. 
  3. Possibility of increasing dividend yields through increased dividends or averaging down the share price. 
  4. No lock-in period, no minimum sum. 

For people who aren’t interested with stock markets at all or don’t know how to select companies may prefer the fixed deposit option. However consider this, when you take on a little more risk and spend time to learn and understand companies, you can mitigate the risks you take. There may be losses, but for the same period of say, 25 years, with dollar-cost averaging or other strategies that you may apply, you’ll likely see returns that fixed deposits can never offer you. And besides, have you ever heard of anyone getting rich by putting their money in fixed deposits alone?

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