Investment Guide for Dummies!

Basic things to know about investments!

1.Stocks

are the most common instrument that people turn to when they talk about investing. The Singapore Exchange (SGX) offers more than 700 stocks that investors can choose from. Of course, finding the right stocks to invest in is not as straightforward.

2. ETFs

If investing in individual stocks isn’t your cup of tea, a good alternative would be to invest in ETFs. ETFs can be thought of as a mutual fund that seeks to only do one thing, and that is, to mimic the index or sector that it is tracking. It aims thereby to receive the benchmark market returns. Here are some articles that you can refer to understand how ETFs work.

3. REITs

Real Estate Investment Trusts (REITs) are getting more popular as an investment class as it’s a relatively accessible means of property investing for an increasingly investment-savvy population.

A REIT basically owns a portfolio of properties which are rented out. The rental income is then used to defray the cost of owning the properties and the remaining profits are paid out as dividends to shareholders.

4. Bonds

Bonds represent debt obligations that organisations and companies issue.

Simply put, these entities are borrowing money today with the promise that they will pay coupons (or interest rates) throughout the lifetime of the bond as well as the principal once the bond matures. Investors purchase them as they are comparatively less volatile and risky, compared to stocks.

Unlike stocks, bonds have a maturity period. The maturity of bonds can be as short as one year or as long as over 30 years. Bonds with a shorter maturity period are characterised as less risky as there is a shorter time frame for interest rates to fluctuate or, for the bondholders to fall into financial difficulties.

Some investors automatically assume that bonds are safe investments, especially when compared to stocks, properties or private businesses.

While this may generally be the case, it does not mean that bonds investments are without risk. In fact, assuming that they are without risk is a major misconception.

We hope these basic knowledge will help you to decide what to invest in and kickstart your investment profile!