💰 Can you invest on S$10 a day?

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A tale of two investors

Investing can be scary. Until only a few years ago I had not invested a single cent.

Hearing about big-name investment moguls made it more paralysing, not inspiring. “Wah, Warren Buffett invested in this!” “Wah, Ray Dalio did that!”

But, but, they have billions of dollars – the rest of us plebs have barely enough for the rent! Your starting position is (/will be, if you’re still in uni) likely not too different from mine:

• Median fresh grad salary ($3.5k~/month)
• Some debt, or pay rent
• Little to no investment background

How then? Well – I went to ask people (my colleagues) who are more relatable, are doing okay today, and see the two contrasting ways they started out!

1. Invest $10 a day

Who: Joan Ng, BT news editor, in her late 30s

Start: Salary was $2,500/month - $500 CPF - $600 rent = $1,400

How I started: As a fresh grad, at 23. A senior colleague told me to put $300 each month – or $10 a day – into unit trusts. He had a convincing analysis that showed if you do that (i.e., dollar-cost averaging) over your working life, you can retire with $1 million.

How it works: By investing a fixed sum at regular intervals regardless of the price of the asset, you end up with more units when prices fall and fewer when they rise. This helps smooth out losses over time and compounds your returns.

Where I am now: On track. When I reached 30, I exceeded my expected rate of return (8%). I’m investing more than $300/month now, of course

Pros:

• Good if no discipline. In fact, it’s automatic if you set up a regular plan with an investment platform
• Less risk. This method limits losses from ill-timed investments

Cons:

• Can be cheaper to invest by yourself because fund managers take a cut
• Potentially more modest returns

Key points

• Save! I didn’t spend too much
• Don’t put your money into stuff you don’t understand
• No sum is too little, and don’t invest what you’re not ready to lose

2. Bad news = ‘Good’ news

Who: Ben Paul, senior correspondent, now in his 50s

How I started: My first job was an analyst at a small brokerage. They made us do mock portfolios, and I knew nothing, so I just put my “money” into blue chips. Didn’t do too badly… I started dabbling after that, buying odd stocks here and there.

How it worked: Remember the Asian Financial Crisis? (Probably not) Everything collapsed. That’s when I bought a meaningful (for me, at the time) amount of stocks. Power plants and cement companies in Malaysia – because I knew the companies, how they worked, the cost. Years later the tycoons did general offers (i.e. someone buys all the shares) and I made a lot of money.

Pros:

• Mistakes get washed out when you start dabbling when young, because your income will keep rising (hopefully)

Cons:

• Going in when it’s a crisis means you have to act against your own fear
• Returns are low at first because you have less money to put in when you’re young. Better to save first!

Key points

• Stay liquid (i.e. put money into assets that can be easily converted to cash)
• Stay informed, keep up with the news so you know when to enter the market
• “Stay within your circle of competence” – Warren Buffett