How To Start Investing With $1,000 In Singapore For Beginners

Invest in an index fund or ETF

ETFs, which is short for exchange-traded funds, track the performance of an index, sector, commodity or some type of assets, so by investing in ETFs, you’re technically investing in the collective performance of a bunch of securities. For example, the Straits Times Index (STI) ETF tracks the performance of the top 30 companies in Singapore.

Regular Savings Plans (RSPs) for novice investors

You’ll be able to invest in stocks, ETFs, or unit trusts through RSPs that are offered by renowned banks or online brokerages in Singapore such as POSB Invest-Saver, OCBC Blue Chip Investment Plan and POEMS RSP, some of which requires even lesser than $1,000 to start investing in selected stocks and ETFs.

Singapore Savings Bond (SSB)

If you really want to play it really safe, investing in a SSB is an ideal one to start with as this bond is almost risk-free, given that it is issued and backed by the Singapore Government. A SSB usually yields returns of between 2% and 3% (tied to Singapore Government Securities) when you hold it till maturity, plus it gives you the flexibility of cashing out any month without losing the accrued interest.

However, with a 10-year maturity, which includes step up interest rates, your payments will gradually be higher and higher, depending on how much longer you plan to hold on to your investment. Note that SSBs cannot be sold on a secondary market, unlike corporate bonds.

Supplementary Retirement Scheme (SRS)

This scheme is a voluntary scheme for Singapore citizens and PRs to help save up for retirement. You'll be able to top up to $15,300 each year, and your contributions to the SRS are eligible for tax relief. So, your investment returns are virtually tax-free, unless you're talking about Singapore dividends. However, 50% of your withdrawals from SRS are taxable once you reach the retirement age of 63.

There's an opportunity cost if you leave your uninvested funds in your SRS account as it only earns 0.05% per year. So you'd rather invest that money in stocks, bonds, ETFs and unit trusts. before withdrawing it at retirement.

CPF Special Account (CPF SA)

Another low-risk form of investment is placing some of your CPF savings in the Special Singapore Government Securities (SSGS) through your CPF Special Account. As SSGS are non-tradable bonds issued specifically to the CPF Board, and are guaranteed by the government, it makes it relatively safe and easy to get involved.

You can start by making top-ups to your CPF Special Account (CPF SA) by transferring some of your funds in your Ordinary Account (OA) to your SA. You are eligible to do this only if you've got sufficient cash in your personal bank account to pay off your flat (including your down payment).

Another option is the Retirement Sum Topping-Up scheme which lets you earn an interest rate of up to 5% when you top up your CPF SA (up to a maximum of $8,000) with a tax relief benefit. You'll also be enrolled into the CPF Life Scheme where you will receive a monthly payout. The downside to this scheme is that you can only get access to these funds once you hit the age of 55.

Cryptocurrency

Ever since Bitcoin was launched in 2009, there have been numerous cryptocurrencies popping up every now and then. By now, you’ve probably heard of the bigger names like Ethereum, Binance, Ripple, Tether, Dogecoin and so on.

Circulating supply and market cap

However, a cryptocurrency’s price, market cap and supply often swings up and down due to its high volatility. This is mostly due to the circulating supply and supply cap of that particular cryptocurrency, the overall cryptocurrency market cap. As every cryptocurrency has a cap on how much cryptocurrency can be produced, the smaller the gap between the supply and its cap, the scarcer it is. When this happens, the price of the cryptocurrency will shoot up.

Buying a little bit of a cryptocurrency

Despite the high volatility of cryptocurrencies, you do not need a lot to start investing in it. You can actually afford to buy bits of that particular cryptocurrency you want with as little as $50 or $100 by getting it via a crypto exchange platform like Binance Singapore, Gemini, Kraken and others.

Getting a cryptocurrency account

Before you set up a crypto exchange account in Singapore, you’ll need to go through a middleman like Xfers to carry out the cash-to-crypto transaction via bank transfer, and then fund your crypto purchases using bank transfers.

However, as a beginner investor, we'd encourage you to read up more on the basics of cryptocurrency first before jumping on the bandwagon of crypto trading because it involves a very high level of financial risk. You may want to refer to this simple guide that we've put together for you:Cryptocurrency in Singapore: 7 Things to Know Before You Start Buying.

Forex

Forex trading is considered as another high-risk form of investment as it requires quite a lot of leverage, which means borrowing money from your broker to carry out the trading. So it is like “spending future money” because you’re using money that you don’t have to trade, relying on just luck to gain some returns from the trade to repay the broker with your earnings.

Speculating the next move

The drastic and speedy fluctuations of the forex markets required you to be present most of the time to watch the market react fast enough in order to trade at the right time. As it entails more of a “speculation” strategy”, it may not be suitable for you if you’re into the “buy and hold” investment strategy.

Having a plan

As a forex trader, you’ve got to always be on your toes as things happen really fast, so you’ve got to be certain of the size of the trades that you want to make and always plan ahead. Given the high frequency of trading in forex, you need to recognise the signs of entering and exiting the market, when to sell a currency whenever you’re earning enough or losing enough.

Trading currencies on a suitable platform

There’s a wide variety of forex trading platforms, but for beginner traders, you might want to start with those which are more popular in Singapore such as Oanda, Interactive Brokers, POEMS, FXPRIMUS, HotForex and FX365 Mobile. Similar to stock trading, you’ll have to set up an account on a forex app, platform or other service provided by a broker before you can start trading on the platform using the provider’s interface.

Currencies are often traded pairs such as USD/EUR or USD/SGD. There are many combinations available, and it usually involves the base currency which is the first currency symbol in the pair, and the second is the quote currency.