Embarking on the journey of investing can be daunting, especially for those who, like me, have long harbored the desire but were constrained by life’s financial obligations. This was until I inherited a sum of money from my parents’ assets after both of them passed on.
It came to my mind how should I allocate these funds for wealth accumulation. Fixed deposit and stock investment are the natural thoughts that popped up.
I am a novice when it comes to investing in 2023. I consumed various resources such as investing books and YouTube videos to learn the ropes.
Why I Choose to Invest
- Diversification: Part of my savings are used for fixed deposits and investing allows me to diversify my assets.
- Passive Income: All stocks in my portfolio are dividend-paying stocks. By compounding the dividends, I love to see my portfolio generate regular passive income that helps to supplement my expenses in the future.
- Wealth Accumulation: Investing offers the potential to generate returns on my capital that exceed the rate of inflation, thereby increasing my purchasing power over time.
- Long-Term Growth Potential: While investing inherently involves risks, history has shown that over the long term, well-diversified investment portfolios tend to grow in value.
Strategy I Use
At the age of 49 and new to investing, I’m adopting a prudent and conservative investment strategy. Prioritizing long-term gains over short-term gains works best for me.
- Invest For Long Term: As a conservative investor, I do not buy and sell in a short time. I am planning to buy and hold the stocks for at least five years.
- Dividend Stocks: My focus is buying dividend-paying stocks. Large-cap companies that show stable growth in dividend payout are top of my list.
- Average Cost Down: I can’t time the market and this is not possible when you can’t predict what millions of investors will do in the short term. As long it is a quality company, I will buy more if the stock price plunges.
It sounds a bit boring but any investing approach has to align with your goals and personality. This is an approach I am comfortable with for now.
The stock market is unpredictable and we have to adjust and refine our investing approach from time to time.
Why I Only Invest in US Markets
All the stocks in my current portfolio are US companies. There are several reasons why I invest in US companies rather than my native country Singapore.
- Higher Growth: In the past 50 years, the S&P 500 probability of gain each year is estimated at 70% as compared to the probability of loss which is around 30%. Singapore stock has a lower probability of growth which is estimated at 56% as compared to the probability of loss which is 44% in the past 36 years.
- Diverse economy: The US economy is highly diverse, with sectors ranging from technology and healthcare to finance and consumer goods. This diversity offers investors exposure to various industries and mitigates risk. The biggest sector of the Singapore stock market is the financial sector and the next biggest is the industrial sector whose performance is bound by the economy up/down.
- Size and liquidity: The US stock market, particularly major exchanges like the New York Stock Exchange (NYSE) and NASDAQ, is the largest and most liquid in the world. This provides investors with ample opportunities for trading and investing in a wide range of companies.
Will I Invest in the Singapore Market?
Yes, I have the intention to delve into the Singapore market soon. The growth and price appreciation may be lower as compared to US markets but there are several advantages to investing in Singapore stock.
- Higher divided Yield: Some companies such as the major banks and REITs pay a handsome dividend. Unlike the US, the dividend paid in Singapore is tax-free.
- Stable Economy: Singapore boasts a stable political environment, strong rule of law, and well-developed infrastructure, which are conducive to business and investment activities.
In general, US stocks are good for price appreciation and capital gains while Singapore stocks are a reliable source of dividend income.
Conclusion
My venture into investing has been a mix of excitement and enjoyment. With the money I inherited, I’ve taken steps toward financial independence. While I’m still new to the stock market, I’ve stuck to a plan that aims for steady growth and safety.
By spreading my money around and focusing on stocks that pay dividends regularly, I’ve tried to lower the risks. Even though my approach might seem cautious, it suits me well and gives me peace of mind, especially in uncertain times.
As I keep going, I’ll keep learning and adapting. Flexibility is important in this world of investing. With each step forward, I’m getting closer to my financial goals and making a better future for myself and my family.