In the grand scheme of things, $1,000 sounds like such a small sum, almost inconsequential. But not when it comes to building a long-term investment portfolio on your way to financial freedom. Consistency from a young age, fuelled by ample research, is key, not the amount of money you start off with.
According to Forbes, your first investment is likely the most important investment you ever make, for two reasons: it has a whole lifetime’s potential to earn passive income for you, and its performance often determines your approach toward investing from here on. While the stakes sound like quite a handful, it’s not really rocket science once you get the hang of it. If you don’t know where to begin, let us guide you through some of the best ways to invest your first $1,000, from the most passive, hands-free option to the least.
1. Robo-advisors
Robo-advisory platforms have been gaining traction worldwide, and for good reason. The robo-advisor is an independent, hands-free option, especially for beginners who need objective guidance. Robo advisors help users select funds in which to invest based on their risk profile, investment goals, and other preferences. Combined with their unique investment algorithms and generally unbiased investment nature, these robo advisors make strategic investments in either ETFs, unit trusts, or both.
This creates a diversified, passively managed investment portfolio that almost runs itself. Even if you’re not well-versed or well-equipped, you can still have an investment portfolio and nest egg managed on your behalf. What’s more, robo advisors’ management fees are quite affordable too—typically less than 0.3% per year. You can even plan for recurring deposits and investments with your robo advisor en route to your financial goals.
2. Regular savings plans (RSPs)
A regular savings plan is an easy, accessible way to grow your money from age 18 on a limited budget and with limited expertise. These plans require you to pay a fixed sum of money on a regular basis (typically every month), which will be invested in blue-chip stocks, REITs, or ETFs. The idea behind it is to put in the same amount of funds at regular intervals, regardless of market performance, in order to protect the investor from most of the volatility.
Consistent exposure, as you ride out the ups and downs, will allow you to reap the benefits of the market’s upward trajectory in the long term. This is a good long-term option for amateur investors who may not yet know how to monitor the stock market and respond to fluctuations. RSPs, such as POEMS RSP, POSB Invest-Saver, and OCBC Blue Chip Investment Plan, are offered by renowned banks and online brokerages in Singapore.
3. Bonds
If you’re looking for more regular payouts, it’s time you consider investing in bonds or fixed-income securities, which offer a lower risk of default and a fixed, modest rate of return. With an initial capital of $1,000, you can consider retail corporate bonds, which allow trading in smaller nominal values through the Singapore Stock Exchange; see the Astrea series of bonds and SIA’s bonds, which have more liquidity on the exchange.
Alternatively, Singapore Savings Bonds (SSBs) are a particularly low-risk fixed-income investment, issued and backed by the Singapore Government. These bonds accrue stepped-up interest rates each year, typically above 2%, if you hold on to them over the 10-year maturity period. Plus, it gives you the flexibility to cash out at any time without incurring a penalty.
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 after you’ve transferred funds from your Ordinary Account (OA). SSGS are non-tradable bonds issued specifically to the CPF Board and guaranteed by the government, and are hence low-risk and relatively safe, especially for new investors.
4. Index funds
One crucial rule of investing is to maintain a diversified portfolio where you’re balancing potential gains with downside risk and any investment fees. Index funds allow the best of both worlds, with low costs and instant diversification for a beginner’s portfolio. Instead of buying individual shares from different companies (which will cost more), buying the index gives you some stake in each while gaining exposure to the broader market. As index funds attempt to match overall market performance rather than trying to ‘beat the market’, they have some of the lowest expense ratios, where fewer investment expenses mean more of your money is invested to reap greater income. All in all, index funds are a great starting point.
5. Yourself!
At a young age and with your whole career ahead of you, investing in yourself is by far one of the most promising courses of action. The benefits you reap and the exponential growth in your career potential are not to be missed. These days, creating learning for yourself is no longer limited to an extravagant university education.
Open online learning marketplaces like Coursera, edX, and Udemy are readily available, offering massive open online courses (MOOCs) that cover a range of topics and subject matters. And if you haven’t used up your SkillsFuture credit, you have until its expiration in 2025 to dig deep into the SkillsFuture courses available and learn something new. If you prefer less formal settings, there are a myriad other ways you can find real learning and intentionally invest in it—think books, podcasts, and so much more.
Many investors often immediately look to ambitious investments, such as in the volatile world of cryptocurrency. Our advice? You may want to gain more experience in the more stable, less risky traditional asset classes first. Cryptocurrency investments require especially close supervision and robust knowledge; things change far too quickly and too drastically for the casual investor. With more practice and accumulated experience, you’ll get there—and with exponentially more than your first $1,000!
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If you have enjoyed this article, do connect with the Vastus Wealth team at enquiry@vastuswealth.com and do follow us on our IG accounts, @vastuswealth and @optimalwealthness. If you are aiming for a life of optimal wealthness, get more tips here at the Optimal WealthnessMedium Blog.
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