A beginner’s guide to investing in Singapore

Mutual funds and ETFs

Mutual funds and Exchange Traded Funds (ETFs) are professionally managed investment products that provide diversification across a mix of asset classes. They can offer higher returns compared to fixed deposits or bonds, but they also carry greater risks. As these products are analysed and managed by a fund manager, they also come with management fees that can reduce your overall returns. With higher-risk investments, there is a genuine possibility of experiencing losses. Your returns are not guaranteed. Therefore, it is important to thoroughly understand the product and its associated risks before committing your hard-earned money.

These products are ideal for investors with a long investment horizon who are looking to grow their money at a higher rate as compared to fixed deposits and bonds. Mutual funds are also well-suited for those who prefer a hands-off approach to investing, as a professional firm manages the investments on their behalf.

Gold as an asset class

Gold has been traded for thousands of years and has seen a surge in popularity in recent years, driven by its sharp rise in price. Gold can be invested in Singapore by buying physical gold bars or coins, trading gold ETFs, or investing through gold mutual funds or unit trusts.

Unlike stocks and bonds, whose prices are largely determined by the performance of a company or government, the price of gold is shaped by economic conditions such as periods of financial uncertainty or geopolitical stress. Traditionally, gold is held by investors looking to diversify their portfolios and as a hedge against inflation. While it is widely regarded as a safe-haven asset, it is not entirely risk-free.

Dollar-cost averaging and new investment schemes

Dollar-cost averaging is a strategy where you invest a fixed amount of money at regular intervals regardless of market conditions. This approach can help you buy more units when prices are low and fewer when prices are high, potentially lowering the average cost per unit over time.

In Singapore, the Central Provident Fund (CPF) Board has announced a new scheme that will work with commercial product providers to offer simplified, low-cost, and diversified life-cycle investment products. This new scheme caters to long-term investors who are willing to take some risk for potentially higher returns but may have less expertise in navigating the CPFIS offerings or prefer not to actively manage their investments. This scheme provides another option for investors who want to diversify and take a long-term approach with some risk, but without the need for active management expertise.

Key takeaways

• Mutual funds and ETFs are professionally managed and provide diversification across asset classes, but they come with management fees and risk of losses.
• Gold can be a diversifier and a hedge against inflation, but it is not entirely risk-free.
• The CPF Board’s new scheme offers simplified, low-cost, diversified life-cycle products for long-term investors willing to take some risk for potentially higher returns.