22 March 2024

Financial Planning in Singapore: How To Start Investing?

Have you ever wondered why some people in Singapore can achieve financial freedom while others seem to struggle? 

It all lies in the art of financial planning, a critical tool for achieving financial independence. This process isn't just about setting goals; it's a careful plan that encompasses everything from your savings to income and debts, all meticulously balanced to guide you toward your desired financial goals.

But here's a thought—in a city like Singapore, where every decision counts in the face of rising living expenses, how do you build a financial plan that withstands the test of time? The journey of financial planning might seem daunting, but with the proper guidance and knowledge, you can confidently chart a course to financial stability. Remember, the sooner you start planning your personal finances, the more time you have to ensure financial health and resilience.

Key Takeaways

• Financial planning means to analyse your financial situation and create a strategy for achieving specific financial goals.
   
• Investments are a vital part of any financial journey as they counteract inflation by growing the value of money.
   
• Investing starts with clarifying your life goals, followed by learning the various asset classes, and diversifying across these classes to mitigate risks and align investments with your long-term objectives.

What Is Financial Planning?

Financial planning is taking a careful look at your financial situation and developing a plan to help you reach specific monetary goals.

This includes things like making a budget, saving money, and insurance planning. Your financial goals can encompass a wide range of areas including retirement planning, risk management, estate planning, and more.

The purpose of a comprehensive financial plan is ultimately "money management"—to ensure that we remain in control of our finances and make sound decisions aligned with our long-term financial aspirations.

Why Are Investments Important for Financial Planning?

Investments provide an opportunity for our money to generate income or appreciate in value. Inflation, on the other hand, reduces the value of our money over time. Thus, investment planning in assets that have the potential to outpace inflation is crucial for preserving and growing our purchasing power. This way, we can better prepare ourselves for future expenses and retirement.

However, investments involve varying degrees of risk, which is why integrating a comprehensive risk management strategy is important. By carefully selecting and managing a diversified portfolio, we can potentially achieve higher returns over time, consequently reaching our financial goals more efficiently.

How to Start Investing?

1. Clarify Life Goals

First and foremost, we need to create a financial plan that suits your individual needs. This means setting clear, quantifiable goals and objectives.

You should incorporate short-term aspirations such as buying a house, building an emergency fund, or securing your family's financial future with the appropriate insurance policies. Your plan should also include long-term ambitions such as saving up for retirement. 

2. Understand Asset Classes

There are various investment products (aka financial instruments) you can invest in, and each of them has its own asset class. Here are some of the common asset classes: 

• Stocks: An ownership share in a company. This means you buy a part of the company and own some of its shares.
   
• Bonds (Fixed Income): Usually issued by companies or governments at a set interest rate.
   
• Cash and Cash Equivalents: Cash includes physical currency like the savings in your account. Meanwhile, cash equivalents are highly liquid, short-term investments that are easily converted into cash.
   
• Real Estate: Investing in property, either directly by buying land or buildings, or indirectly through real estate investment trusts (REITs).
   
• Commodities: Physical goods like gold, oil, and agricultural products. Their value can fluctuate based on supply, demand, and other market conditions.
   
• Alternative Investments: This is a catch-all category for less traditional investments, including hedge funds, private equity, and collectibles like art or wine.

3. Diversify

Now, you can select an investment product. Financial advisers will usually recommend diversification—investing in the different asset classes to minimise the impact of one underperforming investment on the overall performance of your portfolio. This approach can help to smooth out returns and better align your investment choices with long-term life goals.

Here are a few diversified investment products you can consider:

• Unit Trusts: Pool resources from multiple investors to purchase a diverse portfolio of assets, which spreads the risk across different companies, industries, and sometimes even countries.
   
• Exchange Traded Funds (ETFs): Investment funds traded on stock exchanges, holding a collection of assets (like stocks, bonds, or commodities) that help to spread risk and reduce volatility.
   
• Dual Currency Investments: Deposit money in one currency and potentially receive returns in another, based on an agreed exchange rate and maturity date. This strategy focuses more on currency diversification rather than traditional asset diversification. It is suitable for investors who are comfortable with and knowledgeable about currency risks. 
   
• Structured Products: An investment product that typically consists of a debt security and one or more derivatives. It often aims to balance risk and reward. For example, part of the product might be invested in low-risk bonds, providing a safety net, while derivatives linked to higher-risk assets can offer the potential for greater returns.
   

Ultimately, when selecting investment opportunities, it is crucial to understand your risk appetite, which determines the level of risk you're willing to accept when investing. You should also bear in mind the concept of risk versus return—the potential for greater rewards usually comes with greater risks.

Beginning Your Investment Journey with RHB Bank

Here is RHB Singapore’s range of investment products:

1. Unit Trust
    
2. Foreign Exchange
    
3. Dual Currency Investments
    
4. Structured Products
    
5. Fixed Income (Bonds)

When you invest with RHB, you can enjoy our: 

• Wide selection of Unit Trust Funds (we partner with iFAST, a wealth management platform, which will give you access to a huge fund universe to select from.),
   
• Structured Products that allow customers to customise their investment portfolio, and
   
• Attractive foreign exchange rates and foreign currency deposit rates

On top of that, we embrace an Investment Approach that ensures every investment has strong fundamentals. Our strategists and specialists conduct on-the-ground, rigorous research on companies, sectors, economic trends, and country dynamics. We also have analysts who can dive deep into data, and finally, portfolio managers who evaluate the research and determine the risk and returns. 

Ultimately, we aim to deliver sustainable risk-adjusted outperformance for every customer’s investment portfolio.

Financial Planning Services with RHB Bank

As your trusted financial ally, we at RHB aim to provide you with our expertise to guide you through your comprehensive financial planning journey in Singapore. It is our goal to help you make better financial decisions and achieve long-term financial security.

Book an appointment with a financial adviser today to leverage our expertise, seek advice, address your concerns, and make sound decisions to secure your financial well-being. Let's work together to achieve your goals and chart your journey towards a better financial future.

The information presented in this article is accurate as of date of publication.