Q: Is investing the best way to beat inflation or should I go with the interest from fixed deposits?
A: Before we talk about the returns you would like to achieve, you should first consider risks. This is the central principle behind our Risk-First Approach.
Make sure you and your family are protected with adequate insurance coverage. You should then think about your investment time horizon and risk appetite before you take steps to grow your money.
What are your financial goals? Do you need your savings for shorter-term goals, such as buying a home or paying for your child’s university education? Remember to keep your long-term retirement goals in mind too.
Next, how much volatility can you stomach? In other words, if the market experiences a downturn, how much of a fall in your wealth can you accept?
The answers to these questions will make your decision clearer. A fixed deposit gives you more certainty about your risks and returns over the short term. Investing for potentially higher returns carries risk, but you don’t need to take more risks than you are comfortable with on your investments.
You can adopt what we call “Core strategies”, which are less dependent on market cycles and provide regular income. This could include investing in lower-risk, dividend-paying funds and investment grade corporate bonds. You should try to capture tactical investment opportunities only if you have a higher risk appetite.
Focus on what you can control. The returns on your investment may depend on many factors that are not within your control, but you can control the amount of risk you are comfortable taking.
Q: How should I start investing? Are robo-advisors enough? There’s a lot to learn and I don’t know where to start.
A: Many think that investing is complicated and only for the financially savvy, or that you need to monitor your investments 24/7.
The truth is, investing can be as simple or as complicated as you want it to be. If you’re just starting out, you could look at digital platforms like UOB SimpleInvest, which lets you choose from three fund portfolios depending on your investment goals. These portfolios are crafted and constantly monitored by experts who make adjustments when market conditions change, and it can be just as affordable to tap on experts in this manner as it is to invest with a robo-advisor.