“You should save and invest as early as possible!”
This is one of the most repeated financial advice.
Even though it sounds like nagging after a while, that doesn’t make it less true.
You would end up with more money if you start investing while you are young and let compounding work its magic:
- Person A investing $100 a month between 21 to 41 years old would receive $471,458 at age 67.
- Person B started late by investing $100 a month between 47 to 67 years old and he would receive $59,295 at age 67.
- Although the same amount of money was invested, time and the compounding effect caused the huge gap in the amount received at retirement.
For the more mathematically inclined, the compound interest formula shows you that time, expressed in “number of years”, will have the greatest impact on your retirement amount:
Too many people focused on the rate of return and not enough attention to staying invested for long periods of time – returns are overvalued and time in the market is undervalued.
Hence, start investing now and don’t panic sell.
But I don’t have enough capital to invest in stocks…
‘I have no capital’ is a common
reason excuse to procrastinate investing. I believe most can afford to invest $100 per month when they have a job – it is important to invest and spend what’s left rather than spend and invest what’s left.
It is now possible to invest in individual stocks with just $100 because two things have happened:
- SGX lowered the lot size from 1,000 to 100 shares in 2015
- Tiger Brokers did away with the minimum commission for Singapore stocks in 2020
This means that you can buy any SGX-listed stock that is trading at less than $1 with a capital of just $100. The commission you pay is just 0.08% or $0.08 (or $0.09 with GST)! There’s no reason to complain about commissions anymore.
Hack, you can even invest $20 on a $0.20 stock, and pay just $0.02 in commission!
In case you are wondering, majority of SGX-listed stocks are trading below $1. So there are plenty of stocks to choose from to buy with $100.
You can also buy your favourite US stocks regularly
US tech stocks are a favourite nowadays as they have delivered very good returns and they have great world-changing stories to sell.
If you aren’t into Singapore stocks, you can buy US stocks on a regular basis too. There’s no such thing as a lot size for US stocks and you can just buy one stock.
Tiger Brokers offers US stocks too and it has one of the lowest commissions for US stock trading – just US$0.01 per share or US$1.99 minimum.
Let’s say you want to buy 1 share of Facebook (NASDAQ:FB) at US$264, you only pay about US$2.13 inclusive of GST in commission.
There’s also no custody fee (except for ADRs), which local brokers often charged if you do not generate enough commissions over a certain period.
The same principle applies, you can buy US stocks on a regular basis. Just that the quantum has to be higher to make the minimum commissions worthwhile – at least US$200 per trade.
Why you should buy stocks regularly
The number one question asked on when to buy stocks has to be this: should I invest all my money at once (lump sum) or gradually (dollar cost averaging)?
So, why do I still suggest using dollar cost averaging for your investments?
Because we need to know the essence of these studies and consider the practicality in executing it.
Lump sum investing does better because you put the money to work as soon as possible, rather than sit out a rising stock market.
It is similar to what I talked about in the earlier part of this article – time is of the essence and we should start investing as early as possible.
But if you do not have large sums of money lying around, the next best way is to use dollar cost averaging. Instead of saving up a sum of money, start investing each month when you get your pay. This way, you put your money to work as soon as possible instead of ‘waiting’ to invest.
So the principle is the same. Do lump sum if you have spare cash lying around and dollar cost averaging if you have a regular income. Either way, you put money to work at the earliest opportunity.
Dollar cost averaging is easier to do
The greatest fear of any investor is buying at the top of the market only to see our portfolio value tank with the market.
There’s always a lingering question in investors’ heads – is it cheap enough to buy now?
Investors often ended up procrastinating. This inaction is a result of fear.
How many times have you heard someone say he’s waiting for the market to crash and he ended up waiting for 5 years only to see the stock market go up without him.
The best way to resolve this uncertain feeling and fear is to do dollar cost averaging on the stocks you want to hold for long term.
You don’t need to care if the stocks are expensive or cheap, you just keep buying them over time. Your buy price will average out with time.
It also doesn’t matter if it is a dividend, growth or value stock, the most important thing is that you buy it consistently and hold them for the long term. You should also become better at evaluating stocks as you invest.
You can ignore what other people say about the direction of the market. You only have one job – keep investing.
Dollar cost averaging into individual stocks was not possible in the past because of commissions. Discount brokers like Tiger Brokers have made it affordable to do so and I believe the fees would continue to come down in the future.
Can I trust Tiger Brokers?
I hope you are convinced that investing in stocks regularly can be a simple yet effective strategy to compound your wealth.
But it may be the first time you have heard of Tiger Brokers so I would need to do a little introduction here.
Tiger Brokers is a discount broker who is licensed by the Monetary Authority of Singapore (MAS) recently – never trade with any institution that is not licensed!
The company is listed on NASDAQ since 2019 with the ticker TIGR. Its shareholders include Interactive Brokers, Xiaomi and Jim Rogers. So I do think there’s some credibility to speak of.
I have opened a personal account with Tiger Brokers and have invested in a handful of stocks already. I have also joined the community and wrote a Chinese article on TalkMed. Here’s my profile.
If you are interested to open an account, here’s my referral link or you can use my referral code: “NJPOU0“.
Oh yes, I get stock vouchers when you sign up which can offset my commissions until I pay nothing. You can refer your friends and get rewarded next time.
See you inside.
This is a sponsored article by Tiger Brokers but the views belong to the author.