Why be your own fund manager?
Statistics
over the past few years have shown that majority of fund managers underperform
compared to the market. Simply put, if the market has grown 5% over the past
12 months & in that exact same time frame, if your fund manger is
not able to help your capital rise 5%, they have underperformed. True
that fund managers are usually motivated as they take a cut of your
profits after using the money you have entrusted to them. What could
possibly have caused them to underperform then? I guess it's this:
carelessness. Ever wondered how you tend to be more aware of your
spendings when it's out from your own pocket? Well, that's what I'm
driving at. You would think twice or thrice before buying something
expensive but if someone else is paying for it, you would grab it almost
instantly like a kid at a toy store without guilt or shame. So who then
should you entrust your money to? Yourself. Take charge of your own
investments, be your own fund manager. Since you work so hard to earn
money, shouldn't you work even harder to ensure that the value of your
money isn't being eaten away by inflation? Shouldn't you educate
yourself on how to make your money "grow"?
How should I start?
Read up, invest your time properly. Online resources are usually free
and readily available; SG Yahoo Finance, Bloomberg, Financial blogs. The
Business Times (Weekend) newspaper is one of my favorites. Make a trip
down to any bookstore and browse the books under the "investment" section.
Read a few pages or chapters to see if it interests you enough before
bringing the book to the cashier.
Talk
to people preferably someone close to you (family, relatives, friends) .
Ask them what they have bought, what they are going to buy next
& their reasons for doing so. Find out what kind of investors they
are & what their risk appetites are. What they invest in might not
necessarily suit your risk appetite. For instance, I don't fancy my Dad's investing style (I'll elaborate further in another separate post
in the near future) but I was still able to learn and understand why he
does things in a certain manner.
Set up a trading & CDP account
Once you are sure you want to start investing, you will need to have a
trading account & a CDP account. CDP account is where your shares
are being "kept". Just like how we put money into our bank account, we
put the shares we buy into our very own CDP account. Trading account can
be opened at any major banks, preferably a bank which you already have a
savings account with. Do note
that different banks charge differently for each "buy" or "sell"
position. Citibank offers the lowest brokerage fees of $5 for each "buy"
or "sell" position however, it's a little more complicated at Citibank.
The shares that you buy will not be "deposited" into your CDP account
as Citibank will be "holding" onto it on your behalf. The biggest
concern is, if ever Citibank collapses one day, what happens to my
shares? For
that reason, most people play it safe and don't mind paying more so
that the shares they have bought are "deposited" directly into their own CDP
account.
DBS
Vickers (Cash Upfront) Account is what I use. Usually it's about $25
for online brokerage fee across all major banks in Singapore but with dbsvickers (cash upfront)
account I pay $18 instead of $25 for each "buy" position. However, I
can't "sell" using this cash upfront account so when I sell, I have to
pay $25 using dbsvickers account. When you buy a share, you are required
to pay within the next 3 days but dbsvickers cash upfront requires you
to make payment immediately. And because of the investor's willingness
to pay immediately, there's a discount for that.
Get
started! I'm so excited for you! We've all heard that the hardest part
is taking the first step. However, once the engine starts, it's much
easier to "roll" along.
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