Speaker 1: This is AC N A podcast.
Speaker 1: Hey, welcome back to Money Talks. I'm your host, Andrea
Speaker 1: He on the series. This or that. My guest weighs
Speaker 1: the pros and cons of two options. Now, in previous episodes,
Speaker 1: we've talked about car ownership and H DB flats. Today
Speaker 1: we turn our attention to investment. It's practically a national
Speaker 1: pastime for Singaporeans to discuss ways to grow wealth
Speaker 1: or in other words, make your money work harder for you.
Speaker 1: Go on on the days where people are content to
Speaker 1: let their savings sit in a bank account earning meager
Speaker 1: interest rates, whether it's fixed deposits, t bills, government bonds,
Speaker 1: the options are wide for those looking to grow their money,
Speaker 1: but for those with a bigger risk appetite, the stock
Speaker 1: market is always
Speaker 1: a tantalizing but also daunting option. I mean, there are
Speaker 1: so many stocks to look through. How do you decide
Speaker 1: what works best for you? What I want to know
Speaker 1: is should I be stock picking and hopefully find a
Speaker 1: winner or should I just buy index funds and let
Speaker 1: that work for me. So to help me with this question,
Speaker 1: I have Adam Wong, editor in chief at personal finance
Speaker 1: and investment website, the fifth person. Hey, welcome to Money talks, Adam.
Speaker 1: Thank you and good to have you with us. So,
Speaker 1: do you remember when you first started investing? What did
Speaker 1: you buy? Tell us I actually started investing in probably
Speaker 1: the worst possible time. It was just right before the
Speaker 1: financial crisis in 2008. Yeah. So I was looking at
Speaker 1: some of the US stocks and at that time,
Speaker 1: I was just dabbling into things and I thought I
Speaker 1: was doing the right thing. I was learning how to
Speaker 1: do it, you know, but then the crash came and
Speaker 1: everything went down and then that became the best time
Speaker 1: to invest. Actually, I know, I know like people almost
Speaker 1: wait for markets to crash just to invest. What did
Speaker 1: you buy? I bought a bank. So you bought a
Speaker 1: banking stock. Yes. And I was a custom of the
Speaker 1: bank as well. I go to its branches and almost
Speaker 1: every month looks good on the surface. But then it
Speaker 1: really takes a trained eye
Speaker 1: to have a look at what's happening, you know, because
Speaker 1: that was the start of the financial crisis. And I
Speaker 1: realized on hindsight, I wasn't well equipped enough to understand
Speaker 1: that stock and then it went down and lost a
Speaker 1: bit of money on that. Homework always helps man. So
Speaker 1: what was your motivation for getting into investments in the
Speaker 1: first place? So before you decided on buying this banking stock.
Speaker 1: What prompted you to say, hey, you know what, it's
Speaker 1: time to put some money somewhere and make it work
Speaker 1: for me. I think it starts the same with most people.
Speaker 1: You start working, you save a little bit of money
Speaker 1: and then you see the money start to accumulate in
Speaker 1: your bank account and you go the interest rates in
Speaker 1: the savings account, they don't get you anywhere. Fixed deposits
Speaker 1: are a little bit too boring for someone. You know,
Speaker 1: if you're young, you get a bit more excitable. And
Speaker 1: so you look around and say, how do I grow
Speaker 1: my money?
Speaker 1: And the natural channel is just to have a look
Speaker 1: at stocks because property is a bit for bigger investment.
Speaker 1: So you take a look at the stock market and
Speaker 1: you start looking for books, horses, youtube videos to find
Speaker 1: out more about how you can start investing and that's
Speaker 1: how I got started. And how old were you when
Speaker 1: this was happening? I was mid twenties, I think. Ok.
Speaker 1: Do you find more and more Singaporeans getting into investing
Speaker 1: because it feels like you can throw a stone and
Speaker 1: you would hit an investment, bro, or influencers as they're called.
Speaker 1: Now my talking about investing on youtube, Instagram, tiktok. There's
Speaker 1: just so much investment content out there. I even know
Speaker 1: of uncles and aunties who actively discuss bank fixed deposit
Speaker 1: rates and T bills. Ok. Do you see that happening?
Speaker 1: What's your observation? Yes, that is true. A lot of Singaporeans,
Speaker 1: especially since COVID happened.
Speaker 1: A lot of people have started to want to learn
Speaker 1: how to put their money somewhere and try to grow it.
Speaker 1: I've been with the fifth person for 10 years. You know,
Speaker 1: when we first started this website, I think Singaporeans weren't
Speaker 1: as interested in these things or maybe they were not
Speaker 1: as savvy. But
Speaker 1: nowadays, information is everywhere, like you said on social media, Twitter,
Speaker 1: youtube websites and it's so easy to learn about things. Nowadays,
Speaker 1: the data is out there. What's important is knowing how
Speaker 1: to sift through all that information. All the misinformation, you
Speaker 1: must have a framework of knowing how to understand and
Speaker 1: analyze all this data that's coming in
Speaker 1: and then you make your decisions based on how you
Speaker 1: want to invest because everyone is different, everyone has different
Speaker 1: risk profiles and financial goals and then you take what
Speaker 1: works for you and then you try and stick to that.
Speaker 1: So you're saying it's a combination of both people having
Speaker 1: just a stash of money from three years of not
Speaker 1: spending it during COVID plus the wide exposure of content
Speaker 1: on social media,
Speaker 1: the availability. It's basically instant information. It is. And maybe
Speaker 1: 10 years ago, most of your information would be through
Speaker 1: your stockbroker calling you to tell you about, hey, you
Speaker 1: want to have a look at this stock or exactly.
Speaker 1: It makes me wonder what happens to the stockbrokers. Now,
Speaker 1: are they out of a job they still have a
Speaker 1: role to play. But it is increasingly just a lot
Speaker 1: more easy to just get online, get a digital broker
Speaker 1: and
Speaker 1: do everything yourself through the app or the website. Do
Speaker 1: you think there's a danger with having so much easy
Speaker 1: to digest information about investing about money? That is a
Speaker 1: great question. That was my mistake when I first started
Speaker 1: investing because a little bit of information can be dangerous.
Speaker 1: Because when you first start learning something, you get all excited.
Speaker 1: You guys, this learning curve that you kind of feel like. Well,
Speaker 1: I'm learning so many new things and then you want
Speaker 1: to apply all of that,
Speaker 1: but then too little information can be dangerous because you
Speaker 1: think you know what you know, but then you end
Speaker 1: up getting burned and then you realize that you do
Speaker 1: have to have experience in this thing because it's not
Speaker 1: just about information, it's about how you react to news,
Speaker 1: how you react to bad news, how you react to
Speaker 1: stock market crashes. All that is emotional that
Speaker 1: data or information can help you with it. Something you
Speaker 1: have to go through. That's a painful journey for everyone.
Speaker 1: Just speaking from experience. Ok? So most of us know
Speaker 1: that keeping money in the bank, it's the worst way
Speaker 1: to grow your financial wealth. You mentioned it yourself. You
Speaker 1: saw your money sitting in the bank
Speaker 1: and said, you know what? It's not moving it's not growing,
Speaker 1: let's put it somewhere else, would you say then that
Speaker 1: investing in the stock market is the way to go?
Speaker 1: It really depends on the individual. When I said putting
Speaker 1: money in the bank was terrible. And that's from my
Speaker 1: perspective because I wanted to grow my money faster than
Speaker 1: 1% or 3% nowadays. OK? For someone who is retired
Speaker 1: and maybe he or she has $20 million that's totally fine.
Speaker 1: Put it in the bank is great, you know, so
Speaker 1: it really depends on where you are in life. How
Speaker 1: much you have, what are your goals? What your risk
Speaker 1: profile is in general, if you are in your career
Speaker 1: and you're saving some money and you want to grow
Speaker 1: your investments. Historically, the stock market has been the best
Speaker 1: way to grow your wealth. If you look at the
Speaker 1: data over the,
Speaker 1: the last 50 years in the US, anyway, the stock
Speaker 1: market has outperformed real estate gold, obviously cash and all
Speaker 1: of that. But does it mean it's the best way though?
Speaker 1: I think you have to look at the asset class.
Speaker 1: What are stocks? So stocks are essentially businesses and businesses
Speaker 1: intrinsically are companies that they just that want to grow,
Speaker 1: they want to improve, they want to have more customers,
Speaker 1: they want to provide better products and services. That's how
Speaker 1: they thrive. And of course, if you take a look
Speaker 1: at
Speaker 1: the stock market index is a collection of the best
Speaker 1: stocks in a particular market. So obviously, the index should
Speaker 1: grow because they will always contain, for example, the S
Speaker 1: and P 500 in the US, the best 500 US
Speaker 1: companies and there will be growth because those companies will
Speaker 1: be the ones that become successful over time. So maybe
Speaker 1: last time you would have your General Motors and stuff
Speaker 1: like that today, you have Google and Amazon and stuff
Speaker 1: like that.
Speaker 1: So naturally stocks as businesses should grow. That's right.
Speaker 2: Hello, my name is Steve Lei and I'm Theresa Tang.
Speaker 2: And we are the hosts of CNN correspondent, a podcast
Speaker 2: that takes you to the heart of the work our
Speaker 2: correspondents do across the globe from China's COVID response to
Speaker 2: the Child Care Center massacre in Thailand from the fall
Speaker 2: of
Speaker 2: to the rise of Anwar Ibrahim as Malaysia's Prime Minister,
Speaker 2: we speak to the people at the reporting frontlines. So
Speaker 2: if you want to know how the biggest global stories unfold,
Speaker 2: make sure you follow or subscribe to us wherever you
Speaker 2: get your podcasts,
Speaker 1: buying stocks can be really quite daunting. I for one
Speaker 1: don't even venture into it. I let my financial agent
Speaker 1: just handle everything for me. For a new investor. Me included.
Speaker 1: If I decide to go into stocks one day, can
Speaker 1: you walk us through how we should approach stock kicking?
Speaker 1: There's so many different ways you can invest. Some people
Speaker 1: like to invest for dividends, for example, they invest in
Speaker 1: the banks, the local banks or some of the here
Speaker 1: because they give a very steady dividend. Some people are
Speaker 1: looking more for growth. So maybe they look at the
Speaker 1: US markets because the economy, there is so much bigger
Speaker 1: company can scale across the entire US and become a
Speaker 1: huge company or in China as well nowadays. So if
Speaker 1: you're looking for growth, I think the stock market is
Speaker 1: one of the best ways you can consider doing that
Speaker 1: and how you can get started is basically you have
Speaker 1: to understand yourself, what do you want to achieve with
Speaker 1: your money?
Speaker 1: Ok. So for example, someone who is looking for passive income,
Speaker 1: then they would start looking at stocks that give a
Speaker 1: steady dividends. So let's park my money there, let it grow.
Speaker 1: I leave it alone. I don't have to think about
Speaker 1: and that achieves your investment goal for someone else who
Speaker 1: wants something else. They will start looking at a different
Speaker 1: kind of stocks that will give them what they want
Speaker 1: to achieve. So more growth. So what would be the
Speaker 1: personality of someone who goes for growth stocks?
Speaker 1: I mean, this is a stereotype but in general, someone
Speaker 1: who is younger wants to grow the money faster, it
Speaker 1: has less to lose because if someone who's already made
Speaker 1: their millions, they want to play it safe, you know,
Speaker 1: retirement funds, you don't want to touch too much of that. Yeah.
Speaker 1: So someone who is still relatively young, still working. So
Speaker 1: even if they make a mistake in the stock market,
Speaker 1: it can happen, it will happen,
Speaker 1: they lose money there, they still have active income, they
Speaker 1: can make it back, they can make it back, they
Speaker 1: can save more money. But someone who is retired, that's
Speaker 1: a little bit more risky. I think there's also differences
Speaker 1: between men and women. For example, the kind of stock
Speaker 1: that they pick, which brings me to my next question.
Speaker 1: So the alternative to stock picking is index funds, which
Speaker 1: is what I happen to be in because I literally again,
Speaker 1: don't have to think about it. Someone else does it
Speaker 1: for me, correct me if I'm wrong. It's a basket
Speaker 1: of it.
Speaker 1: Is that what an index fund is? So an index
Speaker 1: fund is a fund that tracks an index, the collection
Speaker 1: of stocks. It could you explain to us how index
Speaker 1: funds are then different from buying stocks? So what's the
Speaker 1: difference between stock picking and buying an index fund? So
Speaker 1: when you do stock picking, you are essentially telling yourself, hey,
Speaker 1: I think I know which stocks are going to be
Speaker 1: the best or going to perform or achieve whatever I
Speaker 1: want to achieve. And,
Speaker 1: and you go in doing your research and your analysis
Speaker 1: and then you come up with a thesis and then
Speaker 1: you come up with a conclusion, I'm going to buy
Speaker 1: these bunch of stocks well researched, presumably, right? But mistakes
Speaker 1: will happen. Ok. So as a stock picker, you got
Speaker 1: to back yourself that you know what you're doing and
Speaker 1: then you pick your stocks and you create your own
Speaker 1: portfolio that suits your needs. On the other hand, if
Speaker 1: you don't have the time or the interest to do
Speaker 1: all these things, you can essentially diversify
Speaker 1: your investments and just buy an index fund or an
Speaker 1: index ETF exchange traded fund that basically allows you to
Speaker 1: just own the entire basket of stocks. So instead of
Speaker 1: picking individual stocks and doing all your research, you just
Speaker 1: kind of go, you know what, I'll just buy everything
Speaker 1: and I have a piece of everything. Yeah, I have
Speaker 1: a piece of everything. So even if one of the
Speaker 1: stocks doesn't do so well, I have so many other
Speaker 1: stocks in that fund as well. So on average, you
Speaker 1: should be doing ok. So you don't expect to do
Speaker 1: fantastically well, because you're buying the entire market, for example.
Speaker 1: So you should be making market returns, average returns, but
Speaker 1: that's ok because if that's what you want and that
Speaker 1: suits you,
Speaker 1: there's a totally fine way to invest. Would that necessarily
Speaker 1: mean that there are fewer risks with buying an index
Speaker 1: fund versus stock picking in general? You could say that
Speaker 1: because then you kind of like diversify your risk across
Speaker 1: a whole range of stocks, but it depends on the
Speaker 1: index as well. So if we are talking about the
Speaker 1: broad based index indices like the Singapore S T I
Speaker 1: or the S and P 500
Speaker 1: they represent the country's stock market in a sense. But
Speaker 1: if you go with a more specific index like electric
Speaker 1: vehicle index, so that gives you exposure into the electric
Speaker 1: vehicle industry, so that one could be a bit more tricky.
Speaker 1: So there are specificities within the index fund market. There's
Speaker 1: so many different funds out there that can give you
Speaker 1: exposure to different sectors and different industries. But of course,
Speaker 1: the most diversified kinds are those that basically represent the
Speaker 1: whole market.
Speaker 1: OK. Where does an exchange traded fund or an ETF
Speaker 1: sit in all of this. So an exchange traded fund
Speaker 1: is essentially a fund. Typically you buy funds through over
Speaker 1: the counter that invest in these basket of stocks or assets.
Speaker 1: It's grown in popularity over the last 10, 15, 20 years. Nowadays,
Speaker 1: the funds are listed on the stock exchange. So they
Speaker 1: are traded like a stock so you can buy and
Speaker 1: sell any time you want based on the price at
Speaker 1: that point in time, uh gives you the liquidity
Speaker 1: of flexibility. So it is a fund but trades like
Speaker 1: a stock which gives you that flexibility as well. So
Speaker 1: that's called an exchange traded fund, which is extremely popular
Speaker 1: and the fees are extremely low as well. It suits
Speaker 1: a lot of people because it gives them diversify exposure
Speaker 1: to a particular country or sector for low fees. OK?
Speaker 1: So let's now zoom out a little bit and talk
Speaker 1: about the stock markets. They are very volatile given the
Speaker 1: current macroeconomic conditions one day, good news,
Speaker 1: the markets are rallying the next day. It's a decline.
Speaker 1: This index has lost this much. It's so unpredictable and
Speaker 1: it's almost a challenge to not react emotionally to news
Speaker 1: like that. Right. So in such an unpredictable environment, should
Speaker 1: your average retail investor just give up trying to time
Speaker 1: the markets or look for undervalued stocks and just buy
Speaker 1: and hold index funds. So for the typical person who
Speaker 1: doesn't have the time
Speaker 1: or the interest to do all these things, then definitely
Speaker 1: an ETF is a great solution to that passive way
Speaker 1: of investing. You just kind of like dollar cost. Average.
Speaker 1: Most people do that into a particular ETF that they
Speaker 1: like and then they do it over a number of
Speaker 1: years because over the long term, the stock market has
Speaker 1: performed very well. We can't say that future performance will
Speaker 1: be equal to the past as well.
Speaker 1: But in general, yes, the data historically in the US
Speaker 1: in Singapore, the stock market has performed pretty well. So
Speaker 1: the ETF gives you the exposure to the entire market
Speaker 1: and then you can just do the cost average over
Speaker 1: a period of time, 20 years from now, it should
Speaker 1: be worth a lot more. And that's the way that
Speaker 1: many people can start investing. If you are interested in investing,
Speaker 1: you really want to get into the nitty gritty and
Speaker 1: the nuts and bolts into
Speaker 1: what makes a great company great and how they can
Speaker 1: outperform their competitors or the general market. And you really
Speaker 1: like doing that then by all means you can do
Speaker 1: that as well and some people do a mixture. So
Speaker 1: maybe half of their portfolio is into a T F
Speaker 1: diversify that part and a certain part is this portion
Speaker 1: of the portfolio. I want to stop. We talked about
Speaker 1: this earlier about how there are certain stereos
Speaker 1: types where those who are older, they would invest in
Speaker 1: something that's a little bit more steady. Whereas a younger
Speaker 1: person with a longer career runway would invest in a
Speaker 1: more adventurous path. Does that change with age? I think
Speaker 1: in general that's how it works for most people. Once
Speaker 1: they realize that I can't take this amount of risk,
Speaker 1: they start to derisk their portfolio
Speaker 1: for me. I feel it as well. In my twenties.
Speaker 1: I was looking at all the exciting stuff. How can
Speaker 1: I make money faster? Right. And then now that I've
Speaker 1: saved more and invested more and then I'm in my
Speaker 1: forties now I go like, hm,
Speaker 1: maybe I should have take that risk with this amount
Speaker 1: of money that I have and put it in something
Speaker 1: that's more stable. And I'm happy with that those returns
Speaker 1: because 10 years, 20 years from now I'm going to
Speaker 1: be retired, I want to be comfortable. I don't need
Speaker 1: to be mega rich, but I really want to be
Speaker 1: comfortable and retired, enjoying my life. So then those considerations
Speaker 1: weigh on my mind at this age compared to when
Speaker 1: I was 20. Ok. Sounds like me too.
Speaker 1: What's your final advice to investors in the current market? Ok.
Speaker 1: You were saying just now the news, it sounds like
Speaker 1: the end of the world sometimes and then sometimes it's like, well,
Speaker 1: everything is doing so well. If you've been in this
Speaker 1: thing for so long, you realize it's the same old
Speaker 1: thing again and again, it is, isn't it? It's like
Speaker 1: a cycle. It is a cycle and you just have
Speaker 1: to strip away all that noise and realize that at
Speaker 1: the end of the day, if you are investing, you're
Speaker 1: in it for the long term. And if you do
Speaker 1: an ETF dollar cost average strategy,
Speaker 1: you are investing in a basket of great companies based
Speaker 1: on the index and that should grow over a period
Speaker 1: of time. So all this news that comes in and out,
Speaker 1: it shouldn't really affect you
Speaker 1: because you're diversified across maybe 500 companies. All of them
Speaker 1: are still doing business every day. They still have customers
Speaker 1: every day, they are still making money every day. So
Speaker 1: ignore all the noise and strip back to the fundamentals.
Speaker 1: What are you buying? Does it meet your financial goals
Speaker 1: based on your risk profile and all that if it is?
Speaker 1: And it's been working for, you. Stick to it. There's
Speaker 1: no point jumping from one strategy to the next, trying
Speaker 1: to learn a new thing, trying to look for a
Speaker 1: silver bullet
Speaker 1: stick. What works for you stick with it over the
Speaker 1: next 10 2030 years. And at the end of it,
Speaker 1: if you've been managing your money properly, you know, the
Speaker 1: right financial habits, you should be well ahead at the
Speaker 1: end of the day. Yeah, it's always exciting. Right? When
Speaker 1: an investment pays off and you start to see the returns,
Speaker 1: you know, any investment carries risk, so understand your own risk,
Speaker 1: appetite and do your homework before committing your hard earned
Speaker 1: money. Thanks so much, Adam for helping us weigh the
Speaker 1: options on this or that. And thanks to you, our listener,
Speaker 1: if you've enjoyed this episode of Money Talks, there's more
Speaker 1: content for you to enjoy. Simply follow us on Apple
Speaker 1: Podcasts or Spotify. Give us five stars or leave a review.
Speaker 1: The team behind Money Talks is Joanne Chan, Jacqueline Chan
Speaker 1: Christina Robert and I'm Andrea. He.