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Singaporeans are becoming more financially informed – and that’s a good thing! Nowadays, nobody just sits back and relies on their CPF savings alone for retirement. Instead, we try our best to make our money work towards our goals, whether it’s saving up for retirement or dabbling in financial products to grow our cash.
The good news is that thanks to this digital age, barriers to entry for investing are lower than before (remember all the insane paperwork and accreditation required?). That means more of us can enter the realm of investing and start growing our money, which is great! Innovations like digital wealth platforms that offer investing and cash management options make investing easy and straightforward at every stage of life.
Ironically, the numerous opportunities available have resulted in many of us investing “any old how”. While we might have sound and diversified investments, our portfolio may not be fully aligned with our financial goals, or worse, we may not even have identified these goals yet. When that happens, we cannot maximise our investments to fulfill our needs.
Step 1: Identify your goals
There is no one-size-fits-all financial goal. It’s totally personal and largely depends on your values and what is important to you in life. You might have goals in different areas, such as family, self-improvement, career, hobbies and fitness.
So, what are your goals? When pondering this question, try to think out of the box to figure out what’s truly important to you rather than just going for the typical milestones. To cite a very basic example, if raising a family is important to you, your financial goals might look very different from those of someone who is child-free by choice or is single.
Knowing what you’re saving for will allow you to make the best investment decisions for each goal.
Step 2: Consider your time horizons
Different goals can have very different time horizons: short-term, medium-term or long-term. Determining your investment time horizon is very important because it directly affects your risk tolerance.
Let’s say you’re saving for retirement, a new house, and your child’s education. Even if you’re saving enough each month for each financial goal, you shouldn’t put all the savings in the same place. Why? Because each financial goal has a different time horizon and so needs a different level of risk. Of course, this is also dependent on your risk appetite.
Markets tend to rise over the long term, but they can be very volatile in the short term. So with a longer time horizon (such as your retirement in 30 years), you can take on more risk because the markets will have had more time to recover. With a shorter-term goal, such as saving for your holiday next year, you should be saving in a low-risk portfolio.
A general rule of thumb:
Short-term financial goals: 6 – 12 months +
Mid-term financial goals: 3 – 5 years +
Long-term financial goals: 5 – 7 years +
Understanding your time horizon for each goal is critical to identifying the right solution for your respective goals.
Step 3: Map out your financial plan
So how do you design your portfolio to get closer to your goals as efficiently as possible? The best way to do this is to make it visual – getting it down on paper will allow you to flesh out the details. Map out your goals and your desired timeline to achieve them.
Step 4: Consider your options
While many of us have some sort of financial plan, we often tend to stick to the traditional methods of saving cash, like fixed deposits or insurance.
If this sounds like you, you can explore the possibility of investment and cash management. These solutions cater to people at any stage of their financial lives, from beginners to the financially savvy.
Most of us know that investing is necessary, but getting started or deciding what to invest in can be frustrating. Nobody’s got perfect information, so there’s always the fear that we’ll make bad decisions.
Wealth management platform, StashAway, has a clear understanding of this frustration. That’s why it was the first digital wealth platform in the market. And since its launch in 2017, StashAway has evolved to offer a holistic solution including cash management and investing portfolios.
Step 5: Making your goals possible with StashAway
So, now that you have your plan in hand, how do you decide on an investment solution that would work best for you and your goals?
If you need to cash out in less than two years, consider a low-risk cash management portfolio. StashAway’s cash management portfolios, Simple and Simple Plus, let you earn a return on your cash with no minimum investment amounts and no lock-ins.
With a projected return of 2.2% p.a., StashAway Simple is an ultra-low-risk portfolio for those with an investment time horizon of 6 to 12 months. If you have a time horizon that’s longer than a year, and are willing to take on slightly more risk for higher projected returns, you could consider StashAway Simple Plus, which has a projected rate of 3.6% to 4.1% p.a.
In the current financial climate, Simple and Simple Plus are great options for those looking for a stable way to grow their cash.
Some shorter-term goals that would be suited to Simple and Simple Plus could include that big holiday you’d like to take at the end of the year, a course you want to enroll in for your career, or your wedding.
Assuming you top up your StashAway account with $100 every month, after one year you could find yourself with $1,213.26 with Simple, or up to $1,224.25 with Simple Plus, based on their current projected returns.
Raise your top-up amount to $500 per month and you could find yourself with $6,066.30 with Simple and up to $6,121.27 with Simple Plus.
Bump up your monthly contribution to $1,000, and you could have $12,132.60 after a year with Simple and up to $12,242.55 with Simple Plus.*
Longer-term goals of at least 3 to 5 years
Got a longer time horizon? Then you have more time to ride out volatility, and can go for investments with higher potential returns. In that case, you might want to opt for StashAway’s General Investing portfolios.
Here are 2 of StashAway’s General Investing portfolios:
General Investing powered by StashAway: Invest in globally-diversified portfolios that capture long-term returns, all while keeping risk constant.
General Investing powered by BlackRock®: Powered by one of the world’s largest fund managers, these portfolios provide an investor with broad exposure to the market. You can expect long-term outperformance, and short-term ups and downs that trend with the markets.
Some examples of long-term goals include retirement or your child’s future university education if he or she is still very young. For instance, in order to pay for a 4-year university course, in Singapore, you will need around $30,000 — and that’s not taking into account inflation!
Get ahead with your financial goal
These are just some of the products you can consider to get closer to your financial goals. But do remember that mapping out your plans is just the first step – it’s important to remain consistent and committed to your goals. You can start here and take a look at StashAway’s offering.
Earn projected rate of 1.9% p.a. with your cash with Stashaway Simple.
Start saving for your retirement by investing with your SRS funds.
One transparent management fee, from as low as 0.2% p.a.
No account setup fee.
Unlimited, free transfers and withdrawals.
Rebalancing, transaction, and re-optimisation costs are included.
Fully accessible on 4.6 star rated app on Apple App store and Google Play.
To sign up for a StashAway account, download the app or fill in the sign-up form on their website.
Assumption for return (per annum): StashAway Simple: 2.2%, StashAway Simple Plus: 4%. These return figures are for illustrative purposes and do not reflect actual returns nor the effects of inflation. For current projected returns, check Simple and Simple Plus.
BlackRock® is a registered trademark of BlackRock, Inc. and its affiliates (“BlackRock”) and is used under license. BlackRock is not affiliated with StashAway and therefore makes no representations or warranties regarding the advisability of investing in any product or service offered by StashAway. BlackRock has no obligation or liability in connection with the operation, marketing, trading or sale of such product or service nor does BlackRock have any obligation or liability to any client or customer of StashAway.
For StashAway General Investing portfolios that are powered by BlackRock, BlackRock provides StashAway with non-binding asset allocation guidance. StashAway manages and provides these portfolios to you, meaning BlackRock does not provide any service or product to you, nor has BlackRock considered the suitability of its asset allocations against your individual needs, objectives, and risk tolerance. As such, the asset allocations that BlackRock provides do not constitute investment advice, or an offer to sell or buy any securities.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
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Original article: Wedding? Car? House? How to Make Your Money Work Towards Your Goals.
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