After a long day at work, you might be too exhausted to even think about investing. However, investing is an important aspect of financial planning and cannot be neglected.
Here is a quick guide to 6 investment options that every working adult should know.
1. Peer-to-peer (P2P) lending
Peer-to-peer (P2P) lending is the idea of lending money to individuals or businesses through a matchmaking platform known as a P2P lending platform. In return for lending your money, you get to earn interest rate from lending money to individuals or businesses. To put simply, you are akin to DBS, OCBC or UOB to those who are looking to borrow money from. The benefits of P2P lending include diversification of investment risk and the potentially significant return on investment.
Read also: Why Invest in P2P Lending?
2. Singapore savings bond
Did you know that Singapore has one of the best credit ratings in the world? According to the three credit rating agencies (S&P, Moody’s and Fitch), Singapore is being accorded the highest credit rating by each credit rating agency. Given Singapore’s remarkable financial reputation, there are many investors out in the market who are looking to lend money to our city-state.
The Singapore Savings Bond (SSB) was introduced to give Singaporeans the opportunity to invest your money with one of the safest countries in the world. SSBs are issued and backed by the Singapore government – which means by investing in SSBs, you are essentially lending your money to the Singapore government. In return, the government will guarantee a small return for borrowing the money from you.
3. Regular savings plan
Regular savings plan is an investment option that allows you to adopt a consistent and disciplined approach towards investing using dollar cost averaging. A regular savings plan helps you to get into the habit of allocating a fixed amount of your monthly salary into savings.
However, unlike a normal savings plan where you save it in your bank account, your savings in a regular savings plan is invested in a pre-decided investment option like ETFs or unit trusts.
Many working adults do not get ample time to research and rebalance their investment portfolio. The emergence of robo-advisors is effectively to take care of this problem for working adults.
Robo-advisors help you to take care of your investment decisions by using artificial intelligence. They will even help you tailor your portfolio to cater to your financial needs.
In recent years, cryptocurrency has emerged as one of the most popular investment options among working adults. This is likely due to the significant return on investment that cryptocurrencies were generating for investors. Cryptocurrencies are able to generate the return of traditional investment asset classes (e.g. stocks, bond, property) within a much shorter span of time. However, this also means that investing in cryptocurrencies carry much higher risks than traditional investment asset classes.
6. Investment-linked policy
Remember what we said about many of us being too exhausted at work to think about investing? That probably has resulted in many people taking the easy route, and being persuaded by financial advisors to consider investment-linked policies (ILP).
It’s usually marketed as an investment product that brings you the ‘best of both worlds’: the benefit of having the protection element of life insurance and the opportunity to grow your money. Financial advisors tell us that ILPs are suitable for working adults because it creates a forced savings mechanism. The forced savings are then used to invest to grow your wealth.
However, many readers and bloggers have noted that it’s unwise to tie your investment and insurance under the same policy. One of our readers has told us that his premium increment rate is very much higher than the investment return rate.
Because of the way many investment-linked policies are structured, you could make significant losses if you terminate the policy before its maturity. Furthermore, there is little guarantee that your investment return at maturity would be higher than what you would get from index funds.
Investment-linked policies are an option you should definitely know about, so that you can decide if you should avoid it.
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