If you’ve never invested before, you might think it’s just for moguls and tycoons with money to burn. But when you separate the fact from the fiction, you'll see that investing is more accessible than ever. Look beyond the stereotypes and you might even find that it's right for you.
|Myth 1: It’s too risky|
Of course, there are risks involved with investing. Any trustworthy source for investment opportunities will always include a warning like "you may not get back what you invest".
The key is to understand the risks involved and how they can change over time. That way you can make an educated decision about how much risk is right for you. And by taking a calculated amount of investment risk, you can give your money greater potential to grow than letting it sit in your savings account.
You can find some lower risk investments, such as what’s known as a "cautious" fund. While there is still risk, its value isn’t typically expected to fluctuate much. This means you could invest and enjoy a much smoother, gentler ride over time. (HSBC helps with investment risk management by offering these types of products.)
Myth 2: You have to be rich
This might have been true in the past, but these days (thankfully), it’s much more democratic. Online fund platforms and online investment advice services have opened up investing to the masses so you can now start investing with relatively less.
One of the simplest and most affordable ways to start investing is with unit trusts using a disciplined approach of regular contributions. It takes an initial layout of SGD1,000 followed by monthly investments of SGD100 for the next 6 months – or longer if you wish.
There is also the option of making small investments in foreign exchange (FX). You can buy a variety of currencies, earning money by selling them when the exchange rates change in your favour.
Maybe investing isn't just for the rich after all?
Myth 3: You have to lock your money away
It's true that the longer you hold an investment, the more chance you have of smoothing out the bumps and making positive returns. But you certainly don't need to lock your money away.
With most investments there’s no fixed period you have to invest for and there are no penalties for selling your investments. You can absolutely access your money at any time.
That said, you shouldn't treat an investment like a savings account. You wouldn't want to be forced to sell when the markets are having a downturn because you needed some cash. Otherwise your investments could be worth less than what you put in.
That’s why one of the golden rules of investing is to make sure you have 3 to 6 months’ worth of expenses saved in an emergency fund before you start. That way, if your car breaks down while the markets have a wobble, you can dip into your savings to get it repaired and leave your investments untouched, giving them plenty of time to recover.
Myth 4: You need to be a stock market expert
A lot of newcomers to investing think that the only way to get started is to play the stock market. And while securities trading is a popular choice, it is often complicated and requires constant scrutiny of the stock market. But there are other options.
For many of us, shall we say 'less-expert' investors, investing in funds could be a great way to start. Buying into a fund is like buying a ready-made, off-the-shelf basket of investments. Perhaps best of all is that they’re put together by a fund manager – an experienced investment professional who knows more than a thing or two about investing.
At HSBC, we offer a comprehensive range of funds which are carefully selected and managed by investment professionals who actively manage them on your behalf.
If you’re not confident about picking a fund, why not ask one of our advisers to do it for you? By taking investment advice, you can find out which fund is right for your current situation, how much you should invest and whether you’re even ready to invest.
Myth 5: You have to monitor your investments daily
While it's important to be aware of major changes in the market, you don't need to constantly check for updates. This is another reason why unit trusts can be a great way to invest.
With a unit trust, you can invest and leave it in the safe hands of the experts. They’re professionally managed to ensure that they stay at your chosen risk level – again, making them less risky than investing directly in shares.
Even if you take the more ‘hands-on’ approach and invest in shares, you don’t necessarily need to monitor them daily. When you open a Securities Trading account with us, you get free market analysis and other tools that put you in control. You can set up personalised lists of your favourite stocks in the watchlist so that you can have an overall view of all your preferred stocks.
There are similar tools for FX investing, such as FX Order Watch, which monitors exchange rates around the clock. You can place an order for a certain time and a rate you're happy with and it will automatically make the conversion when your watched rate has been reached.
And when you invest with HSBC, whether in FX, funds or shares, you’ll see the balance of your accounts every time you log on to online banking.
Myth 6: You have to know when it’s the right time to buy
One basic saying everyone knows about the markets is "buy low, sell high". The trouble is, there are so many factors influencing the stock market that predicting when a share price will bottom out or hit its peak is practically impossible. But there’s another saying about investing: "It’s not about timing the market, it’s about time in the market."
The important thing is to start as soon as you can and invest for as long as you can. The longer your timeframe, the more volatility you should be able to deal with because you’ll have more time to recover from any lows.
To see where you're at and what you'd need to do to reach your goals, you can try our handy Wealth Planner calculator. It lets you simulate your financial plans, so you can see how much you'd need to save or invest for major life goals such as retirement.
If you’re 5 years from retirement, you may want to select a cautious investment. If you’ve got 10 years or more to play with, you may be in a position to be more adventurous. Again, if you’re not sure what’s right for you, you could get a professional opinion for some investment advice.