Being the world-class financial center, Singapore boasts with a plethora of modern financial markets. Hence, the investment climate is quite impressive, and leveraged investments (e.g., through CFDs) are available from Singapore stockbrokers. Here, the only issue is primarily about the yields you gain on SGD- denominated investments.
Singapore is famous in the investment community for its trade and economic sectors. As forecasted by CLSA, by 2025 the country will overtake Switzerland and handle nearly a third of the world’s agri-commodity business. The country’s prosperity in global trade is enormous because of its demographic placing and the fact that it has very little corruption, a harmoniously skilled workforce, reduced tax rates, and highly advanced infrastructure.
In any country, expats are concerned with beating inflation and taxes to preserve the value of their savings. However, the good news is that Singaporean residents generally do not pay a fee on their investments unless they carry on a trade or gain income from real estate in Singapore. The core concern is thus about beating inflation.
Investments are tools for multiplying your money, sourced from a house, a new or existing business or a traditional investment portfolio. For example, you might invest in stocks, property or shares in a fund each month. Although, investing is a great way to get more from your money, but it is not for everyone as an investment is a risk-taking activity.
The first thing you ought to ask: why do you need to invest? Planning your goals and timeframes is an essential consideration for any investment. In case, you have debts to pay off, then it might be a good idea to clear these first.
Whether investing makes sense for you highly depends on your goals – and, more specifically, in case, they are long-, short-. Or medium-term.
- Short-term goals: things you plan to do within the coming five years.
- Medium-term goals: things you plan to do in the next five to ten years.
- Long-term goals: things for which you won’t need money for ten years or more.
None of us like to gamble with our savings, but the truth is there is no such thing as a ‘no-risk’ investment. You are always taking on some risk when you invest, but the quantity deviates between different types of investment.
For instance, the money you keep in secure deposits such as savings accounts risks losing value (buying power) over time. This is because the interest rate paid won’t always keep up with the rising prices (inflation).
There are several investment opportunities; choose something that suits your risk profile. In short, riskier investments can fetch you higher gains – as well as losses. Here are some common investment types:
- Bonds: A form of borrowing by an organization. It includes particular types like the Singapore Savings Bond.
- ETFs: Open-ended investment funds listed and traded on a stock exchange (e.g., STI ETF tracks the Strait Times Index).
- Real Estate Investment Trusts (REITs): A professionally managed real estate portfolio.
- Stocks/Equities: Shares that are issued by companies to raise capital or financing from investors. Blue-chip stocks are those of large, established and market leading companies.
- Forex: Negotiation of different currencies in a market.
There are other types of investments available as well, including:
- Collectibles, such as art and antiques
- Commodities, such as oil, coffee, rubber, and gold
- CDFs, where you bet on shares’ gaining or losing value
The various assets owned by an investor are called a ‘portfolio.’ It is advisable to build a diversified portfolio by investing in different asset classes to lower the risk of the overall portfolio underperforming.
Risks and Benefits of Investing in Singapore
Singapore has one of the world’s wealthiest populations.
Benefits of investing in Singapore:
- Favorable demographics: Singapore has the third largest income per capita in the world, the largest concentration of millionaires, and the lowest unemployment rates among developed countries.
- Free, open economy: Singapore is widely considered as one of the most accessible countries in the world. Furthermore, it is a promising place to conduct businesses, with favorable tax rates, low corruption, a skilled workforce, and advanced infrastructure.
Risks of Investing in Singapore:
- Reliance on foreign trade: Singapore’s economy is highly dependent on foreign trade, which led to shrinkage during the 2001 bubble and 2008 financial crisis, but the country followed the path to recovery quickly, growing 14.5% by 2010.
- Connection with China: The country’s economy is highly interconnected with China’s economy given its significant capitalization. Since 2015, this connection proved to be detrimental as China’s economy has deteriorated significantly.
Investors should carefully evaluate these benefits and risks before diving into an investment. Undoubtedly, Singapore should also only be a single part of a diversified portfolio to ensure optimal risk-adjusted returns. Many economic downfalls are challenging to predict, especially in emerging markets, which tend to be a bit more volatile than developed markets.
Key Points to Note
- Singapore is best known in the investment genre for its participation in global trade as one of Asia’s most significant trading hubs.
- The quickest way to invest in Singapore is through ETFs or closed-end mutual funds that include the iShares MSCI Singapore Capped Index Fund (EWS).
- Singapore has a healthy and thriving economy driven by strong fundamentals, though it is sensitive to slowdowns in global trade.
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