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