Stashing Towards Long-Term Growth; A Youth’s Guide to Investing
Country Manager, Wong Wai Ken, explains StashAway falls under the umbrella term of fintech. The app is a digital fund or wealth manager that helps people intelligently invest for the long term.
One’s Starter Pack to Investing:
Before starting to invest, Wai Ken notes that there are four key things to keep in mind. These would be one’s timeline, risk preferences, diversification and fees. “How long you have dictates how much risk you can take. If you have a long period, you can take more risk. If you have less time, you should take less risk.” He suggests using different platforms to understand your risk appetite, especially when you get started, to invest in different ways. Then you’ll find that you may either be comfortable taking risks or less risk-averse and you can invest in line with your preferences.
Wai Ken believes diversification is also important because it limits your downsides under challenging times, and your portfolio can recover faster, go back into the black and start making positive gains quicker. He believes you should diversify into different asset classes, mainly stocks, bonds, property, commodities and cash. He cited two articles he found helpful in understanding diversification (Linked below).
Overall a diversified portfolio will slowly gain value, making it more resilient and more likely to give you long-term returns. If you are investing yourself, he suggests having at least ten stocks, each in a different sector to be diversified with some large caps and some small caps. He adds that you should look at different platforms whenever you invest, do your homework, and make comparisons. “All things equal with quality and performance, always pick the cheaper platform because every percent you save in fees gives you a better net return so you can compound more on your investments.” As for how much youths should allocate for investing, Wai Ken suggests anywhere between 20 to 25 percent of your net salary.
COVID’s Contribution to Beginner Investments:
The current pandemic has led many to be sceptical about investing, given the economic uncertainties it has unleashed. Wai Ken believes this comes into the realm of timing the market. “Regardless of whether it’s a difficult period, I think you should constantly invest because that helps your dollar cost average.” This essentially means putting the same amount aside into your investment portfolio and holding it for the long term. However, this would be more applicable if you invest in index funds or StashAway, which help you diversify. If you are investing in a single stock, he said your entry matters more. He believes understanding the company’s fundamentals is essential as it depends on your investment style. “You shouldn’t be fearful because when the market is at its lowest, that’s where you can get the most gains.”
Gamestop; Profitable Single Timers:
Recent news of Gamestop sparked a lot of chatter on social media resulting in many hopping on the bandwagon to reap quick gains. However, should we be doubtful about joining in on trends? Wai Ken believes in being cautious to a degree. “What investors, especially young ones, shouldn’t do is jump on bandwagons. By the time it reaches the mainstream media, it’s too late.” He suggests learning and understanding what happened because it affects the markets. However, if you want to invest actively and hear about different speculative opportunities (that have not become mainstream), he said you should listen and put a small amount into it. He suggests these speculative opportunities can form 10 to 20 percent of your portfolio. The rest of it should be invested in safe ways like unit trusts such as StashAway, investing in blue-chip stocks, investment properties and more.
A Beginner’s Field of Knowledge:
As for resources to learn about investing, Wai Ken recommends learning through joining societies that focus on finance and investing clubs at university. He notes books go out of style quickly, so go with the classics because they don’t change too much. “I like Rich Dad Poor Dad because it makes you think about your assets and your inflows in a very systematic way.” He also suggests listening to podcasts on BFM’s app, reading The Edge and Bloomberg too. Also, he enjoys watching YouTubers such as Mr. Money and Suyin Ong and bloggers like Mr-stingy.
As a closing note, Wai Ken emphasises that starting young is important because time is on your side. In doing so, you accumulate a lot of investment knowledge, and there would be less burden on you to invest a lot as you get older. “Like your money, your knowledge compounds because when you learn about different asset classes, you learn about different market environments and you will be a better investor.”
References to diversification:
Jenna Ross (2020) Ranking Asset Classes by Historical Returns (1985-2020). Visual Capitalist. https://www.visualcapitalist.com/historical-returns-by-asset-class/#:~:text=The%20top%2Dperforming%20asset%20class,been%20the%20worst%2Dperforming%20investments
Ray Dalio (2020) Diversifying well is the most important thing you need to do in order to invest well. LinkedIn. Available at: https://www.linkedin.com/posts/raydalio_diversifying-well-is-the-most-important-thing-activity-6566723515720970240-eIq5/
Interested to know more about Stashaway and how to empower people to build long-term wealth and meaningful financial services? Fortunately for you, you can check out their job opportunities for brilliant minds like yours here.
Additionally, if you are an existing FLY committee member, do spend some time exploring Stashaway’s Exclusive Investing Offer.
Journalist: Areeshya Thevamanohar
Reviewers: Sara Yow, Elizabeth