‘Dapao’ & Investing, Same Same But Different?
Look down, not up when making your initial investment decision. If you don’t lose money, most of the remaining alternatives are good ones.
The COVID-19 pandemic and subsequent lockdown in 2020 forced many of us to change our behaviour. For a period of time, dining in was not an option and many turned to food delivery services or deliveries from the restaurants themselves to order takeaway or to ‘dapao’.
Ordering takeout for a meal seems like a simple option — no trips to the supermarket, no hunting for ingredients, and no time spent slaving away in the kitchen for meal prep. However, before you can tuck-in, there are some decisions you need to make. Deciding what to eat could be difficult in the moment — after all, you’re hungry and you may have to cater to the preferences and requirements of the rest of the family. The appeal of a ready-made meal makes those decisions worthwhile. The same is true when choosing an investment.
What Do I Want?
Just like choosing what to eat, deciding what and how to invest might be confusing when presented with the myriad of choices. It helps to remember that there are three major asset classes for investment — stocks, bonds and cash (see diagram below). While there are other sub-asset classes like real estate and commodities, currencies, options, and private equity, we tend to exclude them for liquidity reasons, or the fact that you need a derivative in order to trade them.
After looking at the different asset classes, you may decide that you like the higher return opportunities that stocks offer over bonds. And so, you choose stocks. What comes next?
What Should I Order?
Say you decided to have some Italian food; the decision-making process doesn’t stop there. Pasta or risotto? Aglio olio, Marinara, or Alfredo? Seafood or cured meat? Maybe a pizza to go with that? Let’s not forget about the appetisers or antipasti! The choices may seem endless. You might feel similarly when deciding what stock instruments to get.
Individual stocks or shares? However, there are thousands of options to choose from. Singapore market only? How about US companies or stocks listed on the Hong Kong exchange? Having a criteria list for picking stocks may help, but the task remains daunting and requires constant monitoring.
A stock fund or unit trust allows access to hundreds, and for some, thousands of stocks in a single fund. The investments in many of these funds are managed by a fund manager who trades on your behalf based on a certain mandate. Of course some funds do better than others, so deciding on whom you want to work with is a decision that requires careful consideration. You can invest in a fund with a very small starting capital compared to individual stocks. An additional benefit is that you still gain access to the hundreds or thousands of companies which the fund invests in. Funds help to democratise investments and allow many individuals to gain access at a relatively low cost.
How Do I Want to Receive It?
You can either get your food delivered or head down to the restaurant itself to pick it up. In a similar vein, you could DIY, buying the investment yourself — registering for an account with a local brokerage or platform, funding it, and buying the investment. Alternatively, you could get your investment ‘delivered to you’ for a fee. Financial advisors will be able to construct an investment for you according to what you desire. Expectedly, this comes at a cost, but it saves you the hassle and will save you the headache of doing it yourself.
In the end, whether or not you decide to invest boils down to whether you want/need to make the best use of your money. For a lot of us, we simply do not have the required assets to stop working now. Savings in the bank can only go so far in retirement as the cost of living continues to rise. Investing enables us to keep up with inflation, allowing our money to grow above and beyond our annual savings and salary increments.
If you are new to this and need some help getting started, don’t worry and don’t be intimidated! You can schedule a free consultation to speak to us. If you can choose what to ‘dapao’, you certainly can decide on what to invest in.
