Investing might seem like something only adults with lots of money do, but starting early—even with small amounts—can significantly impact your financial future. Understanding investment fundamentals as a young adult in Singapore gives you a powerful head start on building long-term wealth.

Why Start Investing Young?

Time is your greatest asset when it comes to investing. Here's why starting early matters:

The Power of Compound Interest

Compound interest is often called the "eighth wonder of the world." It means earning returns not just on your initial investment, but also on all the returns you've previously earned.

Example: Starting at 18 vs. 28

Person A (starts at 18): Invests $100 monthly for 10 years, then stops. Total invested: $12,000

Person B (starts at 28): Invests $100 monthly for 35 years until retirement. Total invested: $42,000

Result at age 65 (assuming 8% annual return):

  • Person A: $280,000+ (invested less but started earlier)
  • Person B: $230,000+ (invested more but started later)

Basic Investment Concepts

Risk vs. Return

The fundamental principle of investing: generally, higher potential returns come with higher risk. Understanding this relationship helps you make informed decisions.

  • Low Risk, Low Return: Savings accounts, fixed deposits
  • Medium Risk, Medium Return: Government bonds, blue-chip stocks
  • High Risk, High Return: Growth stocks, cryptocurrency, startup investments

Diversification

Don't put all your eggs in one basket. Spreading your investments across different asset types, industries, and geographic regions helps reduce risk.

Inflation

Over time, the cost of living increases. If your money isn't growing faster than inflation (approximately 2-3% annually), you're actually losing purchasing power.

Types of Investments Available in Singapore

1. Central Provident Fund (CPF)

While primarily a retirement savings scheme, CPF offers guaranteed returns and should be the foundation of your financial planning.

  • Ordinary Account: ~2.5% annual interest
  • Special Account: ~4% annual interest
  • Medisave Account: ~4% annual interest

2. Singapore Savings Bonds (SSB)

Government-issued bonds that are:

  • Backed by the Singapore government (very safe)
  • No risk of capital loss
  • Flexible—can be redeemed monthly
  • Minimum investment: $500
  • Returns increase over time (step-up interest)

3. Exchange-Traded Funds (ETFs)

ETFs are excellent for beginners because they offer instant diversification at low cost.

  • STI ETF: Tracks the Straits Times Index (Singapore's top 30 companies)
  • World ETFs: Invest in global markets
  • Sector ETFs: Focus on specific industries (technology, healthcare, etc.)

4. Regular Savings Plans (RSP)

Many brokers offer RSPs that allow you to invest small amounts regularly into ETFs or unit trusts, perfect for young investors.

5. Individual Stocks

Buying shares in specific companies. Requires more research and carries higher risk but offers potential for higher returns.

6. Unit Trusts/Mutual Funds

Professionally managed funds that pool money from many investors. Higher fees but professional management.

Getting Started: A Step-by-Step Guide

Step 1: Build Your Foundation

Before investing, ensure you have:

  • Emergency fund (3-6 months of expenses)
  • No high-interest debt (credit card debt, etc.)
  • Clear financial goals

Step 2: Determine Your Risk Tolerance

Consider:

  • Your age (younger = can take more risk)
  • Your income stability
  • Your comfort with market volatility
  • Your investment timeline

Step 3: Start Simple

For beginners, consider this approach:

  • Start with Singapore Savings Bonds or low-cost ETFs
  • Use Regular Savings Plans to invest consistently
  • Begin with small amounts ($100-200 monthly)
  • Focus on broad market ETFs before individual stocks

Step 4: Open Investment Accounts

Popular platforms for young investors in Singapore:

  • DBS Vickers: Low minimum amounts for RSPs
  • OCBC Securities: Blue Chip Investment Plan
  • Tiger Brokers: Low fees, fractional shares
  • Syfe/Stashaway: Robo-advisors for hands-off investing

Investment Strategies for Young Adults

Dollar-Cost Averaging

Invest a fixed amount regularly regardless of market conditions. This strategy:

  • Reduces the impact of market volatility
  • Removes the need to time the market
  • Builds disciplined investing habits

Core-Satellite Approach

  • Core (70-80%): Broad market ETFs for stability
  • Satellite (20-30%): Individual stocks or sector-specific investments for growth potential

Age-Based Asset Allocation

A common rule: subtract your age from 100 to determine your stock allocation percentage. At 20, you might have 80% stocks and 20% bonds.

Common Mistakes to Avoid

1. Trying to Time the Market

Even professionals struggle to predict market movements. Focus on time in the market, not timing the market.

2. Emotional Investing

Don't let fear or greed drive your decisions. Stick to your long-term plan.

3. Putting All Money in High-Risk Investments

While you can afford more risk when young, don't bet everything on speculative investments.

4. Ignoring Fees

High fees can significantly reduce returns over time. Compare costs across different platforms and investment options.

5. Following Hot Tips

Avoid making investment decisions based on social media tips or friends' recommendations without proper research.

Tax Considerations in Singapore

Singapore offers several tax advantages for investors:

  • No capital gains tax on investments
  • No dividend tax for Singapore residents
  • SRS (Supplementary Retirement Scheme) offers tax deductions

Building Investment Knowledge

Educational Resources

  • MoneySense: Singapore government's financial education website
  • InvestingNote: Local investment community and insights
  • SGX Academy: Free investment courses
  • Books: "The Intelligent Investor," "A Random Walk Down Wall Street"

Stay Updated

  • Follow reputable financial news sources
  • Understand major economic indicators
  • Keep learning about different investment options
  • Join investment communities and forums

Sample Investment Plan for a 18-Year-Old

Monthly Budget: $500

  • Emergency Fund: $100 (until 6 months saved)
  • Singapore Savings Bonds: $100
  • STI ETF (RSP): $200
  • Global ETF (RSP): $100

Adjust amounts based on your income and expenses

Red Flags and Scams to Avoid

  • Promises of guaranteed high returns with no risk
  • Pressure to invest immediately
  • Unlicensed investment advisors
  • Complex products you don't understand
  • Get-rich-quick schemes

Conclusion

Investing as a young adult is one of the most powerful wealth-building tools available to you. Start with simple, low-cost options like ETFs and Singapore Savings Bonds. Focus on building good habits—consistent investing, continuous learning, and staying disciplined during market ups and downs.

Remember, investing is a marathon, not a sprint. The earlier you start, the more time your money has to grow. Don't wait for the "perfect" time or until you have a large sum—start small, start now, and let compound interest work its magic.

Your Next Steps

  1. Build your emergency fund first
  2. Research investment platforms suitable for your budget
  3. Start with Singapore Savings Bonds or broad market ETFs
  4. Set up automatic monthly investments
  5. Continue educating yourself about investing