If you’re new to investing and looking to get started, one of the biggest questions you have is probably: what should your first investment be?
When it comes to dealing with something as sensitive as your real money, the thought of doing something as foreign as investing is understandably nerve-wracking.
To give yourself the best chance of success, you probably want to make sure that your first investment is a good investment.
The question, then, is: what exactly is a “good investment”?
In this post, I’ll talk about what defines a good investment to me, give you some suggestions for good first investments, and 2 questions to help guide you to a decision.
What Is A Good Investment?
To some, a good investment may be one that yields a higher-than-average return for a given level of risk.
To others, it may be one that provides consistent payouts of dividends, or is dedicated to a good cause.
To me, a good first investment is anything that helps you take the first step and get started with investing in the first place.
It should be something that you feel comfortable enough with putting your money in and begin your investing journey.
The first step is always the hardest step, and this couldn’t be truer when it comes to investing.
Regardless of how much research you’ve done about investing, it somehow never feels enough.
The fact that it’s something you were never taught in school and probably have never learned about until you took the initiative to find out more makes it more daunting than it already is.
But once you get started, you’ll definitely gain value – whether it is monetary or not.
Having your money invested will allow you to experience what it’s like to be exposed to risk and volatility, and how you react to it.
You’ll find out what you’re comfortable and not comfortable with, and this will allow you to adjust your investing approach in the future to be aligned with your risk tolerance and goals.
Whatever the performance of your first investment ends up being, you will definitely be able to gain valuable insights that would not have been known if you had never made that first investment.
For example, if you were comfortable with the volatility, then you can try taking on more risk for your next investment.
Conversely, if the volatility led to sleepless nights, then you know that moving forward, you need to make investments with less risk.
Also, making your first investment forces you to experience the entire process of creating an account, funding it, and finally making the investment.
You’ll also probably learn things that you didn’t know before when you were simply reading about investing rather than actually doing it.
All of this helps to eat away at the mysteriousness that often shrouds investing, especially for beginners.
Next, I’ll briefly go over 5 recommendations that I think are good first investments for beginners.
Almost all of these recommendations will be ETFs, so if you’re not familiar with them, you can check out my beginner’s guide to ETFs here.
The first recommendation is an S&P 500 ETF, which is an ETF that tracks 500 large-cap US stocks.
It allows you to be invested in 500 companies from different sectors all at once, which provides the benefit of diversification.
Also, its high concentration of tech companies has driven high growth over the past decade and will likely continue to do so, though it pays little dividends.
However, all of the companies are US-based, which deprives you of exposure to other countries. The high concentration of tech stocks also dilutes the extent of diversification.
You can invest in VOO/CSPX yourself via an online broker that has access to the US market/UK market respectively, like Interactive Brokers, which I think is the best broker in SG.
You can read my post about Interactive Brokers here.
VT and IWDA are world ETFs, which track thousands of large-cap companies from various countries across the world rather than focusing only on US companies.
Naturally, this results in better diversification as compared to an S&P 500 ETF due to the increased number of holdings that are spread across different countries.
However, since the positions of US tech stocks are diluted, the growth of VT/IWDA has been inferior to that of VOO/CSPX over the past decade and may continue to be so if the trend remains.
VT/IWDA also pay out little dividends.
You can invest in VT/IWDA yourself via an online broker that has access to the US market/UK market respectively, like Interactive Brokers, which I think is the best broker in SG.
You can read my post about Interactive Brokers here.
Next, CLR/CFA are ETFs that track a variety of Singapore REITs (Real Estate Investment Trusts) across different sectors.
You can think of a REIT as a company that manages a group of real estate.
Even though the REITs are listed in Singapore, they may own real estate that is overseas as well.
REITs tend to have high dividend yields, which is its main driver of returns, at the expense of low capital appreciation.
CLR/CFA allow you to have diversified SG investments, but limited exposure to international investments.
You can invest in CLF/CFA yourself via an online broker that has access to the SG market like Tiger Brokers.
4: Syfe Equity100
Syfe is a robo-advisor, and Equity100 is one of the available portfolios that investors can choose to invest in.
As its name suggests, it is a portfolio comprising of 100% equity, ie no bond/gold positions, made up of various ETFs like CSPX.
The other ETFs in this portfolio add further layers of diversification to the overall portfolio by including ETFs that track stocks from countries outside of the US and more.
However, a robo-advisor like Syfe charges a recurring fee that grows with the size of your investments.
5: Syfe REIT+
REIT+ is another portfolio that Syfe investors can choose from, which tracks the SGX S-REIT Index, ie Singapore REITs.
It’s basically an alternative to REIT ETFs like CLR and CFA that Syfe offers, so the underlying facts about them are similar.
As above, a recurring fee that grows with the size of your investments will be charged by Syfe.
How To Decide?
Even with these recommendations, it may still be difficult to decide what your first investment should be – how do you know what is going to work for you?
Here are 2 questions that you can ask yourself to get a better idea of what may be more suitable for you.
1: DIY or Robo?
DIY stands for do it yourself, which means you take charge of your own investments.
This includes making several decisions like what to invest in, how much to invest, at what price to invest, what broker to use, and etc.
- more cost-efficient than robo-advisors in the long run
- freedom to customise your portfolio
- encourages investors to be educated
- steep learning curve at the start
- minimum investment sum required (cost of minimum lot size)
- minimum fees per investment transaction
On the other hand, using a robo-advisor helps to take some of the decision making off your hands.
For one, robo-advisors tend to have fixed portfolios for you to choose from, so it limits your choices and can make it easier for you to decide what to invest in.
You also don’t have to decide at what price to invest, because this is decided by the robo-advisor.
Some of the decisions you do have to make are choosing which robo-advisor to use, which portfolio to invest in, and how much to invest.
- easy to get started
- no minimum fees
- no minimum investment sum
- fees increase with portfolio size (% based)
- limited and fixed choices for investments
2: Overseas or SG?
Overseas investments generally refer to either US-based investments (S&P 500 ETFs) or international investments (world ETFs), though any investments that are based outside of SG are considered overseas.
- higher growth potential
- better diversification
- may feel foreign to beginners
- withholding tax on dividends
SG investments are investments that are primarily based in SG. Even though some REITs may own real estate overseas, in general, SG REITs are mainly based in SG.
- high dividend yield
- sense of familiarity
- low capital growth
- limited diversification
Using your answers to the 2 questions above, you can use this table to see which of the recommended investments would be most suitable for you.
My First Investment
Personally, my first investment back in 2019 was actually none of the recommendations listed above.
Instead, it was a DIY investment into a single REIT – Mapletree Commercial Trust (MCT).
When I was starting to invest, I wanted to be a DIY investor because I knew that in the long run, DIY investing would be cheaper than robo-advisors.
I also decided to start with SG investments rather than overseas investments because the sense of familiarity made me feel comfortable enough to take that first step.
At the time, I had just started learning about investments and was still fairly sceptical at the idea of it.
If it were so easy to make money from investing, then why weren’t more people doing it and why hadn’t I heard much about it?
But starting my investing journey with something that was close to home helped me “warm up” to the concept of investing, and I made my first overseas investment months after that.
Currently, I still own shares of MCT, but have plans to sell them soon.
Although the returns from MCT haven’t been amazing over the past 2 years, I don’t regret having chosen it as my first investment.
Ultimately, it helped me get comfortable with investing and gave me the confidence to move on to other investments – which I think should be the goal of everyone’s first investment.
Trying to pick your first investment can be stressful and nerve-wracking since it’s the first time you’re putting money on the line.
However, it’s important to remember that you’re picking your first investment, not your only investment.
The goal isn’t to make sure you pick an amazing investment, though it would be nice if it ends up being one.
Instead, I think what’s more important is to pick an investment that you feel comfortable with putting your money into and taking that first step.
Once you get into the swing of things, then you can start thinking about how to make good investments.
Do your due diligence, put in the effort to pick a good first investment for yourself, but don’t stress too much about it.
If you found this post helpful, share it with someone who’s new to investing!
What was your first investment? Let me know in the comments below!