Starting your investment journey doesn’t require a lot of savings—it can be as simple as understanding the basics and building consistent habits. Whether you’re looking to potentially grow your savings, build passive income or work towards long-term goals, here’s what you need to know to get started.
What is your risk appetite?
Before building your portfolio, understand your risk appetite. This refers to how much risk you are comfortable taking in pursuit of potential returns. It depends on factors such as:
- Your age and time horizon
- Your financial goals
- Your comfort with market fluctuations
In your 20s, you have a longer time horizon. This means you may be able to take on more risk compared to someone closer to retirement, as you have more time to recover from market downturns. You should assess your personal circumstances and may wish to seek advice.
Take note that all investments come with risk. Understand investment risks before you invest by learning more here.
How can you budget for investing?
Setting aside part of your monthly income for investing helps you grow your portfolio while building good financial habits over time.
As a guide, the Basic Financial Planning Guide1 provides useful benchmarks on how much to allocate towards saving for emergencies, insurance and investments, helping you strike a prudent balance between protecting your needs today and growing your wealth for the future.
For investments, you may consider these helpful tips:
- Invest at least 10% of your take-home pay, depending on your risk appetite and financial goals
- Invest with purpose and use your investments to work towards long-term goals such as retirement or buying a home
- Start with a smaller amount and increase it gradually as you become more comfortable
Budgeting also means setting aside sufficient emergency savings. The Basic Financial Planning Guide recommends saving at least 3 to 6 months’ worth of expenses. Insufficient savings during unexpected situations may force you to:
- Sell your investments during market downturns
- Interrupt your long-term wealth-building plans
- Take on high-interest debt
An emergency fund provides liquid cash when you need it most, allowing your investments to remain untouched.
Understanding compounding: How can small investments make a difference over time?
One of the key concepts in long-term investing is compound interest. This is when your investment returns generate their own returns over time.
In simple terms, you may earn returns not just on your initial investment but also on the potential gains that accumulate along the way. Over many years, this effect may help your investments grow, depending on market conditions.
For young adults just starting out, time is your greatest advantage. Even small, regular investments may grow meaningfully when given enough time.
For example, returns earned over a long period may help your investments grow over time, not because of large initial sums, but because of consistency and compounding.
What this means for you:
- Start investing small
- Begin with a monthly amount that you can afford.
- Market timing
- Invest regularly instead of waiting for a “perfect” time.
- Reinvestment
- Reinvest your returns or dividends for potentially higher compounded returns if you’re earning a regular salary and don’t require passive income at this stage.
Investing early gives your money more time to potentially grow. This is why starting early and increasing contributions gradually as your income grows can make a meaningful difference to your long-term financial planning.
What is diversification: Key rule for investing
Diversification helps manage investment risk. It means spreading your investments across different asset classes, countries and industries to potentially reduce risk.
This is important because different investments may perform differently under varying conditions. For example, stocks may fall during economic downturns while bonds may behave differently depending on market conditions. By diversifying, gains in one area can potentially help offset losses in another.
Beginners can consider these simple ways to diversify:
- Invest in diversified exchange traded funds (ETFs) and/or unit trust (UTs).
- Spread investments across different asset classes such as stocks, bonds, commodities like gold or REITs.
- Include investments from global markets, not just Singapore, as well as different industries.
What investments in Singapore can beginners consider?
If you’re a first-time investor, there are several investment options to consider. Here are five common types to help you get started:
1. What are unit trusts (UTs)?
Buying stocks can be challenging on a small budget. On the Singapore Exchange (SGX), stocks are purchased in lots of 100 for stocks priced below SGD10, so a stock priced at SGD3 would require at least SGD300. This can make it harder to diversify across different companies.
Unit trusts pool money from many investors to invest in a portfolio of assets, such as stocks and bonds, managed by professional fund managers. They’re a popular option for beginners in Singapore because they allow you to start with a relatively small amount while gaining exposure to different markets.
Available through banks like UOB, unit trusts offer a range of asset classes and investment strategies, allowing you to choose funds that suit your investment goals and risk appetite.
However, unit trusts do carry risks. Prices can rise or fall with market conditions, and returns are not guaranteed. Fees may also apply and can affect overall returns, so it’s important to understand the fund’s objectives, risks and costs before investing.
You do not need to open a Central Depository (CDP) account to invest in unit trusts.
Good for: Investors seeking diversification who prefer professional managers to select and manage the underlying stocks and bonds.
If you’re new to investing: Consider starting with unit trusts from as little as SGD100 a month through a Regular Investment Scheme (RIS).
2. What are exchange-traded funds (ETFs)?
ETFs are similar to unit trusts but are listed and traded like stocks. They typically give investors broad market exposure in a single investment and come with lower fees than actively managed unit trusts.
However, ETFs also come with risks. Their prices can rise or fall throughout the day based on market conditions, and returns are not guaranteed. Some ETFs may also track specific sectors or markets, which can be more volatile. It’s important to understand what the ETF invests in and the risks involved before investing.
You will need to open a CDP account to hold your securities, as well as a brokerage or online trading account to buy and sell ETFs.
Good for: Cost-conscious investors seeking passive market exposure.
If you’re new to investing: Start with globally diversified ETFs before considering ETFs concentrated in a single country or industry.
3. What are stocks?
Buying stocks means owning a share of a listed company. Investors may earn returns through capital gains if the share price rises, and some stocks also pay dividends.
While stocks vary in quality, they are generally more volatile than bonds and diversified unit trusts. This means their prices can rise or fall more sharply over the same period.
Before investing in stocks, focus on the company’s fundamentals. This includes understanding what the business does, how it makes money and its overall financial health. To manage risk, avoid concentrating too much of your portfolio in a single stock or sector.
Like ETFs, you will need a CDP account to hold your stocks, as well as a brokerage or online trading account to buy and sell them.
Good for: DIY investors who are comfortable researching companies, industries and market trends before selecting stocks.
If you’re new to investing: You may consider diversified unit trusts that invest in a basket of stocks.
4. What are bonds?
Bonds are debt instruments; you lend money to a government or company in exchange for regular interest payments (also known as coupons) and the return of your principal at maturity. They may provide income through interest payments, but their value and returns can vary depending on market conditions and the issuer’s creditworthiness.
Bonds with a high credit rating (e.g. AAA) are of higher quality and come with lower risk, while those with a lower credit rating (e.g. BB) are of lower quality and come with higher risk.
In Singapore, you can invest in Singapore Government Securities (SGS) such as Treasury bills (T-bills) and Singapore Savings Bonds (SSB) via internet banking. These are generally lower risk compared to other investments. You need a CDP account to hold SSBs and T-bills if you’re applying with cash.
Good for: Investors seeking stable returns and regular income. T-bills and SSBs are suitable for those setting aside savings for shorter-term goals and emergency needs.
If you’re new to investing: Corporate bonds typically require a larger investment amount. You may consider diversified unit trusts that invest in a range of bonds.
How can you manage your investments over time?
Starting your investing journey is a long-term commitment, not a one-time decision. To stay on track, focus on these practical habits:
- Pay attention to fees and charges, as they can affect your overall returns over time.
- Rely on reputable sources of information and speak to licensed financial advisers for financial advice.
- Review your portfolio regularly to ensure it remains aligned with your goals and risk appetite.
- Be prepared to rebalance your portfolio as your life stage, income and financial needs evolve.
By staying disciplined, informed and consistent, you can build a foundation for potential long-term financial growth.
Ready to start investing? Manage and grow your wealth on UOB TMRW: https://www.uob.com.sg/personal/digital-banking/wealth-on-tmrw.page
Reference (last accessed 17 June 2026):
1. Basic Financial Planning Guide Planning Your Finances Well
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