Sunday 24 January 2021

How would I start investing with $1000?

Hi Guys, welcome back to another episode of SingaporeanTalksMoney! There are many YouTube videos that talk about how you should start investing $1000. Why $1000? I would think that it is a nice amount to start with because it is not a small amount neither is it too big an amount.

How I am going to invest this $1000 is considering that you have put an emergency fund aside and this $1000 is really just for you to start investing and any fluctuations will be all right for you as investing can mean that your $1000 can easily go to $100 although I do doubt that.

How I will start investing with $1000

Please note that the following are my own opinions and in no way am I encouraging you to follow as I am not a financial advisor and neither am I able to guaranteed that my actions are correct and will generate returns. So first, with $1000, I will split it up and start a regular savings plan (RSP) buying into an Index ETF. With $200 monthly into any Index ETF of your choice (Hang Seng, STI ETF or S&P 500). With this RSP set up, $1000 would last you for 5 months and during this span of 5 months, I am sure you will be able to save another $1000 or even more. If you are able to save another $1000, you can continue on the RSP and with any extra saved up, you can invest it into other stocks that you like to have in your portfolio otherwise, you can adjust you RSP to include other counters or just increase the monthly amount accordingly.

How you will fare in the long run

Assuming an annual growth rate of 5% and a monthly deposit of $200, you will end up with about $30,900 in 10 years time. It might not sound a lot but by then, you would have already developed a habit of saving and putting money aside, if you are able to put more into the RSP monthly and also into individual stock purchases, you might end up with an amount much more than this.

From the table, you can see that year after year, the interest earned is also added back to the principal and earns you back interest and this is the power of compounding. This allows your money to grow over time as the interest is added back and grows as well.

 Why you should just get started now

Just like how we would easily sign up for a savings plan, if we are young and have the base built up eg insurance bought, emergency fund set aside and not much debt. We should put the remainder of our money to work by investing them.

I am glad I started on my investing early on as the mistakes that I have made and learned along the way has slowly shaped my investment style. Although I would have benefited without those mistake at the beginning, I started early and have time on my hand to change. Creating a RSP has made me more disciplined and also to DCA.

Read more: Why you should start investing NOW!

The first few years of investing will not show immediate results and I think the beginning is when you really look forward to having returns, I used to look at my portfolio quite often and every movement excites me. Slowly, you will start to realised that having a long term horizon is the best as the returns will show particularly after you go through a down time and recovery is strong. I wouldn't call myself an expert as I am still learning lots along the way. I have seen many whose portfolios are amazing and they can practically retire based on the value of it. Wishing all of you all the best in your investing journey and don't forget to hit the like button and subscribe to my channel.

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