Investing 101: Reasons to invest and ways to start

When it comes to securing your financial future, just saving alone may not be enough. The cost of living rises, lifestyles evolve, and dreams do not fund themselves. The good news is that you can start investing with as little as S$100 a month, and you can do it in a calm, disciplined way that fits your life. This article is organised in two parts. Part 1 explains why investing matters, especially if you want your savings to keep up with real life. Part 2 shows how to get started, step by step, with simple, realistic options that do not require a finance degree or a fortune to begin.

“To thine own self be true.” Shakespeare had nothing to say about ETFs or robo platforms, but he nailed the first rule of money. Your money plan should match who you are, where you are, and where you want to go.

Most of us picture a comfortable future that includes small luxuries and meaningful experiences. Maybe it is the occasional dinner out, a taxi when the rain surprises you, or a yearly holiday that resets your mind. These choices are part of a life well lived. They also cost money, and the totals add up faster than we expect.

If you want a clear view of what that lifestyle might cost later on, plug your assumptions into a retirement calculator such as OCBC Life Goals. You will get a number that reflects your target nest egg based on your age, desired retirement date, and spending expectations. For a 25 year old who aims to retire at 60, that number can be in the low millions. Seeing S$2.1 million on a screen can feel daunting, especially when you also have to manage rent or a mortgage, insurance, family responsibilities, and everyday living.

This is where people often retreat to a defensive strategy. They trim, they delay, they hope. But hope is not a plan, and trimming cannot beat inflation over decades. Investing is not a luxury for the wealthy. It is the tool that allows ordinary savers to grow into confident investors over time.

Savings accounts are excellent for emergency funds and short term goals. They are safe, they are liquid, and they help you sleep at night. But the interest rates on simple deposits rarely keep up with inflation across long horizons. If your money grows at a pace below the rise in prices, your future purchasing power shrinks. You appear to have the same dollars. They simply buy less.

Investing introduces growth engines. Equities represent ownership in businesses. Bonds pay interest from borrowers who promise to repay. Funds and trusts bundle many of these securities so a single purchase spreads your exposure. A diversified mix of these assets has historically grown faster than cash, and with less day to day stress than a single stock or a single bond. The result is compounding that actually compounds, not just nominal balances that tread water.

Many people assume that investing requires large sums, constant attention, and nerves of steel. In truth, you can start small and stay consistent. Dollar cost averaging is a simple method where you set aside a fixed amount at regular intervals, such as S$100 per month, and invest it into a chosen product. You buy more units when prices dip and fewer when prices rise. Over time, the average cost smooths out market swings and removes the pressure to time perfect entry points.

Automating this process is your guardrail against hesitation and headlines. You remain invested across cycles and let time in the market work harder than timing the market.

Risk is not a villain. It is a reality of how returns are earned. Think of two paths toward the same destination. One is long and flat. The other cuts through a shorter trail that is uneven and full of surprises. Neither is morally superior. One may suit your legs, lungs, and schedule better. Your personal risk profile has three pillars.

Need is about outcomes. If your goals are ambitious relative to your current resources, you may need higher expected returns than cash can deliver. Inflation eats silently, and the longer your horizon, the more it matters. If you want your money to outpace that erosion and still fund your goals, taking some market risk is often necessary.

Ability is about your constraints. Commitments, debt payments, job stability, and emergency reserves influence how much short term loss you can endure without harming your life. If your budget is tight or your income is volatile, your ability to take risk is lower. A quick way to ground this is to map your annual cash flow honestly. If a temporary paper loss would force you to sell, then the position is too large or too risky for your current ability.

Willingness is about temperament. Some investors can watch markets drop without panic. Others lose sleep over small fluctuations. There is no prize for pretending to be a different person. Be candid when you complete a risk profiling questionnaire. Overstating your tolerance often backfires. Taking on too much risk might feel exciting for a while but can lead to bad exits during downturns. Taking on too little risk often stems from fear or unfamiliarity and leaves you short of your goals even if you save diligently.

Give yourself a simple rating for each pillar. If your Need and Willingness are high but your Ability is low, lean toward lower risk until your financial base improves. The only sustainable portfolio is the one you can hold through rough weather. Alignment across Need, Ability, and Willingness keeps you invested when markets wobble. That is when compounding quietly earns its premium.

“Knowing yourself is the beginning of all wisdom.” Aristotle would have made a fine financial planner.

You do not need every product under the sun. You need a clean starting point that matches your profile, and a simple process you will actually follow. There are four primary routes most retail investors use. You can use one or combine them.

Route 1: Invest directly in equities and bonds

Buying individual stocks and bonds gives you full control. The opportunity set is large, at home and abroad. Pick well and your returns can outpace broad indices.

Direct investing requires research, patience, and discipline. You must size positions thoughtfully to avoid concentration risk, and you must accept that some ideas will not work. Minimum ticket sizes can be larger for individual bonds, though the retail market has become more accessible in recent years. If you enjoy analysis and have the time to monitor positions, direct investing can be a rewarding satellite around a diversified core.

Route 2: Invest in bundles through unit trusts, ETFs, and REITs

Funds and trusts package many securities into one trade. A unit trust is professionally managed and can aim to outperform a benchmark. An ETF tracks an index or a rules based strategy and trades on an exchange like a stock. A REIT pools properties and distributes income from rentals.

The advantages are diversification, convenience, and often lower costs compared to building a broad portfolio one security at a time. You do face fees, and those fees reduce net returns. Manager selection matters for active unit trusts. Broad market ETFs are usually low cost and transparent. For many investors, a handful of diversified funds across equities and bonds forms a resilient core that is easy to maintain.

An ETF can hold tens, hundreds, or even thousands of securities. By design it seeks to replicate a market or theme. Because you own a slice of the whole, one weak link rarely sinks the ship. That built in diversification is why ETFs are a popular foundation for dollar cost averaging plans. They are also easy to buy and sell during market hours, which adds flexibility.

Route 3: Use structured solutions thoughtfully

Structured investments and dual currency investments are designed to provide specific payoff profiles linked to underlying assets or rates. They can offer higher potential returns than simple deposits and can be tailored with features that cushion downside or boost income.

They are also complex. Liquidity can be limited. There is counterparty risk. These products are best used with a clear understanding of scenarios and the willingness to hold through the agreed term. If you choose this route, treat it as a complement to a diversified core, not a replacement.

Route 4: Consider investment linked insurance plans

An ILP combines insurance coverage with investment in sub funds. This appeals to investors who want protection and growth in a single policy, with the flexibility to switch funds or pause premiums if there is sufficient value in the policy.

Understand the trade offs. Charges rise with age and are deducted from your units, which can drag returns. Early surrender may trigger penalties. Withdrawing too much can reduce or terminate protection. If you value the dual purpose and can commit for the long term, an ILP can play a role within an overall plan.

Accessibility has improved. The Singapore Exchange reduced standard board lots to 100 shares, making many blue chips easier to buy. The retail bond market has grown, with minimums around S$1,000 rather than six figure institutional lots. Banks and brokerages offer regular savings plans that buy ETFs, unit trusts, or selected blue chips monthly. This turns investing into a habit. The amount can be small. Consistency is the superpower.

If you like the idea of a rules based process that removes human tinkering, consider a robo advisor. These platforms allocate your contributions across diversified building blocks, often ETFs, and rebalance on a schedule. They are designed for hands off investors who want a sensible default that keeps emotions out of it. Algorithms still come from humans, of course, but the discipline is automated and the costs are typically competitive.

If you invest a lump sum right before a drop, the pain is acute and visible. If you invest monthly, the average cost tends to be lower during volatile periods, and the experience feels gentler. In a down year, the same S$12,000 invested in monthly bites usually hurts less than a single S$12,000 purchase at the peak. Over very long horizons, lump sums can mathematically win if markets trend up most of the time. Psychologically, many investors stick with dollar cost averaging because it reduces regret and keeps them engaged. The method you can stick with is the right one.

Begin with your emergency fund and insurance basics. Then choose a core allocation that reflects your risk profile. A common example is a split between a global equity ETF and a global bond ETF. Set a monthly contribution you can sustain, even if it is S$100. Automate it. Revisit once a year to adjust for changes in your life, not for every headline.

If you enjoy research, carve out a small satellite sleeve for direct ideas or thematic funds. Keep it genuinely small so a mistake does not derail your plan. If you prefer a single ticket solution, a diversified unit trust or a robo portfolio can be your entire engine. As your assets grow, add diversifiers such as gold, higher quality income funds, or REITs. Some investors include property through REITs or direct purchase later in life. Others add structured notes for targeted income. Each addition should have a purpose in the whole.

Know your appetite and tolerance for risk. Stay within them. The market will always tempt you with stories of higher returns. The goal is not to win a single season. The goal is to arrive.

Understand what you own. You do not need to forecast GDP or read every annual report, but you should know where returns come from and what can go wrong. Clarity reduces fear. Fear causes bad decisions. Diversify across asset classes, regions, and sectors. Diversification is the only free lunch that makes rough roads smoother without requiring a prediction.

Review your portfolio and goals at least once a year, or after a major life change such as a new child, a new job, or a health event. Tools like OCBC Life Goals help you measure progress and recalibrate contributions. Stay informed but do not let noise knock you off course. Seek professional advice when decisions feel high stakes or complex. A neutral second opinion can save you from costly detours.

You do not need to solve retirement this afternoon. You need to start. S$100 a month is not symbolic. It is the seed of a habit that compounds into confidence and capital. The day you automate that first contribution is the day you become an investor.

Be true to your profile. Align Need, Ability, and Willingness. Choose a simple core. Automate contributions. Review annually. Add complexity only when your foundation is strong and your understanding is clear. That is how ordinary people build extraordinary financial resilience over time. Your money has a job to do. Give it the tools, the time, and the calm discipline to do that job well.