<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>What should I do with my money?
</TR><!-- headline one : end --><TR>The global financial crisis has left average investors feeling bewildered. Financial Correspondent Lorna Tan finds out what the experts think they should do. </TR><!-- show image if available --></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->Schoolteacher Bryan Lim, 31, has been following news of the financial crisis closely, and talking to his remisier to gather some direction as to when the carnage will end.
'My heart sinks each time the STI falls,' he says. 'I know that time is on my side but I don't want to lose the little savings I have. I really don't know what to do.'
<TABLE width=200 align=left valign="top"><TBODY><TR><TD class=padr8><!-- Vodcast --><!-- Background Story -->RELATED LINKS
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DIVERSIFIED INVESTMENTS
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</TD></TR></TBODY></TABLE>So far, he is sitting on paper losses of $5,000 from stock investments. He has another $50,000 in a fixed deposit that matures next month.
He is not alone in feeling bewildered and scared. As regulators around the world scramble to tackle the ever-growing financial crisis, jittery man-in-the-street investors like Mr Lim are left wondering what their options are.
To add to their confusion, stock markets have been swinging wildly. In Singapore, many local stocks hit new 52-week lows when the benchmark Straits Times Index dived a massive 154.38points to close at 1,948.33 on Friday. The last time the STI closed at this level was in December 2004.
The burning question that investors are asking is this: What on earth should I be doing with my money - or what's left of it? Should I just hold on to my cash, or fish for bargains since the stock markets are so depressed, or should I park my money in financial instruments?
The Sunday Times asks three experts for help - a financial adviser, a wealth management expert and a stockbroker.
[email protected]
ADVICE FOR AN INVESTOR WHO...
Is in his 30s and single.
Has a medium risk appetite - that is, he is willing to stomach some ups and downs in his investments and can tolerate temporary losses for long-term gains.
Needs to use half of his investments in three to five years to meet financial obligations, and the other half in 10 years' time.
Has already set aside the proverbial six months' worth of monthly expenses for rainy days.
Has four different investment amounts of $5,000, $20,000, $50,000 and $100,000 to play with.
<HR width="50%" SIZE=1>
Mr Terence Wong,
head of research at DMG
& Partners Securities
Investment: $5,000
It is hard to diversify with $5,000. The investor is better off investing in a fund tracking the STI. I believe you cannot go wrong by buying into a fund that tracks the blue chips at this juncture if you hold a mid- to long-term view.
You should see returns of 50per cent within three to five years. The market will not stay down forever, and when it makes a comeback in the next few years, the returns will be generous.
Funds that track the STI include the STI Exchange-traded fund (STI ETF), Aberdeen Singapore Equity and DWS Singapore Equity.
Investment: $20,000
This is still not a big enough sum for the investor to invest directly in the stock market. My advice is to go for funds, but the investor can be a little more adventurous given his risk appetite. Put half in a fund that tracks blue chips and the other half in a small/mid-cap fund. An example is Templeton Global Smaller Companies.
'Small caps' are firms that have market capitalisation below $500,000. By contrast, 'big caps' are stocks that have more than $1billion in market capitalisation. The latter is worked out from the share price multiplied by the number of company shares.
Returns in the mid-term should be more than 50per cent given that the currently beleaguered small caps will make much bigger gains compared to the blue chips.
Investment: $50,000
With this amount, the investor will be able to build his own diversified stock portfolio. Given his age and willingness to take risks, I am recommending a portfolio of five stocks comprising about 15per cent in small/mid caps and the rest in big caps.
These are 'growth' stocks that are expected to achieve future capital gains, resulting from the firms' expansion plans and new products (see chart).
Four out of the five stocks are big caps and they come with good dividends. The average dividend yield for the group is 5.6per cent, compared against the market average of 5per cent.
Returns are likely to be over 100per cent, meaning that if you put in $50,000 you can potentially double that in the next three to five years. All of the five stocks, despite being relatively safe, have the ability to more than double in the given timeframe.
Investment: $100,000
With more money invested, the investor is able to take on even more risks. We recommend having a 75per cent exposure to big caps and 25per cent in small/mid caps.
The portfolio of seven stocks (see chart) is expected to enjoy superior returns. The average dividend yield of 5.9per cent is even more attractive compared to the $50,000 portfolio.
With a $100,000 investment, the investor can expect a higher return than if he has $50,000. We believe all of the stocks have the potential to at least double in three to five years. The smaller companies may even potentially grow multiple times when the market returns.
The seven recommended stocks
BIG CAPS
1 CapitaLand: The property developer has gone from hot to cold in the past year but the current stock price is a result of an indiscriminate sell-down. In the mid- to-long term, we are excited about the property scene, given the successful remaking of Singapore. It closed at $2.51 last Friday.
2 SembCorp Marine: One of the top oil rig manufacturers in the world with steady orders for the next few years. The counter closed at $2 last Friday.
3 StarHub: A telephone operator, it has a solid capital management, dishing out good dividends over the years. On Friday, it closed at $1.95.
4 Venture: The top contract manufacturer in the region focusing on higher-end work compared to its peers. It is looking very cheap and may potentially be an acquisition target. Also provides one of the best dividend yields among tech companies. It closed at $5 last Friday.
SMALL/MID CAPS
5 Armstrong: One of the best- run small-cap technology companies and has been steadily growing and diversifying its business. It closed at 11.5 cents last Friday.
6 China Hongxing: A sports shoe maker, it rides on the long-term consumerism story in China. It should be one of the first few Singapore-listed China shares to shoot up when China fever returns. It is a question of when it will return, not if it will. It closed at 19 cents last Friday.
7 China XLX: A fertiliser firm, it is a beneficiary of the agricultural boom in China. It closed at 27cents last Friday.
Mr Joseph Chong,
chief executive of financial advisory firm
New Independent
</TR><!-- headline one : end --><TR>The global financial crisis has left average investors feeling bewildered. Financial Correspondent Lorna Tan finds out what the experts think they should do. </TR><!-- show image if available --></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->Schoolteacher Bryan Lim, 31, has been following news of the financial crisis closely, and talking to his remisier to gather some direction as to when the carnage will end.
'My heart sinks each time the STI falls,' he says. 'I know that time is on my side but I don't want to lose the little savings I have. I really don't know what to do.'
<TABLE width=200 align=left valign="top"><TBODY><TR><TD class=padr8><!-- Vodcast --><!-- Background Story -->RELATED LINKS
<!-- Audio --><!-- Video --><!-- PDF -->
<!-- Photo Gallery -->
</TD></TR></TBODY></TABLE>So far, he is sitting on paper losses of $5,000 from stock investments. He has another $50,000 in a fixed deposit that matures next month.
He is not alone in feeling bewildered and scared. As regulators around the world scramble to tackle the ever-growing financial crisis, jittery man-in-the-street investors like Mr Lim are left wondering what their options are.
To add to their confusion, stock markets have been swinging wildly. In Singapore, many local stocks hit new 52-week lows when the benchmark Straits Times Index dived a massive 154.38points to close at 1,948.33 on Friday. The last time the STI closed at this level was in December 2004.
The burning question that investors are asking is this: What on earth should I be doing with my money - or what's left of it? Should I just hold on to my cash, or fish for bargains since the stock markets are so depressed, or should I park my money in financial instruments?
The Sunday Times asks three experts for help - a financial adviser, a wealth management expert and a stockbroker.
[email protected]
ADVICE FOR AN INVESTOR WHO...
Is in his 30s and single.
Has a medium risk appetite - that is, he is willing to stomach some ups and downs in his investments and can tolerate temporary losses for long-term gains.
Needs to use half of his investments in three to five years to meet financial obligations, and the other half in 10 years' time.
Has already set aside the proverbial six months' worth of monthly expenses for rainy days.
Has four different investment amounts of $5,000, $20,000, $50,000 and $100,000 to play with.
<HR width="50%" SIZE=1>
Mr Terence Wong,
head of research at DMG
& Partners Securities
Investment: $5,000
It is hard to diversify with $5,000. The investor is better off investing in a fund tracking the STI. I believe you cannot go wrong by buying into a fund that tracks the blue chips at this juncture if you hold a mid- to long-term view.
You should see returns of 50per cent within three to five years. The market will not stay down forever, and when it makes a comeback in the next few years, the returns will be generous.
Funds that track the STI include the STI Exchange-traded fund (STI ETF), Aberdeen Singapore Equity and DWS Singapore Equity.
Investment: $20,000
This is still not a big enough sum for the investor to invest directly in the stock market. My advice is to go for funds, but the investor can be a little more adventurous given his risk appetite. Put half in a fund that tracks blue chips and the other half in a small/mid-cap fund. An example is Templeton Global Smaller Companies.
'Small caps' are firms that have market capitalisation below $500,000. By contrast, 'big caps' are stocks that have more than $1billion in market capitalisation. The latter is worked out from the share price multiplied by the number of company shares.
Returns in the mid-term should be more than 50per cent given that the currently beleaguered small caps will make much bigger gains compared to the blue chips.
Investment: $50,000
With this amount, the investor will be able to build his own diversified stock portfolio. Given his age and willingness to take risks, I am recommending a portfolio of five stocks comprising about 15per cent in small/mid caps and the rest in big caps.
These are 'growth' stocks that are expected to achieve future capital gains, resulting from the firms' expansion plans and new products (see chart).
Four out of the five stocks are big caps and they come with good dividends. The average dividend yield for the group is 5.6per cent, compared against the market average of 5per cent.
Returns are likely to be over 100per cent, meaning that if you put in $50,000 you can potentially double that in the next three to five years. All of the five stocks, despite being relatively safe, have the ability to more than double in the given timeframe.
Investment: $100,000
With more money invested, the investor is able to take on even more risks. We recommend having a 75per cent exposure to big caps and 25per cent in small/mid caps.
The portfolio of seven stocks (see chart) is expected to enjoy superior returns. The average dividend yield of 5.9per cent is even more attractive compared to the $50,000 portfolio.
With a $100,000 investment, the investor can expect a higher return than if he has $50,000. We believe all of the stocks have the potential to at least double in three to five years. The smaller companies may even potentially grow multiple times when the market returns.
The seven recommended stocks
BIG CAPS
1 CapitaLand: The property developer has gone from hot to cold in the past year but the current stock price is a result of an indiscriminate sell-down. In the mid- to-long term, we are excited about the property scene, given the successful remaking of Singapore. It closed at $2.51 last Friday.
2 SembCorp Marine: One of the top oil rig manufacturers in the world with steady orders for the next few years. The counter closed at $2 last Friday.
3 StarHub: A telephone operator, it has a solid capital management, dishing out good dividends over the years. On Friday, it closed at $1.95.
4 Venture: The top contract manufacturer in the region focusing on higher-end work compared to its peers. It is looking very cheap and may potentially be an acquisition target. Also provides one of the best dividend yields among tech companies. It closed at $5 last Friday.
SMALL/MID CAPS
5 Armstrong: One of the best- run small-cap technology companies and has been steadily growing and diversifying its business. It closed at 11.5 cents last Friday.
6 China Hongxing: A sports shoe maker, it rides on the long-term consumerism story in China. It should be one of the first few Singapore-listed China shares to shoot up when China fever returns. It is a question of when it will return, not if it will. It closed at 19 cents last Friday.
7 China XLX: A fertiliser firm, it is a beneficiary of the agricultural boom in China. It closed at 27cents last Friday.
Mr Joseph Chong,
chief executive of financial advisory firm
New Independent
