Quora Answer: How Do I Get into Investing as a Student?

The following is my answer to a Quora question: “I would like to get into investing, but I am a student?  What would be the best way to get more information?”

The internet will tell you to open a brokerage account, buy an index fund, and start your journey.  The internet is not wrong.  The internet is also not a financial services consultant who knows your specific circumstances, your risk tolerance, your income trajectory, or your obligations.  There is a difference between general advice and advice calibrated to you — and that difference becomes expensive when you discover it at the wrong moment.

Start with the legal reality.  If you are below the age of majority — 21 in Singapore — you cannot purchase financial products under your own cognisance.  You can, however, build the habits that will determine whether you are a competent investor when you legally can be.  Saving consistently, understanding compound interest, reading financial statements, and developing a working knowledge of the instruments available to you costs nothing and builds the foundation that most adult investors never bother to construct.

If your parents or legal guardian are willing to invest on your behalf — through a custodial account or by including you in their own financial planning — that is a legitimate starting point.  The earlier capital is deployed into productive assets, the longer compounding has to work.  S$300 monthly from age 25, at 6 per cent annually, produces S$600,000 by age 65.  The same S$300 starting at 35 produces S$302,000.  The cost of the ten-year delay is S$300,000.  Time is the only input that cannot be recovered.

How to Find a Financial Services Consultant

Once you reach the age of majority, the most important financial decision you will make is not which product to buy.  It is which financial services consultant to engage.  Meet several.  Do not buy from the first one you meet.  This is not cynicism — it is due diligence.  The financial services industry in Singapore is populated with competent professionals and with people who are motivated by commission targets.  Both groups use similar vocabulary.  They do not produce similar outcomes for their clients.

A competent financial services consultant will conduct a financial health review before recommending a single product.  This review covers your financial goals — what you want money to do for you, over what time horizon — your risk tolerance, your current income and expenditure, your existing assets and liabilities, and your tax and legal circumstances.  It is only after this review that any recommendation should be made.  A financial services consultant who opens with a product recommendation before completing this review is telling you whose interests they are primarily serving.

The financial health review is not bureaucracy.  It is the mechanism that ensures the recommendation matches the client rather than the commission schedule.  Choosing a financial services consultant is as consequential as choosing a business partner.  You are looking for congruent values, genuine expertise, and a willingness to tell you things you do not want to hear.  You are not looking for someone who validates your assumptions and hands you a brochure.

Products Available

Once the review is complete, the range of instruments becomes navigable.  Without it, it is bewildering — and deliberately so.  The broad categories are straightforward.  Debt instruments — bonds, fixed deposits, Singapore Savings Bonds, T-bills — provide known returns at defined risk levels.  Singapore’s 10-year SGS yield is currently 2.42 per cent.  The six-month T-bill yields 1.88 to 1.92 per cent.  These instruments preserve capital and provide predictable income.  They do not build wealth in real terms above inflation over long horizons.

Equity instruments — shares, unit trusts, ETFs, investment-linked policies — provide growth potential commensurate with higher volatility.  The Straits Times Index has generated an average annual total return of 5 to 7 per cent over the past two decades.  A broadly diversified equity ETF over a 30-year horizon will, historically, substantially outperform any fixed income instrument over the same period.

The CPF Investment Scheme allows Singaporeans to invest OA balances above S$20,000 in approved instruments.  For a student approaching employment, understanding CPF’s structure — the Ordinary Account at 2.5 per cent, the Special Account at 4 per cent, and the retirement adequacy gap between CPF payouts and actual retirement expenditure — is foundational knowledge that most Singaporeans acquire too late.

The CPF Life Basic Plan payout for a retiree with the Full Retirement Sum of S$205,800 is S$850 to S$910 monthly.  Median retiree household expenditure is S$2,500 to S$3,000 monthly.  The gap — S$1,600 to S$2,100 monthly, every month, for the rest of the retiree’s life — must come from somewhere.  The student who understands this gap at 21 and begins addressing it immediately is in an incomparably better position than the professional who discovers it at 55.

The Practical Starting Point

For the student who cannot yet purchase products independently, three actions build the foundation.  Read.  Benjamin Graham’s The Intelligent Investor remains the most important book on investing for a non-professional.  It is not a get-rich manual.  It is a framework for thinking about capital allocation that has survived seven decades and multiple market cycles.  Read it before you read anything written after 2010 about cryptocurrency, options strategies, or any other instrument whose primary marketing channel is social media.

Save.  The habit of consistent saving — automating a fixed percentage of every income source into a dedicated account that is not touched — is the precondition for investment.  The amount is less important than the consistency.  The student who saves S$50 monthly and invests it is building a different relationship with money than the student who spends everything and resolves to save “when there is more.”  There is never more.  There is only the discipline applied now or the consequences deferred to later.

Meet a financial services consultant before you need one.  A financial health review conducted before you have significant capital to deploy is a low-stakes education.  You learn what the questions are, what the instruments look like, and what the planning process involves — before you are in a position where a wrong decision has expensive consequences.

The student who does all three will arrive at the age of majority with the knowledge, the habit, and the professional relationship to deploy capital intelligently from the first day they legally can.  The student who waits for the right moment to start will be waiting for a very long time.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code