(Post 40/week 30)Tip for thought:Learning investing/trading together part 1(Why invest in stocks?)

Learning for investing/trading is a huge step in making that extra step to make your money work harder for you, as the saying goes"Learning is a lifelong process"

But there are so many books out there on investing, which book should I start with first to learn?

 And of course, the first book should be none other than this book...

Presenting...

My first stock guidebook by SGX!!(No puns intended!)

This is a very useful book that gives a summary of the investment products that are available, without further ado, let's jump straight to the first part of the book

Why invest in share?

• We need to put aside some saving
• Deposit interest rate(yes,your bank saving acc) is less than 0.5% per year
• Inflation ranges from 2-6%
• Hence, we have to generate higher returns in other ways
• Shares are a common investment choice for five reasons

Reason 1: Capital Growth(share increase in value over time)

1. When we buy shares in a company, we are effectively buying a piece of the business. Over time, as the business expands, its revenues and profit growth, bringing up the value of our ownership in the business, which could cause the share prices to rise over time increasing our capital growth
2. Capital Gains: Profit made from selling shares at a price higher than when we bought them
3. Capital loss: Loss incurred when we sell shares at a price lower than when we bought them

Reason 2: Dividend Yield(Shares can pay us revenue when we hold them

1. When companies make a profit...
2. They can choose to reinvest those profits back into the business
3. Hold onto it for future opportunities
4. Distribute it to their shareowners a payout
5. If we want to receive passive income(or a revenue stream from our investment), we look for companies that constantly pay a dividend
6. Dividend payout is, semi-annually(Once every 6 months) or Quarterly(Once every 3 months) or Annually(Once every 12 months)

Reason 3: Diversification(Shares let us invest in different types of companies with a small amount of money)

1. 800 companies are listed on the Singapore exchange, featuring the different business that serves a different market with different growth cycles.
2. Investing in each company only requires a minimum of 100 shares
3. This means you can spread your risk so that you do not have a large amount of money tied to a single company

• Tip: Another way to diversify your investment is to invest in Exchange Traded Fund(ETF).
• These are funds (or portfolios of stock) that are brought and sold through the Singapore Exchange. 
• For example, the Straits times index(STI)ETF is a fund made up of the 30 largest, most actively traded companies that are listed on Singapore exchange.
• These are well known, stable, blue-chip companies like DBS bank, SIA, Keppel Corp, Comfortdelgro, Singtel,capitaland and other familiar names. 
• With a single investment into the STI ETF, we can own shares in 30 top companies! (I am currently vested in STI ETF via DBS Vickers and POSB regular saving plan)

Reason 4: Liquidity(We can buy and sell shares quickly and easily when we want)

1. Another advantage of investing in shares is that we only need to buy or sell a minimum of 100 shares, and can do so quite quickly through brokers online trading services or by calling our representatives. Unlike investment in property and fixed deposits, we do not need to sell or exit the entire investment(just the amount that we want to convert to cash).
2. This is great when we want to hold assets that have higher returns than deposits and yet can be converted to cash in any amount when we want.

• Do note that purchase of share/transaction is calculated by multiples of 100,e.g this means you can only purchase 1400 or 1500 share, no such thing as purchasing of 1468 shares (apply in sgx only)

Reason 5: Transparency(We can see the price of the shares we want to buy or sell)

1. As the shares and ETF are traded on the Singapore exchange, we can see the price of the shares as they are being brought and sold(this is known as the "market price").
2. We can decide if we want to transact at the market price or...
3. If we want to buy/sell at our desire price(although if our desired price is different from the market price, it may take longer to find a counterparty who agrees to transact at our price)

Final tip: While together these advantages apply to shares on Singapore exchange, not every share will offer all five advantages all the time, and certainly not at the same levels. When we invest in a company we are interested in, we should be familiar with what the company's business and what their returns, risk, and dividend are

part 2 here!

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