Sunday, 21 December 2014

How to Invest in the Stock Market with just $100 every Month?




As passive investors, many of us including myself invest regularly on a monthly basis. Additionally, some of us are investing for long term goals that includes retirement.

However, how much can most of us afford to invest every month? The numbers may differ when it comes to different financial backgrounds. Some of us can afford to invest thousands of dollars every month.

But what about us teenagers? Some of us are still schooling, some of us are serving the nation. $100 could be the bare minimum we can scrounge up every month for investing.

But what can $100 buy? If you're looking for ETFs that track the Straits Times Index, even the cheapest would be $300++ to purchase 1 lot.

Some may turn to Regular Savings Plan or use POSB/OCBC to invest. How they work is every month, your $100 buys shares with Dollar Cost Averaging (DCA). When shares are cheaper, your $100 buys more. When shares are more expensive, your $100 buys lesser.

Do I use a Regular Savings Plan? I used to, but not anymore. I opted out for a DIY strategy.

An RSP is ideal for beginner investors without much knowledge and doesn't have time to monitor on a regular basis. A RSP works in the background, every month a set amount is deducted from your bank account.

What if you're purchasing stocks 1 lot at a time individually? How could $100/month purchase anything? Well, I'd suggest perhaps consider purchasing US Shares? Their share prices are significantly more affordable because of the board lot size.

Alternatively, you could save every month until you have enough to purchase 1 lot.

Every person will have his/her preferred strategy and it is not up to any of us to judge or comment.

What are YOUR ways of investing? Do you use any Regular Savings Plan? Do comment below, and share with everyone!

Till next time,
Teenage Investor

8 comments:

  1. Hi Teenage Investor,

    As of 19 Jan 2015, SGX will be reducing board lot sizes to 100 instead of the current 1000. This means that you could own a piece of a quality stock with limited capital.

    Personally, I don't subscribe to RSP. (Not sure if any management/admin fee is charged). I feel that if one buys at every stage of a market cycle, all he gets is average. However, if one selectively begins his purchase, at the bottom half of every market cycle, his investment would yield a much greater gain above the average (Assuming one sells at the peak).

    Perhaps with the new strategy by SGX to reduce board lot size, RSP wouldn't be so relevant anymore. It's good that one wants to be vested in the market, but for the financially literate, I think it would be better if stock picking is done. At least your financial education on equity analysis can be applied and stock returns can be way higher.

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    1. Hi Aloy! Yes i'm aware of the reduction in board lot next year. However, I prefer not to count my eggs until they are in the basket. SGX has been announcing the reduction plans since 2 years ago haha.

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    2. aloypro,

      Firstly, your strategy to buy low sell high is what every investor aims to achieve but timing the market takes experience and skill that not everyone has. RSPs are specifically for small time retail investors who adopt a long term passive investing approach without bothering about market timing. Secondly, while the reduction in lot size is a boon to retail investors, there needs to be a reduction in commission fees otherwise it will still be difficult to invest in small amounts. Only SCB has no commission fees but given it is the custodian and its recent closing of its equities business due to dwindling profits, one can only ponder how long its retail brokerage can hold up

      Just my 2 cents

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  2. RSP is good for those that makes purchase in small amounts as the min commission is only $5

    for purchase of sg stocks the min brokerage can be $25 for local brokers, which is very expensive if your trade size is small, say 1k or less

    one may argue using SCB that charges no min commission, however the shares are not kept in CDP, thus an extra risk

    Cheers

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    Replies
    1. Hi Felix! Personally, I feel that $5 is quite an exorbitant amount to pay in commission especially for small time investors. Any returns on investments would be wiped out with $5 in commission. Don't belittle $5. When they all add up, it's a massive reduction in potential dividends.

      As for SCB, though they are kept in a custodian account, the risk is always there. However, I choose to take that risk for now. When I am able to invest more, I will use other brokerages who knows? Haha take care!

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  3. Hello i have been reading up on investing as well im currently 18 and have an emergency fund set up and im looking to invest in some low cost index funds(s&p500 dow etc ) do you know of any way i could do so CHEAPLY.. and i was contemplating waiting for the next recession to enter the market..
    i would rather give money away to charity then to give it to some broker !!

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    Replies
    1. Hi HJC. U can try StanChart. However since 18, it will be hard to get approval. My advice is start saving and open an account at 21.

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  4. Omg i just read that you manage to invest with vanguard omg im really impressed i feel that we share common ideas about the market if you have any spare time pls introduce me to materials i can read to widen my prospective chewhongjun@hotmail.com 90048820 WA and are you going to tony robbins talk ? I feel inspired and happy that i finally come across a blog that can really be benefical to me i hope that we can get acquainted even if you do you choose to respond to me im sincerely greatful for the effort you put into your blogs ! I'll continue reading your support you jia you!

    ReplyDelete