The Weekly Horse: How should NSFs invest their money?

Source: The Straits Times

I recently received the following question from an NSF reader (published with consent):

“Hi Sir,

I chanced upon your blog while trying to grow my wealth. I am currently still serving my nation, drawing not so much of an allowance (about $860). My monthly expenses is about $400. Currently, I have about $3000 saved in OCBC Frank Account. I am looking to get back about $30,000 in 5 years through investing. Should I put my $3K in unit trusts or ETF (S&P500/NASDAQ) or SREITS?”

I reached out with a couple of clarifications, and this was the reply:

Thanks for the fast reply! I’ll still continue saving during NS and uni as well! I should be able to set aside $100 a month for investment. Is it also possible to just use the $3K initially and grow it to $30K without additional savings?

Fantastic question! When I was 18 years old and serving the nation, all I did in my free time was play World of Warcraft, Dota and go on dates. Learning about investing seems like a pretty awesome alternative.

Basics: What returns does he need to achieve?

Let’s break the question down further. This NSF reader currently has S$3000 saved in the bank. His monthly savings rate is about S$460. I am going to assume he is about 12 months left to ORD, so that’s another S$5520 he can save. I will assume that he can save S$100 during the gap between NS and university as well, so that’s another S$6000 he can save over the next 5 years.

So realistically speaking, he has about S$8520 to grow into S$30,000 in 5 years, and he’ll slowly add in S$6000 over the 5 years. I’ve set out the rough returns after 5 years:

Annual Return Relevance Final returns (after 5 years)
0% This is what you get if you leave the money in the bank earning 0% interest $14,520
2.44% This is the rate if you invest the money fully in Singapore savings bonds $16,011
4.09% This is the 10 year return of the STI ETF $17,117
10.5% This is the 10 year return of the S&P500 $22,285
15.4% This is the 10 year return of the NASDAQ 100 $27,381


So basically, the only way this NSF gets anywhere close to his S$30,000 target, is if he hits a 16% a year return for the next 5 years. Note also these are historical returns for the NASDAQ. If you go out tomorrow and invest this amount, nobody really knows what your returns over the next 5 years will be.

I suppose at this time, a traditional financial adviser will tell you how important it is to manage your expectations when it comes to financial investments. They will also tell you that past returns are no indicator of future performance. If they are particularly shady, they may even advise you that the best option is an insurance/investment plan hybrid that will guarantee you a 4% or higher return for the next 10 years, as well as insure you against any unforeseen circumstances. If they are less shady, they may advise you that your best course forward is to invest in a broad, diversified, stock portfolio such as the STI ETF or the S&P500.

To be very honest, the last option is probably the best option from a pure, returns perspective, for most investors out there. But it’s also boring AF.

So rather than go down the boring traditional path, I’m going to pen an open letter to the 18 year old version of myself serving the nation, and advise him on how to invest his money. You can then see if this advice is useful for you. 🙂

Dear Financial Pony,

You are 18, and you have your whole life ahead of you. You also currently have no financial burdens or constraints to think of, and abundant free time. These are massive resources if you use them right.

Conventionally speaking, the best path to investing success is to dump all your money into the NASDAQ, forget about it for 10 years, and let your future self thank you. But by doing that, you’ll never experience the ups and downs of individual stock investing. You’ll never learn to read an income statement. You’ll never learn to analyse the future prospects of a company. You’ll also never start Financial Horse.

In the grand scheme of things, the amounts of capital you play with at 18 years of age, have little to no meaning on your future well-being. A 300% return sounds amazing, but a 300% return on S$3000 is a lot less impressive and life changing. When you get older and start work for a few years, you’ll make the entirety of your initial capital in less than a month.

So go out there, read up on stocks you really like, and made a decision on which you would like to invest. Here are a couple of rules to keep you in check:

  1. Limit your investments to 5 to 10 investments. You cannot keep track of more than 10 investments effectively. Diversification is a great strategy when your goal is to preserve your wealth, but you don’t have any wealth yet. If you want to grow your wealth aggressively, you need to make large, concentrated bets on stocks you believe in.
  2. Always write down why you’re buying a stock. The goal here is to learn about investing, and about what works and what doesn’t. Always write down your rationale before making an investment. If you lose money 12 months later, ask yourself why your original thesis was wrong. If it’s not wrong, why are you not adding to your position?
  3. Time is on your side. Time is your greatest friend here. At 18 years of age, you have at minimum a 47 year investing timeframe. Einstein once coined compound interest the eighth wonder of the world. He is not wrong. If you save S$10,000 at 18 years, add S$500 monthly for the next 47 years and invest it at a 7% annual return (the long term return of the stock market), you’ll be left with S$2.3 million at 65.
  4. Your Risk Appetite is through the roof. When you are 40 years old and have 1 disabled kid to support (like the guy here), you risk appetite is pretty much zero. When you are 18 years old with your whole life ahead of you can basically lose your initial capital 10 times over, and still become a multimillionaire by 50 if you do it right.
  5. Learn about everything. I cannot stress this enough. When you are young, you are given free reign to learn and make mistakes. And when you are young, you should learn about everything there is out there. A lot of people think that learning investing is about learning to read a cash flow statement. Nothing could be further from the truth. All a company’s financials tell you is how well the company did, historically. To understand how well the company will do in the future, you need to understand how the world works.
  6. Go big or go home. This last bit of advice isn’t for everyone. Some people are content to work their 9 to 5 job for 35 years, invest in the STI on a quarterly basis, and retire with their money. That’s perfectly okay. But if you want to make it really big (I’m talking > 20 million net worth here), if you want to change the world, you’re not going to get there by playing it safe. Take some risk, accept that you will not get it right all the time. Make a few mistakes in your life, and see where that gets you.

To get you started on your investing journey, here are some stock suggestions you can look into. I suggest you pick an industry that you really like, and try to focus exclusively on companies in that industry. Your returns may not be amazing, but the amount you learn will be unbelievable, and in 12 months you’ll be so far ahead of your peers that they won’t even be able to discuss stocks with you.

Banking – DBS, OCBC, UOB

REITs – Mapletree Commercial Trust, Mapletree North Asia Commercial Trust, Mapletree Logistics Trust, Mapletree Industrial Trust, CapitaLand Mall Trust, CapitaLand Commercial Trust, CapitaLand Retail China Trust, Ascott REIT

Technology – Facebook, Apple, Amazon, Google, Netflix, Microsoft, Tesla

Index investing – S&P500, NASDAQ 100, STI, Hang Seng , VTI total stock market ETF

P.S. If you really run out of idea, you can take a look at my own personal portfolio here   for some ideas on construction.

As a bit of motivator, let’s see how different the table looks if you keep saving and investing for the next 47 years of your life. Don’t forget, this assumes that you only save a paltry S$100 a month!

Annual Return Relevance of the benchmark After 5 years After 47 years (age 65)
0% This is what you get if you leave the money in the bank earning 0% interest $14,520 $64,920
2.44% This is the rate if you invest the money fully in Singapore savings bonds $16,011 $132,469
4.09% This is the 10 year return of the STI ETF $17,117 $229,232
10.5% This is the 10 year return of the S&P500 $22,285 $2,717,476
15.4% This is the 10 year return of the Nasdaq $27,381 $21,798,865


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  1. Thank you for the inspiring article currently an NSF too. For the projected returns after 5 and 47 years did you factor in the 30% WHT? If no, is investing in American ETFs still the better option? Thank you and can I get your 7 commandments too please?

    • Glad you enjoyed it! No I actually didn’t even factor in dividends, so the actual number may be even higher. Added you to the mailing list!


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