This article is sponsored by Nikko Asset Management. All views expressed in this article are the independent opinion of DollarsAndSense.sg based on our research, is purely for informational purposes and should not be relied upon as financial advice. DollarsAndSense.sg is not liable for any financial losses that may arise from any transactions and readers are encouraged to do their own due diligence. You can view our full editorial policy here.
At the start of each year, many of us set New Year’s resolutions—whether for relationships, fitness, education or even investing. One common financial goal is to start investing.
Just like other important goals in life, the best time to start investing is as soon as possible. Much like planting a tree, investments need time to grow. The earlier you start, the greater the potential benefits of compounding returns.
Many investors believe that making money in the market requires knowing exactly when to buy (at low prices) and when to sell (at high prices). However, this isn’t true. Even experienced investors struggle to consistently catch the right time to invest in the market.
Time In The Market > Timing The Market
For anyone who is new to investing and feeling overwhelmed, here’s some good news: How much time you choose to spend in the market would frequently beat timing the market. What do we mean by that?
Research consistently shows that staying invested over the long term leads to better returns than trying to predict market movements. One of the clearest examples of this is the impact of missing just a handful of the market’s best-performing days.
Take the S&P 500 as a reference. If you had stayed fully invested in the index from 1 January 2005, to 31 July 2024, your annualised returns would be 8.8% per year. However, if you just missed 10 of the best days during this period, you returns would be significantly lower at just 5.9% per year. And if you missed the 40 best days, your returns would drop to a mere 1.0% per year.
Source, 22 August 2024
The point here is that since timing the market on when’s the best time to invest is incredibly difficult, and doing it over a long period of time is virtually impossible, we should be less concerned about when the right time to invest is.
Instead, I believe that our focus should be to increase our chances of a better outcome by staying fully invested over a longer period of time.
Building A Resilient Investment Portfolio: The Power of Diversification
Starting your investment journey early gives your portfolio more time to grow, but that’s just the first step. To build a resilient portfolio that can grow over time, diversification is the key to reducing the investment risks that we are exposed to.
When investing, we are exposed to two types of risk: systematic risk and unsystematic risk. Systematic risk refers to market-wide risks that affect all investments, such as economic downturns, inflation or interest rate changes. These are risks that cannot be eliminated, no matter how well we diversify.
The second is unsystematic risk. This refers to risk that is specific to a single company or industry such as poor management decisions, regulatory changes or declining industry demand. Unlike systematic risk, unsystematic risk can be significantly reduced through diversification.
While we can never completely eliminate risk, a well-diversified portfolio ensures that our investments are not overly reliant on any one company or sector. This allows us to weather market fluctuations more effectively and stay focused on long-term wealth building.
How To Diversify Using ETFs
One of the simplest ways to achieve instant diversification is by investing in exchange-traded funds (ETFs). ETFs are investment funds that trade on stock exchanges, similar to individual stocks. However, unlike investing in a single stock or bond, which offers no diversification, ETFs pool together a broad range of assets, allowing investors to spread their risk across multiple holdings with a single investment.
For example, on the Singapore Exchange (SGX), investors can access different asset classes through a variety of ETFs:
- Stocks: The Nikko AM Singapore STI ETF (SGX: G3B) provides exposure to the 30 largest companies listed on the SGX by market capitalisation, including DBS, OCBC, UOB, and SingTel.
- Real Estate: Investors looking to invest in real estate investment trusts (REITs) can consider the NikkoAM-Straits Trading Asia ex Japan REIT ETF (SGX: CFA/COI), which offers exposure to some of the largest REITs in Singapore and across Asia.
- Corporate Bonds: For those interested in fixed-income securities, the Nikko AM SGD Investment Grade Corporate Bond ETF (SGX: MBH) provides exposure to high-quality corporate bonds.
- Government Bonds: Investors interested in Singapore government bonds can consider the ABF Singapore Bond Index Fund (SGX: A35). This fund invests in a range of Singapore government bonds with varying maturities.
There are plenty of ETFs available on the SGX that we can consider depending on the asset class (e.g. stocks, bonds, REITs) or the industry that we want to invest in. See below for the full suite of Nikko AM ETFs.
Source: Nikko AM, February 2025
By investing in ETFs, investors can build a well-diversified portfolio across different industries and asset classes while benefiting from lower costs and greater accessibility. You can find the various ETFs offered by Nikko Asset Management on the SGX here.
Why Investing In ETFs Via A Regular Savings Plan Makes Sense
For those looking to start their investment journey, investing in exchange-traded funds (ETFs) through a Regular Savings Plan (RSP) is a great way to begin. This approach combines the two key investment principles that we have discussed – 1) time in the market and 2) diversification.
RSPs are offered by various banks and brokerage firms in Singapore. They utilise the concept of dollar-cost averaging (DCA), a strategy where a fixed amount is invested into selected ETFs every month, regardless of market prices.
- When prices decline, the fixed investment amount buys more units of the ETF.
- When prices increase, the same amount buys fewer units of the ETF.
This approach is particularly well-suited for younger or less experienced investors, as it eliminates the pressure of trying to predict market movements. It also helps new investors to overcome the inertia to start investing for fear that they may be entering the market at the wrong time.
With an RSP approach, the focus shifts from timing the market to consistently growing wealth over the long term. This disciplined approach not only reduces emotional decision-making but also builds a strong investment habit early on, setting a solid foundation for long-term investment growth.
To find out more about how an RSP approach can help you invest in ETFs, you can check out the Nikko AM RSP page.
Understand & Invest In SGX-Listed ETFs
While ETFs make it easy to invest in a diversified portfolio, it’s important to remember that not all ETFs are the same. Just as there are different types of stocks and bonds, the universe of ETFs is vast, covering various sectors, asset classes, and strategies. This is why understanding what you’re investing in is just as important as investing itself.
At the same time, it’s important to note that just like regular stocks and bonds, ETFs are not immune to market volatility. While you might make profits when markets perform well, you could also face losses during downturns. Some ETFs may also be more volatile than others, especially those focused on specific sectors or emerging markets.
If you’re new to investing, check out this short video that breaks down everything you need to know about ETFs in a simple and engaging way.
In addition, join us on Saturday, 22 March, at SGX, where I’ll be sharing my investment experiences in a panel discussion and how I kick-start my investment journey by investing in ETFs listed on the SGX.
Organised by SGX in collaboration with Nikko Asset Management and DBS, the event—Millionaire in the Making: Path to Your First Million—is designed for young working adults in Singapore who are just beginning their investment journey. If you want to learn how simple, consistent investments in ETFs can help you build long-term wealth, this session will be especially valuable.
Registration is free, and you can sign up here. Don’t miss out!
Important Information by Nikko Asset Management Asia Limited:
This document is purely for informational purposes only with no consideration given to the specific investment objective, financial situation and particular needs of any specific person. It should not be relied upon as financial advice. Any securities mentioned herein are for illustration purposes only and should not be construed as a recommendation for investment. You should seek advice from a financial adviser before making any investment. In the event that you choose not to do so, you should consider whether the investment selected is suitable for you. Investments in funds are not deposits in, obligations of, or guaranteed or insured by Nikko Asset Management Asia Limited (“Nikko AM Asia”).
Past performance or any prediction, projection or forecast is not indicative of future performance. The Fund or any underlying fund may use or invest in financial derivative instruments. The value of units and income from them may fall or rise. Investments in the Fund are subject to investment risks, including the possible loss of principal amount invested. You should read the relevant prospectus (including the risk warnings) and product highlights sheet of the Fund, which are available and may be obtained from appointed distributors of Nikko AM Asia or our website (www.nikkoam.com.sg) before deciding whether to invest in the Fund.
The information contained herein may not be copied, reproduced or redistributed without the express consent of Nikko AM Asia. While reasonable care has been taken to ensure the accuracy of the information as at the date of publication, Nikko AM Asia does not give any warranty or representation, either express or implied, and expressly disclaims liability for any errors or omissions. Information may be subject to change without notice. Nikko AM Asia accepts no liability for any loss, indirect or consequential damages, arising from any use of or reliance on this document. This advertisement has not been reviewed by the Monetary Authority of Singapore.
The performance of the ETF’s price on the Singapore Exchange Securities Trading Limited (“SGX-ST”) may be different from the net asset value per unit of the ETF. The ETF may also be suspended or delisted from the SGX-ST. Listing of the units does not guarantee a liquid market for the units. Investors should note that the ETF differs from a typical unit trust and units may only be created or redeemed directly by a participating dealer in large creation or redemption units.
The Central Provident Fund (“CPF”) Ordinary Account (“OA”) interest rate is the legislated minimum 2.5% per annum, or the 3-month average of major local banks’ interest rates, whichever is higher, reviewed quarterly. The interest rate for Special Account (“SA”) is currently 4% per annum or the 12-month average yield of 10-year Singapore Government Securities plus 1%, whichever is higher, reviewed quarterly. Only monies in excess of $20,000 in OA and $40,000 in SA can be invested under the CPF Investment Scheme (“CPFIS”). Please refer to the website of the CPF Board for further information. Investors should note that the applicable interest rates for the CPF accounts and the terms of CPFIS may be varied by the CPF Board from time to time.
The units of Nikko AM Singapore STI ETF are not in any way sponsored, endorsed, sold or promoted by FTSE International Limited (“FTSE”), the London Stock Exchange Plc (the “Exchange”), The Financial Times Limited (“FT”) SPH Data Services Pte Ltd (“SPH”) or Singapore Press Holdings Ltd (“SGP”) (collectively, the “Licensor Parties”) and none of the Licensor Parties make any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the Straits Times Index (“Index”) and/or the figure at which the said Index stands at any particular time on any particular day or otherwise. The Index is compiled and calculated by FTSE. None of the Licensor Parties shall be under any obligation to advise any person of any error therein. “FTSE®”, “FT-SE®” are trade marks of the Exchange and the FT and are used by FTSE under license. “STI” and “Straits Times Index” are trade marks of SPH and are used by FTSE under licence. All intellectual property rights in the ST index vest in SPH and SGP.
The units of NikkoAM-StraitsTrading Asia ex Japan REIT ETF are not in any way sponsored, endorsed, sold or promoted by FTSE International Limited (“FTSE”), by the London Stock Exchange Group companies (“LSEG”), Euronext N.V. (“Euronext”), European Public Real Estate Association (“EPRA”), or the National Association of Real Estate Investment Trusts (“NAREIT”) (together the “Licensor Parties”) and none of the Licensor Parties make any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE EPRA/NAREIT Asia ex Japan Net Total Return REIT Index (the “Index”) and/or the figure at which the said Index stands at any particular time on any particular day or otherwise. The Index is compiled and calculated by FTSE. However, none of the Licensor Parties shall be liable (whether in negligence or otherwise) to any person for any error in the Index and none of the Licensor Parties shall be under any obligation to advise any person of any error therein. “FTSE®” is a trade mark of LSEG, “NAREIT®” is a trade mark of the National Association of Real Estate Investment Trusts and “EPRA®” is a trade mark of EPRA and all are used by FTSE under licence.”
Neither Markit, its Affiliates or any third party data provider makes any warranty, express or implied, as to the accuracy, completeness or timeliness of the data contained herewith nor as to the results to be obtained by recipients of the data. Neither Markit, its Affiliates nor any data provider shall in any way be liable to any recipient of the data for any inaccuracies, errors or omissions in the Markit data, regardless of cause, or for any damages (whether direct or indirect) resulting therefrom. Markit has no obligation to update, modify or amend the data or to otherwise notify a recipient thereof in the event that any matter stated herein changes or subsequently becomes inaccurate. Without limiting the foregoing, Markit, its Affiliates, or any third party data provider shall have no liability whatsoever to you, whether in contract (including under an indemnity), in tort (including negligence), under a warranty, under statute or otherwise, in respect of any loss or damage suffered by you as a result of or in connection with any opinions, recommendations, forecasts, judgments, or any other conclusions, or any course of action determined, by you or any third party, whether or not based on the content, information or materials contained herein. Copyright © 2023, Markit Indices Limited.
The Markit iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index are marks of Markit Indices Lmited and have been licensed for use by Nikko Asset Management Asia Limited. The Markit iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index referenced herein is the property of Markit Indices Limited and is used under license. The Nikko AM SGD Investment Grade Corporate Bond ETF is not sponsored, endorsed, or promoted by Markit Indices Limited.
Nikko Asset Management Asia Limited. Registration Number 198202562H.
The post Why I Think Investing in ETFs Through a Regular Savings Plan (RSP) Is One of the Best Ways to Start Your Investment Journey appeared first on DollarsAndSense.sg.
