Wednesday, 24 February 2016

Start Index Investing

Where to start?

All too often, we get caught up with our busy lives and our time is spent on work, family, leisure etc. We understand the need for personal finance and investment but seem to have no idea where to start. I usually recommend getting your personal finance stuff in order first i.e. savings accounts, credit cards etc. It's a one time exercise that ensures that you maximise the interest earned from your cash holdings and the rebates/rewards earned from credit cards spending. I will eventually post more information on how we approach our personal finance situation but thought it might be good to touch on the investment side for now. If you have already assessed your personal finance status or do not feel that it will make a difference, the next bit should be more relevant.

How to start index investing?

There's no point in me re-writing how to start index investing with the Standard Chartered online equities trading account. You can refer to this post from Turtle Investor for an introduction on that. What I would highlight is the need to understand the type of foreign currency settlement accounts that will need to be set up when you invest in overseas ETFs. In our case, we have the USD, GBP and EUR settlement accounts based on our selection of international ETFs.

Since there is no minimum commission on the Standard Chartered online equities trading account, it's a good way to start building your exposure to equities in your portfolio. By investing small amounts monthly into the local equities, local bonds and international equities ETFs, it will start to accumulate over time. Once you get comfortable with the index investing strategy, you can start to increase your monthly investment amounts into the ETFs. The key is to be consistent in building up your ETF portfolio and try not to time the market by buying and selling the ETFs. This dollar cost averaging technique works well over the long run and you have to give it time to see the results.

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