How to Build a Good Investment Portfolio in Singapore

11 August 2023

Embarking on your investment journey and building a solid portfolio may seem intimidating at first glance, but it doesn't have to be daunting at all. With a thoughtful approach, you can build a strong investment portfolio that aligns with your financial goals. By considering your current expenses and planning for both short-term and long-term objectives, you can navigate the investment landscape effectively. The key is to find a balance between growth opportunities and risks, all while understanding your own risk appetite. After all, building a diversified investment portfolio is the cornerstone of financial success.

To help you out, here are some key steps to build a robust investment portfolio tailored to your needs.

What is an investment portfolio?

An investment portfolio is a diversified collection of financial assets that an individual or entity holds with the purpose of achieving specific financial goals. It consists of various types of investments, such as stocks, bonds, commodities and real estate.

The portfolio is carefully constructed to balance risk and return by spreading investments across different (sub) asset classes and geographies, each serving a specific purpose. As such, it's crucial to understand the distinct purposes of each investment to avoid duplicating assets across different avenues and ensure optimal portfolio management.

The main objective of an investment portfolio is to either achieve capital appreciation over time, preserve capital over time or generate income. It serves as a long-term strategy for wealth accumulation, retirement planning, and meeting financial objectives. And by diversifying investments within a portfolio, investors aim to mitigate risk and optimise potential returns.

Building the right investment portfolio based on your financial goals

Building an investment portfolio can be broken down into simple steps that set you up for success. By following these steps, you'll have a better chance of creating a portfolio that reflects your investment needs and helps you achieve your desired outcomes.

1. Determine your financial goals

Before you embark on building your investment portfolio, it is crucial to define your financial objectives.

Categorise these goals based on their time horizon: short-term, medium-term, or long-term. This categorisation will help you determine the appropriate approach for each goal and allocate your investments accordingly. For example, if you're saving for retirement that is still decades away but also need to fund a vacation in the near future, you have both long-term and short-term goals to consider.

Alternatively, you can work on them simply based on whether your aim is to grow your capital, secure your capital, or earn an income from your savings.

Either way, understanding your goals will guide your investment strategy.

2. Know your risk tolerance

Assessing your risk tolerance is another essential step for building a well-balanced portfolio. Your risk tolerance determines how comfortable you are with the potential fluctuations and volatility of the market.

Your risk tolerance may vary over time based on your financial situation and life stage. But to fully understand how much risk you can take, it is best to understand your risk profile. To do so, consider factors such as your age, job, income, expenses, the timeline of your financial goals, and, of course, risk tolerance. While, in general, a longer time horizon allows for a more aggressive investment approach and short-term goals require a more conservative strategy, it is all about striking a balance between risk and comfort level for long-term investment success.

3. Choose an investment account

Various investment accounts are available, each designed for specific purposes and offering unique benefits. To choose the right account, consider factors like tax advantages, investment horizon, and liquidity.

For instance, the Supplementary Retirement Scheme (SRS) is ideal for retirement savings. It provides attractive tax benefits, but it comes with no liquidity till retirement for Singaporeans and PRs and till 10 years for foreigners. Investment returns through an SRS account also have the advantage of being accumulated tax-free, and only 50% of the withdrawals made during retirement are subject to taxation. On the other hand, if you have short-term investment plans within the next three years, a high-yield cash management account like StashAway Simple™ Plus might be a better option.

4. Choose your investments

Once you've established your goals, time horizon, and risk tolerance, it's time to choose the investments that align with your portfolio strategy. Consider a mix of assets like stocks, bonds, commodities and real estate. Stocks offer growth potential but come with higher risk, while bonds provide stability and regular interest payments. Funds, such as ETFs and Unit Trusts, on the other hand, offer diversification across multiple securities.

Given the variety, research and consider the risk-reward trade-off of each investment option, and consider consulting with a financial advisor or a StashAway Wealth Advisor (available for Accredited Investors) who can also provide valuable insights tailored to your specific investment objectives.

5. Monitor, rebalance and adjust

Building an investment portfolio is an ongoing process. Therefore, be sure to regularly monitor your portfolio to assess its performance and ensure it remains aligned with your goals. These regular check-ins enable you to review your asset allocation and make any necessary changes since life events may occur, requiring adjustments to your investment strategy. Rebalancing also comes into play when certain investments have experienced significant growth or decline, requiring adjustments to maintain your desired risk-reward balance. And if you have opted for the route of investing through a robo-advisor that can automate the rebalancing process, it's still essential to stay informed and involved.

Build a diversified portfolio that lasts

As you embark on the path of constructing your investment portfolio in Singapore, it's crucial to recognise that you hold the key to your financial future. However, if you're looking for a hassle-free way to build your wealth, consider exploring StashAway's General Investing Portfolios. Our expertly managed portfolios offer a range of risk-return profiles to suit your particular needs. With a diversified mix of sector equities, government bonds, corporate bonds, and gold, the General Investing Portfolio can help you achieve any medium to long-term goals. 

Take control of your financial future and start building your investment portfolio with StashAway today.


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