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How Peer-To-Peer Lending Supports Financial Inclusion

Financial inclusion is increasingly becoming a buzzword in the finance arena. While crucial in setting a strong foundation for development, the Southeast Asian (SEA) region and the world still has a lot of room for improvement. This is where Peer-to-Peer (P2P) lending can step in to steer the money lending economy in the right direction.

Why is financial inclusion important?

Financial inclusion refers to people and businesses having access to affordable and useful financial products and services, delivered in a sustainable manner. This can include access to transactions, payments, credit, savings, and insurance, just to name a few.

A crucial foundation

Financial inclusion is important as it contributes directly to the ability of communities to develop and grow. It equips people with the tools to manage their wealth by having savings and enabling the allocation of resources to various aspects of their lives such as health, education, and business. According to the American Economic Review, financial inclusion can aid in the reduction of poverty through an increase of one’s income potential and asset-building capabilities. Financial inclusion also acts as a safety net to let companies survive financial emergencies through business loans.

The state of financial inclusion in SEA

Despite the importance of financial inclusion, many individuals and businesses still lack access to quality financial services. Global Findex Database found that 1.7 billion people worldwide do not have access to basic financial services, like a bank account. Deloitte reported that less than 60% of Small Medium Enterprises (SMEs) in Indonesia, Malaysia, Philippines, Singapore and Thailand have access to bank loans as a means of financing. Shockingly, the region around us continues to use personal funds as a dominant source, particularly in Indonesia.

The reality is that SMEs’ financial requirements are more often than not too large for microfinance, yet too small to be effectively served by corporate banking models. As such, there are many underserved companies with poor access to mainstream financial services and need to rely heavily on alternative financial services.

How does P2P lending support financial inclusion?

The presence of financial exclusion reveals a potential market for lenders. In particular, P2P lending can help address the issue of accessibility while providing an alternative form of investment.

Accessibility upgrade

P2P lending brings lenders and borrowers in direct contact through a common platform. By skipping traditional financial institutions through a convenient digital platform, the P2P lender is able to enhance access to much-needed working capital. Lenders and borrowers are not bogged down with the same degree of bureaucracy and regulation imposed by traditional credit providers, and other measures of assessing creditworthiness are in place. Instead of waiting for a week to process loan applications, a more immediate relief can be provided through P2P lending for business emergencies in the form of SME loans, bridge loans, invoice financing, and more.

Viable investment opportunity

On top of the improved access to funds, P2P lending also adds more options to the pool of investment types available. As opposed to a large starting capital of $10,000, P2P lending allows easy entry with affordable options starting from $20. New and seasoned investors alike can look forward to diversifying their portfolio through this form of alternative investment.

In this digital age, there are lesser excuses for financial inclusion to remain problematic. Banks and Fintech businesses need to ensure that the underserved community is not left behind. P2P lending has the potential to reinvent the funding sphere.

Read Also: Step-By-Step Guide To Investing With Funding Societies In 2019

What Is An Escrow – And Can It Help Reduce Risk For P2P Investors?

When conducting important transactions that involve numerous intricacies, it is essential that safeguarding measures are in place to protect the interests of both parties. One efficient and common approach is none other than utilising an escrow account.

What exactly is an escrow account?

Now what exactly does escrow imply, and how does an escrow account work? Escrow refers to the use of a third party entity that is not directly involved in the transaction or contract, to safe keep documents, funds and the likes before the transaction is finalised. Terms and conditions are drafted by immediate parties (e.g. mortgagor and mortgagee) before the escrow account is created. If the agreements fall through, funds will be returned to the original owner.

Funding Societies understands the importance of building trust with investors and borrowers, and became the first peer-to-peer (P2P) lending platform in Singapore to use an escrow. We engage Vista Trust Singapore, which is regulated by the Monetary Authority of Singapore (MAS). This ensures that our borrowers and investors go through the Know-Your-Customer (KYC) process- a compliance process to verify their identity, and that all monetary transactions uphold the requisitions of the Anti-Money Laundering Act.

Why is Escrow important for a P2P lending platform?

First, it ensures transparent transactions. Funds will not be transferred directly into the business account of the platform at any point in time. Rather, it goes from the investor to the escrow and finally the business as a loan, upon fulfillment of all terms and conditions. Essentially, an escrow serves as an intermediary that acts on behalf of investors or businesses to guard and transfer the funds such that neither parties have immediate access to it. Thus, all stakeholders involved in the transaction can rest assured that no underhand dealings will take place.

Second, escrow acts as a second line of safety for investors like yourself. In the event that the platform goes bankrupt,  the escrow agent will continue to collect repayments for ongoing loans from the borrowers to pay the investors. In other words, investors’ money is protected by the escrow and the terms are still fulfilled.

Why should Funding Societies be your chosen P2P investment platform?

At Funding Societies, earning trust from our clients is our priority. This is the core reason why we dedicate time, effort and resources to engage an escrow agent to serve both ourselves and clients. We want to do things right, and gain the trust and support of our most valued clients.

Introducing CrowdFund Talks, A Community for Savvy and Discerning Investors

There are many forums out there but few that focus on investments in crowdfunding and alternative investments.

CrowdFund Talks is Funding Societies’ very own community page. They are firm believers of the collective wisdom of the crowds – after all, they’re a crowdfunding platform! They  wanted to create a platform where everyone is welcome to get involved, discuss, and share their experiences on alternative investments. By reading and contributing actively, you can benefit from the wisdom of crowds.

Be a subject matter expert

Join in the community and share your thoughts on the world of investing. Whether you’re a fresh graduate or a retiree, share your investing experience and hear from other users. Listen to others share their investment strategies and ideas for investments.

Crowdsource your burning questions

Confused about basic investing and Peer-to-Peer lending? Whether you’ve invested in bonds, stocks, deposits, property, or a new instrument like crowdfunding and bitcoins, come to crowdfund talks and start your own thread now and find the answer you’re looking for!

Give feedback and see them implemented

Make an impact with your opinions. Over the past year, the team at Funding Societies has taken some of the users’ feedback and implemented them on our investors’ platform.  A recent case was when Crowdfund Talks forum user Jonas requested for a portfolio download option. The Funding Societies team agreed the feature would greatly benefit our investors and they went ahead and implemented the feature!

 

Get rewarded while learning about alternative finance

At Crowdfund Talks, the opinion of investors is valued and they rate quality knowledge highly. Generous givers of learning are recognised with points and there is even awards for top contributors!

Be part of a vibrant crowdfunding community

Crowdfund Talks has been around for a year now and it has evolved its own distinctive culture. On top of that, they also host meetups with the community!

In the first community meetup in KL, active members were treated to a nice dinner catch-up where members shared their respective p2p experiences and progress, and eventually exchanged contacts to stay in touch! Joseph, one of the Top 5 Contributors was even presented with a prize.

In the spirit of community and two-way communication, feel free to reach out to Funding Societies should you have any questions, thoughts, and feedback through the forum. Your input will help create the best possible site for crowdfunding conversations and discussions.

While the forum is owned and operated by Funding Societies, they have committed to operating on a light-touch model and allow users to discuss freely, only moderating if there is harmful or offensive content (or otherwise violating other Content Guidelines).

Welcome to CrowdFund Talks. Check it out here!

Complete Beginners’ Guide To Investing In P2P

By now, you’ve probably heard about P2P lending as a fast-growing alternative investment.

P2P lending allows investors to earn attractive interest on their money by lending it to businesses with growth potential and plans.  Returns come in the form of regular repayment of interest and principal. For any given loan, there could be hundreds of investors who put up the money and share the risks and returns of the investment.

There are some misconceptions about P2P lending, which you should be aware of so that you can make your own informed decision whether to invest in it or not.

Read Also: The Myths And Misconceptions About Peer-To-Peer Lending

The P2P Sector Has Grown And Matured

The alternative finance industry, or marketplace lending, has become increasingly popular regionally in recent times and has been growing at an impressive pace.

In 2016, Southeast Asia’s alternative finance market grew 363% from 2015 to a value of US$215.94 million, with marketplace business lending amounting to more than half of the market’s value. Further data showed that the market size of Singapore’s marketplace business lending grew almost 10x from US$9.43million in 2015 to $88.4million in 2016.

Funding Societies, one of the leading P2P platforms in Singapore and Southeast Asia recently surpassed $200 million in P2P loans successfully transacted through their platform, while maintaining industry-low default rates. The number of investors of P2P loans have also increased significantly – with 75,000 investors on Funding Societies’ platform alone.

Earlier this year, the Singapore Fintech Association formed the Marketplace Lending Committee, with the aim to represent all marketplace lenders, nurture and build relationships, design and promote good practices, and play a part in ensuring that the industry remains a reliable and viable source of alternative financing for business owners.

Why Invest In P2P Lending?

There are many good reasons why investors might want to consider investing in P2P, including flexibility, low investment amount, and transparency about the company you’re lending to, and their own skin in the game.

There are a few platforms that offer retail investors with P2P investing opportunities. One of them is Funding Societies, where users can enjoy loans with a short tenor, receive fast and frequent updates to their app and platform, as well as access loans with high potential returns.

Once you’re ready to take the plunge, head over to Funding Societies’ website to sign up for an account and take a look at the loans that are currently available for investing.

Read Also: 3 Good Reasons Why You Should Consider Investing In P2P

Sound Investing Principles Still Apply

Even though P2P lending is a new and nascent investment instrument, the fundamentals of investing still apply, such   as diversification, investing only what you can afford to lose, and knowing your own risk tolerance.

All investments carry risk, and you should be fully aware of what the risks are before investing your hard-earned money. The key risk being that of companies defaulting on their debt obligations.

Read Also: 8 Principles Of Investing For Beginners And Beyond

S$200 Million Mark Reached For P2P Crowdfunding Platform Funding Societies

Funding Societies announced that they have surpassed the SGD 200 million mark in total crowdfunded SME loans. This achievement came just 6 months after crossing SGD 100 million in January this year. In the same period, its investor base has also increased from about 40,000 to  75,000, indicating strong demand from investors to support local SMEs while diversifying their investment portfolio.

Kelvin Teo, co-founder and CEO of Funding Societies commented, “It took 30 months to achieve our first S$100M and 6 months for our second S$100M. But the industry is still nascent. We’d continue to focus on serving SMEs’ and investors’ needs.” Kelvin is also the c0-chair for the Singapore Fintech Association’s Marketplace Lending Committee.

As you probably know, Funding Societies provides business financing to underserved SMEs for their working capital and expansion needs across Singapore, Indonesia and Malaysia. This is done through its digital marketplace platform where retail and institutional investors come together to lend to the SMEs. Businesses can avail loans ranging from just SGD 5,000 going up to SGD 2 million and with a quick turnaround time,  as fast as 2 hours for loan approval and 24 hours for SMEs to receive the funds. On the other spectrum, investors who lend to the SMEs through the platform receive up to 14% per annum in returns and can invest starting from just SGD 20 per loan. In linking SMEs and investors, Funding Societies has achieved a notable track record of less than 1.5% in default rate, one of the lowest in the region.

According to the SME Development Survey by DP Information Group, 35% of SMEs in Singapore surveyed in 2017 face finance-related issues, up from just 14% in 2015. This problem is further compounded, with 81% of these Singapore SMEs experiencing delayed payments from their customers, a jump from just 14% in the previous year. The problem of cash flow management faced by SMEs is an issue that needs to be addressed. Funding Societies is committed to support SMEs by providing more flexible business loans to suit the financing needs of these SMEs.

Funding Societies has been innovating to serve SMEs. In 2016, it launched FS Bolt, a first-in-Singapore mobile app based loans meant for micro and young businesses. Funding Societies was also the first FinTech firm to adopt MyInfo under GovTech’s initiative, to simplify SMEs’ loan application process. In the last few months, Funding Societies introduced  Property-backed Secured Loans as well as an enhanced version of Invoice Financing where based on past aging, for well paying debtors, the tenor can be extended up to 120 days.

Most SMEs Funding Societies has funded come from diverse sectors and do not receive adequate financing through traditional options. Others have existing bank loans but approach Funding Societies for fast and short term bridging loans. The speed of crowdfunding is fast with loan campaigns getting funded within minutes for small loans to a few hours for larger loans. The efficient crowdfunding reflects a strong demand by local investors and provides SMEs access to funds in a shorter time frame.

In its recent Series B funding led by SoftBank Ventures Korea, Funding Societies raised US $25 million, the largest for a peer-to-peer lending platform in Southeast Asia. The funding round was supported by global and local investors like Sequoia India and Golden Gate Ventures.

Funding Societies has earned many local as well as global awards and recognition over the last one year. Its Indonesian entity Modalku won the Global SME Excellence Award from United Nations’ ITU Telecom late last year – the first and only Asian startup to win the award. It has earlier won the Fintech Award from Monetary Authority of Singapore (MAS) and was recently recognised amongst the Best 50 Companies to Work for globally by Silicon Review. The local and international awards highlight the impact of financial technology on SMEs and society as a whole.

News of this milestone for Funding Societies, and the larger P2P lending space, also made it to Digital News Asia and Crowdfund Insider.

What Is Invoice Financing And How Can It Help Your Business?

In 2016, Funding Societies launched their second product, Invoice Financing. For those who are not familiar with the concept, here’s a quick introduction.

What is Invoice Financing?

Invoice financing is a product where business owners sell the future receivables or invoices they issued to their customers to get immediate cash.

Say there is a business owner and a buyer. Your customer purchased goods or services from you, the business owner, and was issued an invoice with a credit term of 60 days. This means the business owner will only receive payment after 60 days, at the earliest; but what if you need cash right away? This is where invoice financing comes in. Business owners can sell their invoices at a discount, in exchange for immediate cash, thus enhancing cash flow.

Utilised wisely, invoice financing can be a useful tool for business owners to fund business growth, even if their short-term assets are tied up in accounts receivable.

The process of getting upfront cash through invoice financing is significantly quicker than applying for a loan from a traditional financial institution, and unlike a business term loan, you are not taking on any additional debts. You are simply freeing up money owed to you, for the service you have already delivered to your clients.

Recently, Funding Societies announced the launch of Invoice Financing V2.0, an upgrade to their existing product, to provide SMEs with more flexibility and support in improving their cash flow.

With Invoice Financing V2.0, SMEs can expect:

  • Cash upfront for their invoices
  • Up to 80% of invoice value
  • No collateral required
  • Quantum up to SGD 1 million
  • Pro-rated interest on a daily basis

To help you better visualise the improvements they made, here’s a deep dive into Invoice Financing V2.0’s fresh new features:

1. Pro-rated interest on a daily basis

For regular invoice financing, interest rates are fixed to the invoice amount and loan tenor, and will not differ even if you or your clients repay early. Funding Societies’ Invoice Financing V2.0, on the other hand, pro-rates interest on a daily basis, providing SMEs with savings for early repayment. For example, if your clients were to repay a 100-day Invoice Financing in 90 days, only a 90-day interest will be charged, saving you a total of 10 days of interest!

2. Flexible Loan Tenors

For most Invoice Financing products, your loan tenor is fully dependent on your invoice terms, regardless of early or late repayments. In reality, however, companies often struggle with late invoice payments from debtors. With Invoice Financing V2.0, Funding Societies takes into account the client’s receivables aging history and offers up to 120 days tenor to provide SMEs greater flexibility and cash flow assurance through their invoices.


Funding Societies is dedicated to improving our products to better serve your financing needs. Invoice Financing V2.0 was crafted to help business owners like yourself have greater confidence in your business’ cash flow and provide SMEs with a quick turnaround option to fund operations and capture opportunities.

Funding Societies now takes into account invoices’ aging history for the approved loan tenor and also provides more flexibility for early repayment that would incur zero interest for the remaining invoice days.

Never miss out on another opportunity with Invoice Financing V2.0! For more information, you can live chat with Funding Societies today to find out more!

4 Reasons To Consider Investing With Funding Societies

Peer-to-peer lending, or P2P lending, utilizes technology and big data to connect investors and small and medium-sized enterprises (SMEs) looking for business funding. To investors, it can function as an alternative investment that gives them an opportunity to earn passive income by financing business loans for SMEs.

In Southeast Asia, P2P lending has witnessed significant growth in recent years, led predominantly by Singapore. To date, around 60 platforms are currently operating in the online lending and crowdfunding space, which have become an increasingly popular alternative investment option.

If you’re wondering how you can take part in investing with P2P lending, Funding Societies would be a great place to explore. As of May 2018, Funding Societies has onboarded more than 70,000 investors across Singapore, Indonesia and Malaysia and provided more than S$160 million worth of investment opportunities in crowdfunded loans.

Here are four things you can expect when investing in P2P lending through Funding Societies.

# 1 Business loan products with short tenors

Funding Societies offers three investment products: Business Term Loan, Invoice Financing, and the newly launched Property-Backed Business Loan. Business Term Loan allows you to make investments by financing SME loans with tenors ranging from 1-12 months. In return, you will receive monthly repayments of principal and interests. You can maximize your returns by reinvesting your repayments to new loans.

Meanwhile, with Invoice Financing, SMEs would be able to cash out by pledging their invoices to Funding Societies. Invoice Financing has a shorter tenor, which generally lasts for only 30-120 days with a one-time repayment of principal and interest at the end of the tenor.

With Property-Backed Business Loan, investments are secured by a property (residential, industrial, or commercial). Different from the other products, Property-backed Business Loans offer security in the form of property as a collateral, and is a good option to add diversification to your investment portfolio.

# 2 Potential returns as high as 14% p.a.

As an investor, the returns you get from your P2P lending investments come in the form of interests paid by SMEs.

Given that P2P loans are generally more flexible in its tenor and SMEs that get financing from Funding Societies have shorter or imperfect operational track records, interest rates are determined accordingly based on risk, in the range of 8-14% p.a.. Higher risks typically come with higher returns, so investors should invest based on their appetite for risk.

# 3 Regular updates from the platform

Expect to get regular updates from Funding Societies as an investor on the platform! With every important event or update, the platform sends alerts via email or in-app notifications so that investors are constantly kept up to date with us.

For instance, whenever there is an upcoming loan for crowdfunding, investors will receive an email notification. In the event of late repayment or if there’s an update for specific loans, Funding Societies will also communicate in the quickest and most transparent way. So make sure you switch on your app notifications for any important alerts!

If you need any further clarifications, Miyu, Funding Societies’ very own chatbot, and our customer experience (CX) team will be happy to answer all of your questions via live chat. Or call us at 62210958 to have a quick chat with our team.

# 4 Well-designed User Interface

Funding Societies Website

Funding Societies Mobile App

Investors should be able to review their portfolios easily. That’s why Funding Societies’ website has recently been improved to provide details of your investment portfolio in a clear and concise manner.

In addition, since 80% of Funding Societies’ investors access our platform via their mobile phone, the company has created a Funding Societies mobile app to cater to all mobile users out there. As an investor, you can review your portfolio, change your auto-invest settings, crowdfund a loan, and even use the live chat feature — all in one app! It’s simple, convenient and efficient.

Funding Societies is also constantly taking feedback from investors and working on them to improve the whole experience for you.


About Funding Societies

Funding Societies is the leading digital P2P lending platform in Southeast Asia and is operating in Singapore under the Capital Markets Services license issued by the Monetary Authority of Singapore (MAS). Recently, it has raised a Series B round of funding, the largest by a P2P lending platform in Southeast Asia. Funding Societies is also the only P2P lender to have received the Fintech Award given by MAS.

Sign up as an investor with Funding Societies now!

3 Tips You Can Use For Expanding Your Professional Network

Ask any business owner and they will tell you how important it is to build a solid business network. A great business network is high-quality and consists of a group of people you can count on. Building such a network requires commitment and consistency. Not to mention, a balance between giving and taking, not simply exchanging business cards and contact information. Here are 3 tips for building a better business network:

Be Authentic

When introduced to new acquaintances and businesspeople, it’s recommended to be knowledgeable and up-to-date. But it’s more important to be yourself. Sure, we all want to present a more refined and polished version of ourselves to the world, but it’s another thing altogether to mislead acquaintances about your goals and values. Understandably, there are many people we would want to impress, but the best relationships (yes, business relationships too) happens when you start with a natural connection and common ground. Being authentic also enhances your reputation to others in your field.

Bad Behavior Is Never a Good Idea

We hear of several charismatic yet overbearing and unpleasant business leaders. We start to wonder if such traits are perfectly acceptable, or worse, integral to success. Please don’t try this.

Being a jerk while taking benefits from your relations and not giving back is detrimental at any stage, but especially so when you are in the process of building and growing your business. You will get an unsavory reputation and trust us, your network will pass on juicy anecdotes of nasty behavior to their relations.

Thank your acquaintances when they have provided you a favor. Be kind to them even when it looks like there is no visible payoff for doing so. Being trustworthy and dependable has business value.

Get More Personal

Want to know a particular person better? Ask them to hang out together. You’ll have the chance for a more personal discussion. Be open to different ideas. Be willing to have someone teach you business models you may be skeptical of. Share your experiences, points of views, and professional plans to see if this is someone you want to share a more lasting business relationship with. Also, see if this is someone you can trust.


Building a solid business network doesn’t stop at exchanging contact information. It’s what happens after that matters most. Be authentic, be professional and responsible, and establish quality relationships with talented people who trust and inspire.

Looking for more business tips? Click here for how to maximize business productivity and here for ideas on growing a small business.

Saving In The Digital Era

We’ve all been there before: at first, we were just absentmindedly scrolling through our Instagram feed when we come across a beautifully made travel bag or trendy sneakers posted by a brand account. Next thing we know, we’ve placed our order and we’re ready to make a purchase.

Everything happened too fast! When the order arrives at our door, our satisfaction levels are high. But in mere days we realize we didn’t really need the product in the first place.

Temptation is everywhere in the digital era, and it’s becoming harder and harder to save money. With the rise of technology and social media, online shopping is just one easy click away. If you fall prey to too many ill-considered purchases, you will soon have bad financial habits.

So how do you save money in the social media era?

Set up automatic deposits into your saving accounts

Establish a budget, period. When you have an accurate view of your income and expenses, you can start improving your personal finances. Once you have set a budget and clear goals, get in the habit of saving money by automating the process. Set up regular and automatic deposits into your savings and investments accounts, either directly from your paycheck or from your checking account.

Get a money buddy

According to an MIT study, friends with similar traits can pick up good habits from each other. Financial planners also recommend having someone to hold you accountable for the task at hand to increase effectiveness and deliver stronger results.

Consider using the concept to save more money. You don’t need a finance whiz, you can find a partner in a friend, a parent, a sibling, or your own spouse. Set an achievable savings goal and ask your money buddy to monitor your progress and keep you on track.

Solo shopping

When it comes to shopping, it’s fun to shop with company. For the sake of personal finance, however, it’s better to shop alone. In a fun and relaxed mood, your friends might encourage you to buy more things than you intended. Obviously, it’s not healthy for your financial condition.

If you still want some company, ask your money buddy to accompany you. They are monitoring your personal finance progress, after all – chances are they won’t suggest shopping as a way to have fun in the first place.

When you get a raise, raise your savings too

Everyone says they would save more when they have more. But do people actually do it? When we get a raise, usually the first thing we do is buy something expensive to celebrate the occasion. Maybe a handbag, or plane tickets to a dream destination.

Celebratory spending is fine. Some self-reward is healthy. But remember to increase your automatic monthly transfer to savings as well. It might be painful now, but you will reach your personal finance goals faster if you allot more money to your savings and investments from a younger age.


Ultimately, saving enough money comes down to willpower and contentment. Do you have enough willpower to save? Are you okay with not having more right now? If you can develop both these qualities, you will grow wealthy over time.

8 Principles of Investing for Beginners and Beyond

To start, there are no investment hacks and shortcuts. Investing requires time, research, and maintenance. Effort? Depends on the instrument. Stocks, for instance, would need more vigilance than bonds, which is mostly a ‘buy and wait for maturity’ affair. Overall, however, there are no instafix to get you high investment returns.

For beginners and those who want to refresh the main principles of investing, we’ve collected 8 crucial tenets.

1. Know that investing is a commitment

Investing can be compared to quality relationships. Both require patience and its close kin, time. There are more investment options available than ever on the market, with new ones like cryptocurrencies and P2P lending entering the mainstream. But before you choose “the one”, you must first determine your investment profile. Then, you need to mull over the pros and cons of various instruments before selecting those that best fit your purposes.

Time also applies to the investments themselves. Some investments allow you to cash out by a relatively quick maturity date. Others take longer. It also pays to take time and review your investments regularly. Depending on how the markets have moved, you may have to rebalance your investment portfolio to fit your personal risk tolerance.

2. Invest when you have enough savings

Everyone has a benchmark for how much savings is “enough”. But it’s essential to have several months’ worth of monthly expenses before you invest your money. Three months’ worth is a good minimum amount, six months’ worth is safer.

If your savings account is stable, you have something to turn back to if you have an emergency and need funds immediately. When all your money is tied up in investments during unexpected times, you may have to withdraw funds when the markets aren’t optimum or when your investments haven’t reached maturity – exposing you to hefty penalty fees.

3. Watch the inflation rate

The interest we get on our savings is insignificant and when you factor in banks’ admin fees, our savings usually stay flat over time. What doesn’t stay flat, unfortunately, is the price of goods thanks to inflation.

Inflation is why we invest; we want to stabilize our purchasing power in the long term. To do so, our investments must beat the national inflation rate. To solve this, balance an investment portfolio that delivers overall returns above the inflation rate.

4. Know your personal risk tolerance

Thereby, know the risk and return principle, which declares that the higher the potential returns, the higher the risk – and vice versa. Because of the risk and return principle, everyone’s investment portfolio will look different as every investor balances risk and reward according to his personal risk tolerance and future goals.

Aggressive investors will aim for instruments with the highest returns, no matter how risky. Their portfolio can consist of 80-90% high-risk instruments. Meanwhile, investors with a low stomach for risk will veer towards safer products.

Age is often, but not always, a factor in determining risk tolerance. Rationally speaking, someone young and healthy, with enough savings and a long period of productivity ahead of him can afford to take more risks.

The idea of establishing your personal risk profile is to support you in building your perfect portfolio – one that reflects your personal preferences.

5. Remember the risk and return principle: anyone promising extremely high returns either requires you to take an equally extreme risk or is selling an investment fraud

Certain instruments can be stable while offering higher returns relative to other instruments, but there is no magic instrument with high profit and no risk. It simply does not exist. Be instantly wary of suspicious offers. Investment scams tend to have several things in common: high and unsustainable returns (think monthly returns above 10%), lack of transparency, general product claims (gold, foreign exchange, etc), and no operational license.

6. Diversify, diversify, diversify

How do you mitigate risk? You diversify your investments. Diversification means allocating your funds among a variety of investments. The more diversified your portfolio, the more protected you are. Even if an investment fails, your overall returns stay positive.

Diversification is how you build your unique investment portfolio. Remember personal risk profile? Maybe you are risk-averse. You may want to compile a portfolio of 70% bonds and fixed deposits, 10% in cash and equivalents, and 20% in stocks. If I’m risk-averse, why not spend 100% of my funds on fixed deposits, you ask? Even “safe” instruments have risks. What happens when fixed deposit interests fall? Your portfolio value will be diminished. Spreading your investment across various assets will prevent this problem.

7. Reinvestment is essential

When your investments generate earnings, you have several options. You can withdraw and cash out. But if you want long-term benefits, you should reinvest those earnings so they generate more earnings.

Say you invest SGD 10,000 into bonds with 7% annual interest. After a year, you have earned SGD 700 in interest. You decide to reinvest the total SGD 10,700 into the same bonds in year 2. SGD 10,700 now reaps SGD 749 in interest earnings rather than SGD 700 and you didn’t do anything.  Over time, you would double your starting principal or more. The key is in diligence and frequency.

8. Invest early because time matters

The reinvestment principle especially shines when you start investing early. Let’s say person A invests in an instrument with 5-6% annual interest at age 25 and reinvests every year. Then there’s person B who does exactly the same with the same initial amount starting age 35. Various graphs show that when they are both 60, person A would have nearly double the money of person B.


Remember: start early, commit over the long term, have enough savings, know your risk profile, be wary of suspicious offers, diversify to build an optimum portfolio, and reinvest your earnings.