Rethinking investments in the time of Covid-19

Life in the time of Covid-19 has nudged Singaporeans to take a closer look at their financial health. Over the past year, many have shored up emergency funds, turned their savings around and ramped up insurance protection to buffer against future uncertainties.

Interest in wealth accumulation, too, has spiked amid the current climate. People understand the importance of not letting their extra cash sit idle, and are generally aware of the megatrends and opportunities driving markets today.

But the inertia to start investing remains high. A UOB survey last year found that 73 per cent of Singaporeans aged 21 to 45 indicated that investing is important, while 71 per cent have been thinking more about investing since the pandemic. Yet, 69 per cent still procrastinate when it comes to taking the first step.

Jacquelyn Tan, UOB head of group personal financial services, observes that many retail investors think investing is a massive financial commitment and have not set aside enough funds to start.

This is further compounded by their perceived lack of knowledge. In other words, investing is seen as only for the financially savvy, she adds.

About 46 per cent of Singaporeans surveyed by UOB said investment felt too complicated, while 42 per cent were afraid of making the wrong choices.

“Many retail investors worry about missing out on investment opportunities. They may even see the potential in trends such as the growth of China, healthcare and artificial intelligence but are not quite sure how to participate in these,” says Ms Tan.

It’s important for investors to know that they do not need to be financial experts in order to capture long-term market opportunities.

Active investing made accessible

Investing in passively managed funds through affordable robo-advisory platforms is a common starting ground for new investors.

Passive investing aims to match the returns of a given benchmark, while active investing entails frequent buying and selling to outperform the benchmark. Though both have their benefits, active strategies tend to fetch higher returns in certain climates — particularly during market upheavals.

Many believe that active strategies at the retail level are out of reach, reserved only for financial experts or wealthy individuals with access to portfolio managers.

But Ms Tan stresses that everyday investors can own actively managed investment funds.

Recent years have seen a sharp growth in digital wealth services for the masses; some of these platforms partner with asset management firms to offer portfolios that are actively rebalanced based on latest market observations.

UOB’s new investment platform, SimpleInvest, ropes in the expertise of asset managers including Fidelity International, JPMorgan and UBS that collectively manage almost US$10 trillion (S$13.5 trillion) in funds. Retail investors can choose from three portfolios based on their risk appetite and goals.

If there is a major market event, or if the asset manager has a specific view, for instance, the portfolio will be rebalanced as necessary. This differs from passive investments that are typically rebalanced at fixed intervals, either quarterly or twice a year.

“This way, investors do not have to research the entire universe of investments to decide where to put their money. They will also have experts watching over and managing the risk in their investments, as well as making adjustments when market conditions change,” says Ms Tan.

Affordability

But what about fees? Actively managed funds are traditionally more expensive as investors pay for experts to watch over their investments.

But such fees have come down steadily amid digitalisation and stiff industry competition to tap the growing retail market.

Says Ms Tan: “Some may think that getting the experts to watch over their investments is something only the rich can afford to do, and that retail investors can only afford low-cost, robo-advisory platforms. This is not true. We believe investors should be able to invest affordably, while tapping experts who will keep a watchful eye on their investments.”

On the SimpleInvest platform, for example, investors can start investing from $100 with a sales charge of up to 0.8 per cent and no platform fee. This is comparable to many robo-advisory services in the market.

Diversification

As investing continues to be democratised, retail investors are no longer just limited to vanilla asset classes such as stocks and retail bonds.

They can easily access a wide range of equity, fixed-income and multi-asset funds covering global markets and gain exposure to investment megatrends to capture long-term and disruptive market opportunities.

Against this backdrop, investors should explore their options and diversify their portfolios, says Ms Tan.

“Some are used to thinking about investing only in terms of stocks and bonds, while others keep an eye on selected markets they are familiar with. However, with the right solutions, retail investors can actually get access to a wide range of asset classes and global markets.”

Natalie Choy is a journalist at The Business Times.

What is SimpleInvest?

A new investment platform via the UOB Mighty app. Individuals can choose from three solutions that best suit their risk levels and goals:

1. Liquidity

  • Consists of high-quality bonds, government securities and bank deposits

  • For investors seeking to minimise risk while still getting higher returns over deposit interest rates

2. Income

  • Consists of fixed income, equity and multi-asset funds that provide income and moderate long-term capital growth

  • For investors seeking regular income from a globally diversified portfolio

3. Growth

  • Consists of globally diversified equity funds that are actively managed

  • For investors seeking to maximise the potential of growing their capital

Read other articles in our “Rethink Your Wealth” series below.

Empowering mothers to take charge of their finances

Why holistic wealth planning is a must

Insurance: A tool to hedge against life’s risks

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