There are so many different types of investors and investment methods and vehicles in financial market, it may be daunting sometimes. For the risk-averse, it seems like risk lurks at every corner and is just waiting to pounce.
For those not wanting to invest in volatile markets and trade stocks, forex, crypto, and other traditional high-risk assets but still want to grow and build their wealth, investing in a regular savings plan can help you achieve just that.
What is a regular savings plan?
A regular savings plan is a disciplined method that requires regular monthly input of an equal amount of money into specific funds, REITs, and stocks of your choosing. The goal of this plan is to make money from dollar-cost averaging, an investment method that protects investors from short-term market volatility by riding out financial markets and profiting off of them in the long-term.
5 benefits of regular savings plan
- You can have a plan tailored to your risk appetite
One of the best things about a regular investment plan is that you can have it tailored exactly to meet your needs and to fit your risk appetite. This is because many banks and investment platforms allow you to choose from a selection of plans, ranging from low to medium to high risk. You will never have to take chances with a plan you are not comfortable with, yet your capital will also have the opportunity to grow steadily.
- You can start small
Many regular savings plans in Singapore allow you to start small, investing in as little as $50 or $100 a month. You can easily invest more at a time, depending on your bank. Starting small has many benefits: you can build your wealth slowly while still having sufficient cashflow. It will also make it easier to invest monthly, for practical and psychological reasons, when your monthly pay-check arrives.
- You can practise financial discipline
Stock, forex, and crypto trading is all about strategy, whereas savings plans are more about discipline. As a long-term financial journey, investors need to have a certain amount of discipline to invest the same amount of money each month come rain or shine. Of course, strategic input is also needed, and you will need to understand the differences between each portfolio and manage your risk appetite accordingly. However, there is a big focus on honing your skills in financial discipline, which is a great thing to instil in yourself.
- Regular savings plans reduce your taxable income
Another good thing about regular savings plans is that often times, putting money into your account can reduce your net taxable income. Money in your savings portfolio is essentially sheltered from tax until you withdraw them again. Many people like to withdraw these funds only when they’ve grown sufficiently years down the line. Another advantage of that is that when you finally do withdraw your funds after you’ve retired, you’re more likely to be at a lower tax bracket and therefore have to pay lower taxes.
- There is still room for capital growth
Many believe that regular savings plan are only for the risk-averse as they do not offer much capital growth but rather focus on capital perseverance. However, that could not be further from the truth. Many savings plans offer great potential for profits through aggressive plans, and investors can and do make sizable profits from them.
If you are investing in a plan, you can let your fund advisor know your intentions and they will recommend more aggressive portfolios for you to take on. Just remember that there will be greater risk involved and higher volatility of markets, therefore you should be aware that losses could be possible.
No matter which bank you choose, always remember that it is a reputable and reliable one, authorised by the Monetary Authority of Singapore (MAS). This way, you can ensure that your capital is safe and in good hands. For more information on regular savings plan and how to open one, you can visit Saxo Bank.