The little one woke up 3 times last night. Sleep regression is very real argh! If you are busy with your little one too, there is little time left to create and monitor an investment strategy for them. I understand and here’s an easy method to invest with your child.
Why invest with your child now?
When you invest together with your child, you impart the importance of it to them. Let them know which big brands they own and let them feel proud of it! By investing as early as possible, the investment returns you make with your child can compound more. Compounding is to generate returns on returns and it is a proven method to exponentially growing your savings.
How much to invests?
I used to order diapers in small quantities just to explore which brand and size suits my little one. Investing can also be in small quantities from as little as $100/month. With a small starting amount, you can sleep peacefully. Most parents that I have surveyed save around $300/mth for their kid. There is no lock-in period for investing and you can modify the monthly contributions along the journey.
If you would like to manage your own investments
If you have no preference on which shares to buy, we suggest you consider investing into the Straits Times Index. As the saying goes, never put your eggs in 1 basket and by investing into the index, you effectively buy all 30 blue chips shares of Singapore like DBS and Singtel. There is no need to know stock analysis or know how to read charts.
However, investing in a diversified way does not shelter your investments from losses. There may be periods of poor performances and we recommend that you look long term and learn how to keep your greed and fear in check.
OCBC Blue Chip Investment Plan (BCIP): Nikko AM Singapore STI ETF
If you have an OCBC banking account online, you may set up a personal BCIP. For a joint account with child, you will need to submit
1) Account opening form for BCIP-Joint with child
2) Your IC
3) Child’s BC
*BCIP charges $5/month
OCBC will take instructions solely you until your child reaches the age of 18years old.
Phillip Securities Junior Shares Builders Plan (SBP): SPDR Straits Times ETF
If you do not conveniently have an OCBC banking account, you may look for Junior Shares Builders Plan (SBP) by Phillip Securities. As a brokerage firm, Phillip securities offers more share counter choices to do your SBP. At age of 18, Phillip Securities allows you to transfer full ownership to your child without any charges.
You will need to submit
1) Account opening form (Tick Joint minor account)
2) Your IC
3) Child’s BC
4) GIRO form
*SBP charges $6/month
If you would like advice on how to build your portfolio
Investing diligently every month can achieve a dollar cost averaging strategy which can improve your long term return. Once your portfolio becomes large (perhaps after a few years), the dollar cost averaging losses effect and it becomes important to practise asset allocation.
In a landmark paper published in 1986, “Determinants of Portfolio Performance,” Gary P. Brinson, L. Randolph Hood, and Gilbert L. Beebower concluded that asset allocation is the primary determinant of a portfolio’s return variability, with security selection and market-timing playing minor roles.
A qualified investment adviser should help you to
- choose the right mix of asset classes in your portfolio
- carry out portfolio rebalancing
- manage your expectations well when certain asset classes perform poorly
Have you created an investment plan with your child? We would love to hear from you!
