Steps to take to accumulate more wealth

Some have asked how I had accumulated $200,000 at a young age. Below were some steps I took.

Save a significant portion of salary

Don’t live a paycheck to paycheck lifestyle, save a portion of your salary for investments and future consumption.

Don’t put too much Money in Bank accounts and FD

I hate putting a lot of money in saving accounts because the interest rates of these accounts are very low. The only advantage saving accounts have is the liquidity it provides. I suggest to place approximately $10,000 in these saving accounts unless a major expense is coming. This is because $10,000 equates to approximately 3 months expenses incurred by ordinary Singaporeans.

The rest of the money should be placed in Singapore Saving Bonds (SSB) or stocks. This is because the SSB provides a higher interest during the initial years and this interest becomes higher if you keep it with government longer. Furthermore, the SSB is relatively liquid where you are able to make a withdrawal in one month. This will be handy in situations where you need the money. Also, there are no conditions we have to meet to enjoy these returns unlike the OCBC 360 and UOB account. 

For starters, I will recommend Singaporeans set aside some money to bid for SSB once a year. Fixed Deposits in banks are a definite no no given the current climate. They lock you up for a period of time and offer rates only in the region of SSB's. I will only consider SGD denominated FD if the interest offered is at least 2% per year.

Buy Term and Avoid Whole Life/Endowment/ILP

I have shown how buying a term policy and investing the rest in CPF and STI ETF is likely to yield a better return than whole life. You can read it here. This method is likely to empower you to accumulate more wealth than insurance plans.

Investing when Young

This is very important. Investing does not mean putting money in bank FDs or insurance policies. It is to invest in the stock market.

Yes, the stock market is a casino to the layman. However, there is still a way to grow one's wealth in the stock market. That is via the SPDR STI ETF or Nikko AM ETF. Both are index funds and are good instruments to help grow your wealth.

For individuals with a sound understanding in finance and accounting, it is likely the stock market will not be a casino to you. This is because the wealth of experience and knowledge you have accumulated will help discern between the value traps and stocks with true value. If discerning these stocks are still a challenge, it is advisable to stick to the 2 ETFs mentioned above.