17 and Financially Free for Poly students: Your Guide to Making Smart Money Moves in Singapore

Looking to make the most of your finances as a Polytechnic student in Singapore? Look no further than “17 and Financially Free for Poly students!” Our comprehensive guide is filled with tips and tricks to help you make smart money moves and achieve financial freedom at just 17 years old. From managing your expenses to investing wisely, we’ve got you covered. Don’t miss out on this must-read resource for any student looking to level up their financial game!

First Step : Doing Part- Time Jobs

There is a culture in Singapore to do Part-time jobs. When you O-levels/N-levels end and you are entering into Polytechnic, you have holidays varying from 4 to 6 months. The average pay is $10/hr which means you earn $80/day. In a month, you can collect close to $1600. Even before entering Polytechnic, if you multiply it by 5 months, you have $8000.

50/30/20 rule is useless at this age

What’s the best way to manage your money? The 50/30/20 budgeting rule may not be the best fit for young students without many responsibilities. Instead, try the 80/20 rule: invest 80% of your income into a stock portfolio and keep the remaining 20% for your needs and wants. By starting to save and invest at a young age, you can build a strong financial portfolio for your future.

So if we use the above reference, if we take 80% of $8000, you are left with $1600 for your needs/wants and the remaining $6400 is for investing.

Hard Truth about Budgeting

If you want to become financially wealthy from a young age, you have to save money. If we take for transport, if we top up $75, it is enough to last for a whole semester. If we are eating lunch in school everyday, we keep it at $5 a day. You are spending $80 a month on food which is spending around $400 dollars a semester. In total, you are just spending to $575($100 added for miscellaneous expense) a semester.

Investing in Stocks

If you’re interested in investing in stocks but feel intimidated by the complexity of finance, don’t worry — you don’t need to be a genius to succeed. By staying informed and playing it safe, you can start building a solid portfolio.

Important Rules to Remember:

1. Don’t follow the crowd: It’s important to make your own decisions when it comes to investing, rather than just following what your friends or peers are doing.
2. Avoid greed: As Warren Buffet famously said, “Be fearful when others are greedy and be greedy when others are fearful.” Don’t let greed cloud your judgement when making investment decisions.
3. Think long term: When you invest in a company, consider their future prospects for the next 5–10 years. Playing the long game can often lead to more successful investments in the end.

Set a monthly budget for stock market investment

By having a clear idea of how much you’re willing to invest, you can make smarter decisions and avoid overspending. Start small and gradually increase your investment as you gain more experience and knowledge about the market.

But why start small? Investing small amounts of money every month is known as dollar-cost averaging and it’s a safe and smart strategy for new investors. The stock market can be unpredictable and volatile in the short term, so by investing a fixed amount each month, you can buy shares at different prices, some high and some low. This helps to average out the cost of your investment and reduce the impact of short-term fluctuations in the stock market.

Plus, investing small amounts regularly can help you develop a habit of investing and benefit from the compounding effect of returns over time. So, why not start with a blue-chip company like Apple? Invest $200 every month and watch your investment grow over time.

Best stocks for beginners

1. S&P 500

S&P 500 chart for the last 10 years

Warren Buffett has famously said a low-cost S&P 500 ETF is the best investment most Americans can make — and choosing individual stocks only if you believe in the company’s potential for long-term growth.

The S&P 500 is an index consisting of about 500 of the largest publicly traded companies in the U.S. Over the last 50 years, its average annual return has been more or less the same as that of the market as a whole — about 10%.

2) Mix of growth and blue-chip companies

1. Apple has a market capitalization of over $2 trillion and has consistently delivered strong financial results, including record revenue and profit in recent years. Moreover, the company also continues to innovate and expand into new markets such as wearables, home automation, and streaming services.
2. Microsoft has a market capitalization of over $2 trillion and is a dominant player in the software industry, particularly with its Office and Windows products. However, the company has also shown growth potential in its cloud computing division, Azure, which has seen significant growth in recent years.
3. Amazon: Amazon is a well-established company and is considered a blue-chip stock. However, the company has also shown impressive growth in recent years, with revenues increasing by over 38% in 2020.
4. Alphabet (Google): Alphabet is a tech giant that has shown impressive growth over the years. However, the company is also considered a blue-chip stock due to its size and stability. In 2020, the company reported revenues of over $180 billion, up from $136 billion in 2016.

Trend Stocks — Is it Risky?

Investing in trend stocks can be tempting, especially when a particular industry is making headlines and seems to be taking the market by storm. Right now the trend is AI and its various applications across different industries. While investing in trend stocks can offer high potential returns, it also comes with high risk. The market for trend stocks can be highly competitive and unpredictable, and it’s difficult to know which companies will emerge as leaders in the industry.

When investing in trend stocks, it’s important to do thorough research and due diligence before making any decisions. This includes analyzing the financials of the company, understanding its competitive advantage, and considering the potential risks and rewards.

Companies like Apple, Microsoft and Nvidia which are both blue-chip and growth companies, have made significant investments in AI and may be good options for investors looking to gain exposure to this trend.