Guide to Investment Planning: What It Is and Why It Is Important

 In 2022, Investment, Retirement Planning

Investment planning is one of the critical plans to help make your life better. Investment planning directs your finances together and lets you consider where you should organize your needs, especially here in Singapore.

A wise investment can improve your financial situation, and it will assist you in obtaining enough finances to realize your ambitions. Before investing, it is critical to plan. People nowadays have a portfolio that includes investments such as equities, gold, bonds, government programs, etc. As a result, well-thought investment planning is what you need to ensure your financial future.

If you are trying to find ways to start planning your investments, you are in the right place.

What is Investment Planning?

The process of supporting your long-term financial goals with your financial resources is investment planning. Financial planning includes investment planning as a critical component, and one cannot exist without the other.[i]

Investment planning is the act of setting financial goals and putting them into a strategy. Determining your goals and objectives is the first step in investment planning, and we must match those objectives to our financial resources. So, depending on your financial resources, you can invest in these aspects to achieve your goals and objectives.2

Three Benefits of Investment Planning3

It Gives You A Better Idea of Where Your Money Goes

A proper investment plan takes into account your income, expenses, existing assets and liabilities. With proper planning, you can better keep track of where your money goes every month, and have a better picture of your current net worth, and cash flow.

It Ensures That You Have Sufficient Liquidity

While it is true that investment planning should be for a long time horizon, it is also advisable to not over-invest such that your short term needs are not taken into account. One may need to have an amount ready for emergency purposes. Hence, it is recommended that you have sufficient liquidity in your investments. The rule of thumb is to set aside 3 to 6 months of your monthly salary as cash for emergency purposes.

It Improves Your Financial Literacy

Investment planning helps in gaining a better understanding of your existing financial status. It is not just about the “end goal” of being financially free. The rigor of investment planning is an exercise on its own to help improve one’s financial literacy, and a better understanding of one’s current financial position, risk appetite, time horizon, and a greater appreciation of various investment instruments.

A Basic Checklist When Starting Your Investment Planning Journey

Begin by evaluating your risk appetite.4

Understanding your risk appetite or risk tolerance is crucial for an investor. Investing, especially in the stock markets, may be extremely volatile. There are various investment instruments that will suit different risk profiles. As a rule of thumb, the longer your time horizon, and the lower the need for liquidity, the higher your ability to take risk. However, one’s willingness to take risk may be subjective. It is recommended to understand the difference between risk and return, and to assess your own risk tolerance using this quiz provided by the CPF board.

Assess the current financial situation

This includes a thorough understanding of the investor’s current liabilities, assets, cashflow. For instance, an investor with too much high interest liabilities may consider clearing their debts first before starting to invest. Also, an investor who may not even have enough emergency funds should probably work on that before starting to invest.  Understanding your own financial situation, sets the course for developing an investment strategy.

Assess your investment objectives.5

It is important to know what your ultimate goal with investing is. For some Singaporeans, investing is a way to achieve financial freedom and retire early, and this movement is known as F.I.R.E (Financial Independence, Retire Early). The end goal of this movement is to essentially generate enough passive income from your investments such that it exceeds your expenses, or even your salary.

In order to calculate how much you need to retire, one can use various rules of thumb for this. According to this article, the amount needed to achieve F.I.R.E is 25 times your annual expenses.

So for instance, if one has a monthly expense of $3,000 a month, which adds up to $36,000 a year, the amount needed to be financially free based on the 25X rule would be $900,000.

Consider the suitable assets after determining how much you need.

You can start thinking about what assets to invest in now that you have a clear goal in mind (the amount you’ll need to retire and the time frame needed to achieve that goal).

Using one’s risk-return profile, time horizon, and liquidity needs, an investor can then develop an asset allocation strategy, that selects from various asset classes, including stocks, bonds, cash and alternative investments.  The asset allocation strategy is typically based on the investor’s current situation and goals, and is usually adjusted as life changes occur.

An investor may also consider various insurance endowment plans that assist in accummulating assets over a certain period while also offering some essential insurance protection, such as death benefits and critical illness or Total and Permanent Disability coverage.

Unit trusts are actively managed investment vehicles, whereby your money is pooled with money from other investors and invested in a portfolio of assets according to the fund’s stated investment objective and approach.

Manage your debt to make your life better.

You must never enable your monthly commitments (debt repayments) to surpass 30% of your monthly income as a rule of thumb. If your debt-to-income ratio is higher than this, you should focus on paying off your debt before beginning to invest. At the same time, pay off your debts and set aside money for savings and insurance. It’s also worth noting that when you take out a loan to buy a house, the Total Debt Servicing Ratio (TDSR) is set at 55%.6 It means that your total monthly debt, including your mortgage, credit cards, student loans, and other debts, cannot exceed 55% of your monthly income.

List of Investment Opportunities in Singapore7

Investors best know Singapore as one of Asia’s greatest trading hubs. The country offers significant opportunities for anyone looking to invest in a growing market in Southeast Asia. There are many investment planning options in Singapore.

ETFs (Exchange Traded Funds)

ETFs, or exchange-traded funds, have been popular in recent years. They’re also suitable for beginning investors who diversify their stock portfolio with smaller investments.

Mutual Funds (MFs)

Mutual funds are investments that pool money from multiple investors and hold various securities such as bonds, stocks, money market instruments, and other assets. On the other hand, a unit trust fund is founded under a trust deed, and the investor is the trust’s effective beneficiary. They a wide variety and professionally managed portfolios for small and individual investors. They levy annual fees known as expense ratios and commissions in some situations, which can have an impact on overall results.

Unit Trust Funds

Property, securities, mortgages, and cash equivalents are common types of investments managed by unit trust funds, and they also allow access to a wide range of securities. Unit trusts are open-ended investment opportunities divided into units with varying prices. New investments and withdrawals to and from an open-ended fund are allowed.

SSBs (Singapore Saving Bonds) and Corporate Bonds (CB)

If you’re looking for capital preservation and a stable source of income, bonds are a great option. You “lend” money to a firm (CB) or the government (SSB) for a set period at a guaranteed interest rate when you buy a bond. Interest is paid every 6 months or semi-annually and your money is usually refunded at the end of the contract period. Bonds often provide more significant returns than bank deposits, and you may be able to profit from capital gains if you sell them for more than you paid for them.

Questions to Ask Yourself Ahead of Investment Planning

Are you insured enough?

Before you begin investing, you need first to address your insurance requirements. A hospitalization plan and a critical illness plan are examples of health insurance coverage. It’s crucial to remember that having adequate insurance covers you and your family. This is because any terrible sickness that they have will have an impact on your emotional well-being as well as your financial situation.

Even the best financial strategies can backfire if your insurance needs aren’t met first.

What Are Your Investment Goals?

Before you start investing, it’s a good idea to figure out what you want to get out of it. It is critical since your investment strategy will eventually define where you should put your money. If you are risk adverse, for example, you should choose long-term investment products like the CPF Special Account and bonds like Singapore Savings Bonds or highly graded corporate bonds. You can also look into alternative investment products that could give you more significant returns depending on your risk level.

Have a long-term perspective for your assets and consider dollar-cost averaging as an approach to lessen risk. This is why it is preferable to begin investing when you are younger since it allows you to consolidate your profits over a more extended period.

How much income do you have to invest?

By investing, you are essentially putting money aside that you have now to ensure that you will have sufficient money tomorrow. While this encourages the vital principle of delayed gratification, you must still ensure that your immediate needs are met. Always make sure you have enough cash on hand in an emergency. This equates to six to nine months of monthly costs for most people.

Monthly Investing or Lump Sum Investing?

Should you invest all of your money at once in a lump amount or over some time? This is one of the most critical questions that any new investor should ask. What you invest in may be determined by your response to this question.

If you were investing a lump sum, you’d want to be sure you picked the correct assets that would pay off in the long run. It could take the shape of choosing the right stocks and properties to invest in. These investors are frequently attempting to time the market, which involves understanding how to do so. If you’re planning a monthly investment, it suggests you’re prepared to ride out the market’s short-term volatility. You’ll use a dollar-cost averaging strategy, which means you’ll buy more stocks when prices are low and fewer equities when they’re high.

What is your current level of investment knowledge?

It’s natural to feel hesitant about which investments to make, especially when you’re initially starting. Nobody is born knowing everything there is to know about something. Be honest with yourself. Consider approaching a financial adviser first if your expertise is inadequate. They can assist you in learning the basics of investing while also allowing you to expand your knowledge over time.

Begin with a modest project. It’s pointless to invest a considerable sum of money if you’re not confident about the investments you’re making. You should check in with your financial advisor frequently to see how your assets are doing. You may quickly build up your investment expertise for the future by speaking with them often.

Learning Starts Now

According to Lorna Tan, head of financial planning literacy of DBS Bank, budgeting, credit management, insurance, investment, home planning, retirement, and estate planning are all part of a comprehensive financial plan.

In other words, this is about the big picture of your finances.

Investment planning saves you the time of worrying. Since it gives you an idea of where your assets should go and how you should maintain their growth, it delivers you various insights on how to improve the quality of your life. Given the ever-changing and evolving daily needs, it will always be up to you how you will go along this path for the better. More investment planning should be in the picture if you have a family to sustain.

The best time to start is now.

Important notes:

The views and opinions expressed in this article are solely that of the author and do not reflect the opinion of Professional Investment Advisory Services Pte Ltd. The information contained in this article is for general information only and does not constitute the provision of financial advisory services. The precise terms, conditions and exclusions of any services or products mentioned are specified in their respective policy contracts. For customized advice to suit your specific needs, consult an Apex Financial Advisor Representative

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apex Private Wealth Management is an authorised group of Financial Adviser representatives from Professional Investment Advisory Services Pte Ltd



2 Elearnmarkets. (2022, January 21). Investment Planning: How it works to make better financial life. Elearnmarkets.

HSBC. (n.d.). Strategic financial planning. HSBC.

3Manulife. (n.d.). Financial Planning – a 101 Guide. Manulife.

4Sen, L. (2021, July 25). Building a financial plan? You may already be on your way. The Straits Times.

5Sen, L. (2021, August 15). Financial planning is key to facing everyday challenges. The Straits Times.

6Smart Funding. (n.d.). Investment Opportunities in Singapore. Smart Funding.

7Standard Chartered Bank (Singapore) Limited. (n.d.). 6 investment options to help you maximise your savings. Standard Chartered Bank (Singapore) Limited.


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