Chapter 1: Intro to Investment

All of us have our own goals in life, even though the goal may be just as simple as buying a watch on the next pay rise. The question pondering many bewildered working adults - how are we going to achieve them all with the limited resources we have got?

Investment not only serves to help us achieve the financial goals, it lets our money work hard for us, instead of the other way round. What is the future value of present 2 dollars in the next decade if you invest it? You will be amazed. Other than that, investment is also a good way to fight inflation, has this thought ever brush across your mind? Why is a cup of coffee which only cost 50₵, in our primary school days, cost us as $0.80 to $1.00 today. This is inflation at work.

Albert Einstein once said that one of the greatest forces in the universe is the power of compounding. You probably learned that lesson as a child, which is putting away some of your allowance and watching your savings grow. One method to help us understand the power of compounding better is by "the rule of 72". In finance, the rule of 72 refers to a method for estimating an investment's doubling time. As most of the interests are calculated on a compounding basis, this rule helps us have a very fast and rather accurate estimation on the effect of different interest rate.

So how does the rule of 72 work to double the worthiness of your cash?

For instance, if you were to invest $100 with compounding interest at a rate of 9% per annum, the "rule of 72" gives 72/9 = 8 years required for the investment to be worth $200; an exact calculation gives 8.0432 years. Thus can you imagine the power of investing and compound interest? By starting early, one can actually be a millionaire through wise investing and power of compounding. Refer to the following article on how setting aside a small sum a month to become a millionaire.

http://www.investopedia.com/articles/05/032105.asp. BE WARE, COMPONDING INTEREST CAN WORK LIKE A DOUBLE EDGE SWORD, IF YOU HAPPENS TO OWN BANKS MONEY IN THE FORM OF CREDIT CARD DEBTS, IT CAN REALLY BE A NIGHTMARE IF YOU LET IT COMPOUND!
For further reading, refer to Wikipedia, http://en.wikipedia.org/wiki/Rule_of_72.

On the other hand, if one decides to leave his/her money in banks, the value of your money actually shrinks! Opportunity cost! For those who takes econs. This is due to the fact that most banks offer an interest rate of only 0.25~1% p.a. whereas for inflation rates this year, the official forecasted figure by MAS is 1% to 2%, which means in terms of purchasing power, your money is shrinking in the bank.
Since, historically STI is proven to be able to generate average returns as high as 7%, you can actually double your money in less than 10 years through astute investing.

"Watch your money grow!" Insightful investing with acute judgement will pave a way to your future financial success.

"But how do we get there?" In the next chapter, we will discuss about the various types of investment instruments available.

For your "interest", we had gone to the various bank websites to gather the following informations on the latest basic savings interest rate from the few banks in the local market:
DBS/POSB passbook savings: 0.25%
http://www.dbs.com/ratesonline/dddd.html
OCBC: website down... estimated to be 0.25%
UOB passbook savings: 0.25%
http://www.uobgroup.com/pages/resources/ratesfees/shared/rates_sgd_deposit.htm
HSBC passbook savings: 0.125%
http://www.hsbc.com.sg/1/2/personal/deposits/singapore-dollar-deposit-rates

Chapter 2: Different instruments of investment

Generally assets can be classified into 2 types, real assets and financial assets. Real Assets consist of land, buildings, machines and workers that are used to produce goods and services for the economy. The creation of real assets leads to improvement in the standard of living, as there will be more goods and services available to everyone.

On the other hand, financial assets (also known as paper assists) consist stocks, bonds, futures, options, etc. They channel funds from the saving society to the investing segment of society. We can view financial assets as the means to by which investors hold their claim on real assets.

Types of Investment Assets

1. Money Market Securities

These are debt instruments issued by governments, financial institutions and corporations with maturities of less than a year. Due to their relatively short maturity, money market securities have relatively low risk. However, the minimum denominations of money market securities are usually relatively large at S$250,000 and above.

1a. Treasury Bills (T-Bill)

Money markets issued by governments are Treasury bills. There are short-term government securities (for one year or less) issued by government to borrow money from the investing public to fund government expenditure. They are safest type of investments and are generally considered to be risk-free. Investing in a Treasury bill is equivalent to lending money to a sovereign government.

The yield on Treasury bills is usually used as a benchmark for risk-free rate. Treasury bills are usually on a discounted basis. This means that investors pay an amount less than the face value, but will receive the face value at maturity. The difference between the face value and the purchase price represent the interest earned on Treasury bills, and is used to calculate the yield on such securities.

1b. Bank's Acceptance and Certificate of Deposit (CD)

Money market securities issued by financial institutions include banker's acceptance and certificate of deposit; Banker's acceptance is issued to facilitate international commercial trade transactions, as it represents a claim on the issuing bank for a specific amount on a specific date. CD is a certificate issued by bank that indicates that a specific sum of money has been deposited with the bank. It bears a maturity date and a specific interest rate.

1c Commercial Paper

This refers to short-dated unsecured promissory note issued by corporation. Like T-bill and bank's acceptance, it is issued at a discount to face value. Owing to the unsecured nature of this security, only corporations with strong credit rating are able to issue commercial papers.

1d Repurchase Agreement

One of the ways in which secondary trading in money market securities takes place is through a repurchase agreement (commonly known as repo). A repo is the sale of a money market security with a specified price on a future date. In short, it is a collateralised short-term loan, where the collateral is the money market security. The yield on repo can be calculated using the difference between the sales and purchasing price.

1e Bank deposits

These are time or fixed deposits with banks for fixed periods with fixed interest rates for the period. Generally, the longer the deposit period, the higher will be the interest rate. As all banks in Singapore are licensed and regulated by the Monetary Authority of Singapore, there is very little risk of loss of principal and interest. Time deposits do not provide a good inflation hedge, as the stated interest rates offered by banks at the inception do not change over the deposit period in response to changes in the market interest rates. Lastly there are penalties upon early or premature withdrawal, such as the loss of interest.

2. Fixed Income Securities

Fixed Income Securities are debt instruments in which the issuer promises to repay to the lender the amount borrowed plus interest over some specified period of time more than a year. Fixed Income Securities can be regarded as IOUs (I owe you) issued by companies or governments to raise funds. The face value of the fixed income security is known as the principal while the periodic interest payment is known as the coupon interest.
Fixed income securities generally stress current income and offer modest appreciation in value. It there is an active secondary market; they can be bought and sold at any time before maturity. This marketability gives the investors the opportunity to realise capital gains since bond prices may rise if interest fall. However, if the secondary market is inactive, the investor's money is locked up for the full life span of the security.

Fixed income securities may be classified by the currency in which it is issued, or by the issuers. Domestic fixed income security is denominated in the local currency while foreign-currency denominated fixed income security is denominated in a foreign currency. Euro band is an international bond dominated in currency not native to the country in which it is issued. It can be categorised according to the currency in which it is issued. Eurodollar is denominated in US dollar and sold outside the United States to non-US investors. Euro yen is denominated in Japanese Yen and sold outside Japan to non-Japanese investors. Yankee bonds are US dollar fixed income securities sold in the United States, but issued by a non-US corporation or foreign government.

Issuers of fixed income security may be governments, statutory boards, supra-nationals or corporations. The yield on fixed income security is dependent on the maturity of the issue and the credit rating of the issuer. Generally, the yield on fixed income security tends to be higher for issues with longer maturity and/or lower credit rating.

3. Equity Investments

Equity represents ownership in a corporation. Equities have the following features:
- Equity investors are entitled to all residue claims on the income and assets of the corporation, after all other creditors have been paid I full.
- Indefinite tenure whereby equity assumed to have perpetual lifespan.
- Limited liability in the sense that the maximum amount that an equity holder can lose in the event of a corporation failure is its paid-up capital. It the share is bought in the secondary market, the maximum loss is the amount paid for the shares.
- Equity investors are entitled to vote at annual general meetings or extraordinary meetings.

Equity investments have higher price volatility compared to money market or fixed income security. This is because the cash flow associated with the former is more volatile than the latter. The cash flows accruing to investors on money market or fixed income securities is contractual. The cash flow pattern associated with equity investment is volatile, as investors are entitled to the residue claims.

Two main kinds of shares

3a Preferred Shares

Preferred shares are a hybrid security. This is because a preferred share has features of fixed income security and equity. Preferred shares are shares which give the holder a right to a fixed dividend provided enough profit has been made to cover it.

3b Ordinary Shares

Companies that go public issue ordinary shares to the investing public. When an investor holds an ordinary share of a company, he is a shareholder. As a shareholder, an investor owns part of the company and he is entitled to a portion of the profits (after the payment of debts, corporate taxes and other expenses) in the form of a dividend.

4 Derivative Instruments

Derivative instruments are financial assets whose value is derived from an underlying asset- equity, stock market index, interest rate, fixed-income security, commodity- hence the term derivatives. For example, a stock index future is linked to the performance of a specified stock market. Derivative instruments include options, warrants, and futures.

4a Options

Investors can buy a right to purchase or sell a security at a future date.
Options entitled the holders the right, but not the obligation, to buy or sell an asset within a certain period at a specified price called the strike price. An option is not issued by the company, but by investors seeking to trade in claims on the asset.
There are two types of options. Call option is an option to buy an asset within a certain period at a specified price called the strike price. Put option is an option to sell an asset within a certain period at a specified called the strike price.
An option is bought for a price or a premium. Option prices are directly tied to the prices of the common stock they apply to. The life of an option may vary but the common durations adapted are three, six and nine months. Institutions for longer periods, from one to five years, can also buy over-the-counter options.

4b Warrants

Known as transferable subscription right (TSR), is a special type of call option issued by corporation that gives the holder the right to acquire equity at a specified price within a designated time period, typically several years. Warrants are seldom issued on their own, but are often provided free as an attraction to rights or loan stocks issued by a company to raise extra capital. The warrants are usually detached from the loan stock and traded separately in the securities market. The options attached to the warrants can be exercised by subscribing for ordinary shares in cash, by exchanging the loan stock or by a combination of both.

4c Futures

A contract where a buyer and seller are obligated to buy or sell an asset within a specified time period at a specified price. They differ from options in that there is an obligation to transact regardless of future price movement. Futures contracts are available on stock market indices, commodities, fixed income security, interest rate or currency.
In particular, stock index are future contracts based on a particular share price index constructed to measure the overall price movement of a stock market.
The trading of index futures involves standardised contracts to buy or sell a hypothetical portfolio of all stocks included in the index at some specified future date at a price agrees at the time of the deal.
The buyers agree to take delivery and to make cash payment at expiry date, and the sellers agree to make delivery at the same time. The settlement of the contracts Is made in cash without the actual delivery of the securities covered by the index. The profit derived from trading stock with index futures is determined by comparing the original contract value with the contract value at the time of settlement.

5 Property

Property is a good form of investment as in the past experience that on the average in most countries, real estate is a very good hedge against inflation because property values and the income from properties rise to keep pace with inflation.
Real estate values to appreciate over time, although this is not guaranteed. The use of mortgages and leverages enable the investor to use small amounts of cash to gain control of large investments and earn large returns on the money invested.

6 Unit Trust

A unit trust is a pool of co-mingled funds contributed by many investors kept in trust by a trustee and managed by a professional fund manager.
The Registrar of Companies and Businesses is the authority which grants approval to trust deeds by which unit trusts are established. This grants approval enables a trustee to hold the pool of money and assets in trust on behalf of all investors. The pool is managed by a third party, the investment manager. The fund manager manages the portfolios of investments and operates the market for the units. The unit trust is essentially a three-way arrangement among investors, the fund manager and the trustee.
Investors who are interested in receiving the benefit of professional portfolio management but who do not have the sufficient funds and/or time to purchase a diversified mix of securities would find investing in unit trust attractive.
It is important that the investment objectives of the unit trust chosen match those of the investor. Unit trusts are required to state their investment objectives clearly on the prospectus which every investor should acquire before buying. The types of assets, which may be bought by the fund manager, are also specified in the objectives of the unit trust contained in the trust deed.
Among the different types of unit trust, it can be further classified by their asset class. Because the fact that unit trust can invest in almost any investment class under the universe, it is important to know the different risk associated with different unit trusts due to their different underlying assets. Basically a unit trust or "fund" that invest mainly in stocks will have a higher risk while a fund that invest in bonds and other fix income instruments will be relatively safer. Asides from the underlying asset class, the geographic exposure of the fund will also play a role in determining the risk exposure of the fund. Example will be a fund that invests solely in Thailand, it will be exposed to the risk unique to that country over and above the other risks experienced by funds in that region, be it ASEAN or Asia ex-Japan, and thus will be more risky. A general guide on the different risk level of different risk level of fund can be found on the following graph.

7 Life Insurance

Some life insurance products can also serve as savings/investment media. There are basically three different classifications of life insurance policies: Term Insurance, whole life insurance and endowment insurance. BUT ALWAYS BE CLEAR ABOUT THE TERMS AND CONDITIONS OF THE POLICY, BE WARE OF THE HIDDEN COSTS.

8 Annuities

An annuity is a series of payments guaranteed for a number of years or over a lifetime.

8a Immediate annuity

An immediate annuity is a contract under which payments to the annuitant begin as soon as it is purchased. It is always a single premium.

8b Deferred annuity

A deferred annuity, in contrast is one which the payments to the annuitant begin at some future date. The date is specified in the contract or at the annuitant's option. The amount the annuitant will periodically receive depends on his or her contributions, the interest earned on them, the annuitant's sex, and the annuitant's age when payments begin. Deferred annuities may be purchased with either single premiums or periodically premiums.

Chapter 3: Different Channels to Invest

After knowing the different types of investment, you will probably want to know where you can go to to start investing. The following is about the different channels and platform that you can invest.

1. Stock brokers

You buy stock through a brokerage firm. A brokerage firm is a business licensed by the government to trade securities for investors. Brokerage firms join different stock exchanges and abide by their rules as well as the rules laid down by the Singapore Exchange, or SGX.

Two types of brokerage firms

For illustration purpose, there are basically two distinct types of brokerage firms, namely full service firms and discount brokerage firms. Here's a description of each.

Full service Brokerage Firms

These are the largest, best-known brokerage firms in the country, who spend millions of dollars a year advertising their names. Examples are Morgan Stanley, Goldman Sachs, Merill Lynch, Paine Webber, and the like. They are all the same. The two words that should immediately come to the minds of investors when they hear the names of full service brokerage firms are expensive and often misleading. Other than that, they are great. In most full-service brokerage firms, there are three divisions, namely investment banking division, research division, and retail division. In general, investment banking division is what helps young companies make their initial public offering of stock and sell additional share in secondary offering; research division analyzes and writes evaluations, fact sheets, and periodic report on publicly traded companies; and retail division is what you and I deal with. It comprised of stockbrokers, who are really just sales rep, who call their clients and urge them to trade certain stocks. They charge large commissions that they split with the brokerage firm. The justification for the large commissions is that you are paying for all the research the company does on your behalf. But as researches can be misleading sometimes and are not always accurate, it may not be such a good idea to trade using this platform.

Discount brokerage firms

As the name implies, deep discount brokerage firms charge lower commission that those charge by full service brokerage firms. They exist only for the purpose of carrying out stock trades. Investors don't get much research assistance. Discounters are ideal for investors who conduct their own research and merely need a broker to place their trades.
Online brokerage houses

Online brokerage houses

In the resent years online trading has been the hottest new babe in the market. It offers the lowest discount with the easiest accessibility, you only need to be familiar with the internet to trade. Asides from the ease to trade, often online trading platforms usually also comes with charts and other tools to aid traders to make better informed decisions.

Place Orders

Once you have chosen a platform and you have got money in your account, you're ready to invest. This section explains the bid, ask and spread; discusses different types of orders available to you; and show how to place orders by computer.

Bid, Ask and Spread

The bid is the highest quoted price that buyers are willing to pay for a security at any specific moment. In the same specific moment, the ask is the lowest quoted price that sellers are willing to accept for the security. The bid is the price you get when you sell the stock, the ask is the price you pay to buy the stock. The spread is the difference between the two numbers and is kept by a market dealer who's called a "market maker" on the OTC.

Order

There are three types of orders namely market order, limit order, and stop order.
A market order is very easy to understand. It instructs your broker to buy a security at the current ask price. That's it. For instance, say SIA is trading at $15.50 per share and you place a market order for 100 shares. If you don't buy at $15.50, you'll probably pick them up somewhere between $15.25 and $15.75.

A limit order instructs your broker to buy or sell a security at a price you specify or better. That means if you say to sell a stock at $10, your broker will sell either at $10 or at a higher price. Of you say to buy a stock at $20, your broker will buy either at $20 or at a lower price. Limit order and stop orders have a time period associated with them. When you place a limit order, it is either a day order or a good-till-cancelled (GTC) order. A day order expires at the end of the current trading day regardless of whether or not its conditions were met. A GTC order remains open until its conditions are met, which might never happen.

A stop order becomes a market order when a price you specify is reached. Like limit orders, stop orders are either good for the day or good-till-cancelled. If you own a stock and instruct your broker to sell it at current price lower than it currently trades for, that's called a stop loss because you're stopping your potential loss and protecting the profit you've already gained. When the price you specify in a stop order is reached, the stop order becomes a market order. That means your broker will then trade the stock at its current price.

Buying stock online

If you have access to the internet, you should try online trading. It's convenient, plus it's easy to specify exactly what you want to do by checking boxes and clicking buttons. It's also a way to save money. Most brokers give discounts for online order because they are cheap to fulfil. Nobody needs to answer the phone, fill anything out, or otherwise deal with you. You just go to the website and do it yourself. An additional bonus is that you can monitor your accounts from anywhere in the world and take immediate action.

See how simple it is? Just select the buy or sell button, enter the number of shares and the symbol, then push the market or limit order button. The market order button produces an order confirmation screen. The limit order buttons produces a screen where you select the type of limit order you want, your target price, and whether the order is good for the day or good until cancelled.
Can you still believe that people are still paying full service brokers to do this for them.

Chapter 4: Rational Investing with Portfolio Investment

One and one reason that we NEED to diversify our investments is that simply no one can afford to lose all his money. In our opinion, there's only 2 ways to avoid that, 1st is never to time the market wrongly or be wrong on a bet.

This is the performance of the US DOW JONES INDUSTRIAL AVERAGE taken from Yahoo Finance as of 12 Sept. As we can see, the market is full of ups and downs, even with all the charting tools, it's almost impossible to say with a 100% certainty that whether the market is going to rise or fall. Therefore are you willing to bet all your money on just any stock? Are you so sure that nothing bad will happen to the market? What if events like 911 or another terrorist attack were to strike again in the US, can you afford to be wrong just once in your life time if you are going to invest all your money on a single investment?

The 2nd option is a more practical way and that is to diversify, as the old saying goes, never put all the eggs in the same basket. Just like you don't want to have all your eggs broken when the only basket drops, you won't want to lose all your hard accumulated capitals to some bad timing in the market. Diversification will limit the potential downside of your investment and if planed properly is able to withstand market turbulences and give you the desired returns at the end of day.
One simple diversified way of investing is simply the portfolio method.

What is portfolio? It's not a port-of-Oreo biscuits... it's a basket of diff investments instruments. Think of it as a pie and recall the different investment instruments we talked about in the Chapter 2, now the pie has different pieces

Numerical illustration of portfolio diversification in the long run:

Long long time ago, on this small island in the southern sea of china, there's this guy named Dick. Dick is not very smart, when someone told him that investment can earn him big $ and him not been very smart, trusted whatever people told him. So Dick happily and blindly picks 4 investments, investment A, B, C and D, putting $2000 in each investment.

Over the next 20 yrs time he realised he did not chose wisely, can't really blame him, I am sure a lot of people out there have this problem.

On a yearly basis, Investment A was able to generate 10% interest, Investment B earned him 0% interest, Investment C lost 10% interest yearly and worst, Investment D generated -20% returns annually.

Do you think he manage to earn any money? What is the return/loss for Dick during the 20 yr's time? Please take out your calculators. Come on don't be lazy, the answer
is as follow:

$2,000(1.00 + 0.10)^20 + $2,000 + $2,000(1.00 - 0.10)^20 + $2,000(1.00 - 0.20)^20

= $13,455 + $2,000 + $243 + $23

= $15,721

As you can see for yourselves, he actually made decent gain!

The above is pure illustration only. No stock or unit trust can give the consistent 10% return like investment A, neither will any investment that loss 10% to 20% consistently likely to be in the market for 20 years. Only Investment B is likely to exist- fix deposit with interest rate same as that of inflation...

The numerical example shows us how diversification can help to reduce risk. Even if one happens to pick a losing investment, diversification is able to limit ones' potential down side. Alongside with power of compounding, the losing investment's damage can be limited while the wining investments can do wonder for your finance.

Therefore the rule of thumb here is to invest across different mix of investment vehicles. A sample diversified unit trust portfolio is shown in the following link by fundsupermart: https://secure.fundsupermart.com/main/investmentportfolio/investmentportfolio.tpl

Observe the different mix of asset class and geographic locations (equity vs bonds and US vs Europe). They are chosen because of their non-corresponsive co-relations. Meaning that a sudden drop in the US equity market is unlikely to have an adverse effect on the Singapore bond asset class.
For a more detailed (also more credible) article on how to construct a basic portfolio, visit Investodepia.com and check out:
http://www.investopedia.com/articles/pf/05/060805.asp
Notice the above pie chart is labelled "balanced portfolio" this is because when constructing a portfolio, we need to take into consideration one's risk appetite- meaning how much a person can stomach risk. We all know investments can be volatile, the stock market goes up and done, so does property prices, if a person is unable to cope with such sudden rise and fall, it can mean much mental and emotional distress, resulting in irrational behaviours. For simple illustration purpose, imagine this: a rational investor will buy low and sell high, however in real practice, when you see your investment fall by 5% 6%, some people may panic and think the stock market is heading for a crash, you lose sleep over it, can't eat well and become very stressed. Logic tells you that the prices are low now and probably be a good time to invest, however your fear tells you that what if the market crashes, you will lose everything. Eventually, investors who can no longer take the stress from the market will sell out, making a lost. Should him be rational and keep in mind that the stock market in the long run will always move upward, he would have simply wait for the market to correct itself, or better still chance on the opportunity, do some homework and pick some value stock and make a handsome profit from it. Therefore it is important to understand your risk appetite before investing to avoid such irrational behaviours.

Risk appetite is usually assessed using the risk profiling method. It simply use a set of questions to find out a person's risk classifications, be it conservative, balanced, growth or aggressive. From there develop an investment mix that suits a person's investment appetite.
Although there's a lot of controversy behind the risk classification and portfolio way of investing, it has been proven by time to be a good way to start investing and do wonders for a person's finance.
Ones a person has determined his risk tolerance lever, he can then proceed to design his portfolio with the desirable mix of investment assets. Typically, a conservative portfolio will have 0 to 30% invested in equity while the mean bulk is invested with fix income vehicles, this portfolio as the name suggests has the lowest risk level and usually generate lower returns. A typical balanced portfolio has a mix of 50% equity and 50% fix income assets. Although it has slightly higher risk then the conservative portfolio, usually a balanced portfolio will do better than a balanced portfolio in the long run. Growth portfolio by far is the most favourable over the rest given a reasonable time horizon of 10 yrs to 20 yrs. A sample portfolio will be made up of 70% equity and 30% fix income. It provides potential capital appreciation from equity with bonds and other fix income investment to lower down the violability. The highest risk portfolio will be the aggressive portfolio, it is made up of up to 100% equity or other higher risk investment assets. Although it has the highest potential return, it also takes a really strong stomach to endure the ups and downs of the market.

Chapter 5: Basics of Stock Selection

How to Research On Stocks before Making an Investment

Just what is the stock market, and how do you begin investing in it? These are important questions, and many people are unclear about the answers. Understanding how stocks and bonds are traded, what's an index, and where to open a brokerage account will help you begin the investment process armed with your most valuable asset: knowledge.

The Stock Market

The stock market is the general term for the organized trading of stocks, and a stock exchange is a market for buying and selling stocks. The New York Stock Exchange is the largest stock exchange in the in the world. The National Association of Securities Dealers (NASDAQ) is also an important exchange.

Stock prices are determined by supply and demand - by sellers and buyers willing to buy or sell at a certain price. As demand goes up, the price rises, and when demand goes down, the price follows suit.
Indexes

An index takes a sample of stocks and uses it to measure the market as a whole or by a specific industry. Three of the most common indexes are:

• The Dow Jones Industrial Average (DJIA). The DJIA is comprised of 30 blue chip (well-established, financially sound companies) stocks.

• The S&P 500. This index is owned by Standard & Poor's, and consists of 500 stocks chosen for such factors as market size, liquidity (the ability to convert an asset into cash quickly and penalty-free), and industry types.

• The Wilshire 5000. This index tracks the performance of most publicly traded, U.S.-headquartered stocks available on the major exchanges.
As an investor, you can look to indexes to gauge how the stock market is doing. For example, if you hear reports that the DJIA is up, the larger companies are doing well, and so too should your stocks if you are invested in them. Following an index can help you make educated investment decisions.
Brokerage Accounts

So how do you actually begin? All you need is to open a brokerage account at a financial institution or brokerage house. As soon as you open your account, you can begin to buy and sell stocks and bonds - a process called trading. You can make trades with the assistance of a broker, over the phone, or online via the financial institution's website. Whether you do it on your own or with help, you will be charged a fee for each trade you make.
Where you choose to open your account depends on how much assistance you need or want, and if you are willing to pay for it. You can open a brokerage account at:

• Your financial institution. Many credit unions and banks sell investment products, and they may even have financial planners on staff who can provide guidance.

• A traditional brokerage house. These companies provide a wide range of services. They staff professional money managers who can help you with very specific investment advice (for a fee). Traditional brokerage houses tend to have higher commissions than other options.

• A discount brokerage house. If you want to invest without professional assistance, a discount broker may be the right company for you. You will be charged for making trades, but it will be considerably less than if you had an expert assist you. Commissions are even less if the company is Internet-based.

Research Before You Buy

Even if you trust your broker or advisor completely, it is important to do your own research before you purchase any security. After all, it is your money on the line - win or lose, the person or company who sells you the investment product earns a commission. Remember too, to have realistic expectations. Don't take "hot" stock tips that promise a huge payout, particularly if you hear about it through an anonymous email!

The best place to begin your research is the Internet. Visit the company's website and read all about it - including a history of its stock price, financial position, breaking news about products or services, and management. Whether you are buying stocks or bonds, it is important to know what you are getting into.

Investing is an exciting, and most often worthwhile venture. Will all of your investments pay off the way you want them to? Of course not. Even professionals lose money. Expect setbacks and keep learning - you'll be on the road to riches before you know it.

Useful links
http://www.helium.com/tm/182663/before-informed-investorfirstly-wander
http://stocks.about.com/od/evaluatingstocks/Evaluating_Stocks_for_Investment.htm
http://www.schwab.com/public/schwab/research_strategies/stocks/index.html?src=mww

End Note

After reading this report, hopefully you will find something useful and hopefully will answer some of the questions you have in your mind, and at the same time will create some constructive questions that will propel you find out more about investment on your own.

Here's some useful resource to improve on your investment knowledge...

http://www.moneysense.gov.sg/publications/articlestier3.html
MAS money sense, basic investments, beginners please read!

http://www.investopedia.com/
Online encyclopaedia of investment, more for intermediate level investors.

http://www.sgfunds.com/
Local forum for investers, mainly on unit trust investing. For both beginner and intermediate investors.

http://www.bloomberg.com/
Website to get the latest news! May be confusing for beginners!

http://finance.yahoo.com/
Provides easy access to basic stock charts.