Many people have been asking me about how to invest in stock market and beat the inflation rate. First of all I would like to say that there are many ways to make money in the stock market. Example: Value investing and trading. However, today I am going to share with you a method that does not involve any monitoring or analysis. And yet you will be able to passively gain 4% to 8% annualised return in the long run(based on track record since 1987) with capital as low as $100. Are you interested to know about it?

The investment instrument that I am going to share with you now is called the Exchange- Traded Fund(ETF) which widely also known as ETFs. So what is ETFs. An ETF is a type of fund which owns the underlying assets (shares of stock, bonds, oil futures, gold bars, foreign currency, etc.) and divides ownership of those assets into shares. To give you a better example, will be Singapore Straits Times Index ETF. The Straits Times Index is an index that hold the top 30 largest companies in Singapore based on market capitalisation. And therefore this Straits Times Index are often used to represent Singapore’s economy in general. STI ETF is the fund that tracks the movement of Straits Time Index because the ETF own all 30 companies that’s own by strait times index. So if Straits Times Index rise, STI ETF rise. when Straits Times Index fall, STI ETF will also fall.

The following picture shows the holdings of straits times index(Top 30 largest company listed in Singapore)

sti-components

So after you know about STI ETF, how can you benefit from this?

The picture below shows the price of STI index from 1987 to 2015. What can you derive from this price chart? It shows that short term the market is volatile, but in long term, Straits times index will always rise up.

sti-historical-chart

 

The picture below is one of the ETF that tracks the straits times index. It has an anualised return of 4% to 8% per year. Some one you may think the return is a lot, some of you may think is too little. The message I want to bring across is that just by investing in STI ETF, we are able to have a return more than our Singapore bank fixed interest rate(around 1.5%) and inflation rate(around 3.5%).

example-of-sti-etf

I hope you find this information useful. Feel free to share this information to people around you to benefit as many people as possible.

*All information are for educational purposes only. No stock recommendations are intended