Investing 101 Part 5: 5 Basic Investment Strategies for Beginners August 11, 2021

Investing 101 Part 5: 5 Basic Investment Strategies for Beginners

By now, you should have built a resource library, opened an online brokerage account, and perhaps contemplated dipping your toes into some blue chips or ETFs. Are you then eager to start investing?

Today’s Investing 101 introduces you to five basic investment strategies for beginners.

As you digest the information, bear in mind that there is no one best investment strategy.

The truth is that markets ebb and flow and investors are not as rational as we would like to think. We may become overly optimistic when times are good and overly pessimistic when the economy and markets lose steam.

When the unexpected happens, remain calm. Remember Warren Buffett’s golden advice, “Be fearful when others are greedy and greedy when others are fearful.” Greed drives asset prices up while fear causes asset prices to dip. As counterintuitive as it sounds, economic downturns could be perfect buying opportunities!

Being aware of these fundamental investment strategies can help you develop a go-to investing approach. You may even combine strategies, depending on market conditions and your investment goals. Think of today’s Investing 101 as a starting point for your investment journey.

Let’s begin!

1. Dollar-cost averaging

Dollar-cost averaging is a strategy where small amounts of money are invested regularly in an asset. For instance, investing S$100 every month in a stock for a year is a form of dollar-cost averaging. You buy more of the stock when prices are low and you cut your purchases when prices are high. Due to your commitment to make consistent investments, your price per share eventually averages out.

To maximise returns with dollar-cost averaging, you could invest more regularly when opportunities arise and cut back when prices rebound. Opportunities arise when prices dip or when markets crash.

Over time, dollar-cost averaging reduces your exposure to price volatility. You no longer try to predict market movements. Instead, you are in it for the long haul.

Read more here: 3 Reasons Why Dollar-Cost Averaging is a Smart Investment Strategy

2. Diversification

Diversifying investments means buying assets in different asset classes or across industries and markets.

Your asset holdings should ideally not dip together when times are bad. Instead, you want to hold some assets that will still stay profitable even when other asset prices are down.

For instance, if a pandemic hits air travel and causes airline stocks to nosedive, airline stocks will likely dip across the board. If you have not diversified your portfolio, you would book losses from all your investments!

Diversification makes your investment portfolio more resistant to singular events.

Do you now see why ETFs are useful? They are one way of diversifying your investments. An example of an ETF is the SPDR S&P 500, which tracks the S&P’s 500 large- and mid-cap US stocks. In Singapore, the STI ETF provides exposure to a basket of blue-chip companies listed on the SGX.

Read more here: 10 Types of Investments for Beginners

3. Rule of 40 for stock picking

If a software company is in its initial growth stage, most of its profits are probably reinvested back in the business. This is because new businesses need to spend a fair bit of money to build market share so that they have the critical mass to turn profitable at some point. That being the case, how do you decide whether to purchase its stock?

The Rule of 40 can guide you. Under the rule, you may invest in this software company if its revenue growth rate and profit margins add up to more than 40%. The next time someone advises you to purchase the stock of a high-growth company, use the Rule of 40 to decide if the investment is worth your risk!

Read more here: Rule of 40 for Stock Selection

4. Technical analysis

Basic knowledge of technical analysis is useful for all investors. Technical charts can help you verify what financial analysis concludes about an asset or market trends.

Charts provide data on historical performance and the information extrapolated can provide some indication of how prices will move in the short term.

Stock investors can also apply technical analysis to different stocks to evaluate recent price movements, and therefore, infer their relative strengths and weaknesses.

Some basic terms in technical analysis are head and shoulders, support and resistance, and double top reversal. Sounds alien? Check out the link below for more detailed explanations and illustrations! You may also be interested in our weekly technical analysis webinars where our analysts interpret charts and share their latest insights on US markets.

Again, bear in mind that chart predictions are not foolproof. Over the long term, they are subject to even more unpredictable variables. Mostly, technical analysis aids in short-term analysis and less so for longer time horizons.

Read more here: 3 Powerful Risk Management Strategies Using Technical Analysis

5. 4-3-2-1 budgeting rule

As new investors, how do we decide the amount to save or invest?

The 4-3-2-1 framework provides a simple guideline. It limits your spending in each category. Under this framework, 40% of your budget should go to daily expenses, 30% to loan repayments, 20% to savings or investments, and finally, 10% to insurance.

The 4-3-2-1 budgeting rule can help you decide how much to invest each month!

Watch the explainer video here: Personal Budgeting – 4-3-2-1 Rule

To recap, these are the 5 basic investment strategies:

1. Dollar-cost averaging
2. Diversification
3. Rule of 40 for stock picking
4. Technical analysis
5. 4-3-2-1 budgeting rule

There is no cookie-cutter investment approach for all investors. You have to make a judgment call based on all the information that is available to you. The 5 strategies are also not mutually exclusive and you may mix and match for your optimal investment outcomes.

Want to learn more investment strategies? Register for our free webinars here and learn from our professional dealers, analysts and industry veterans today!

Now that you have learned the 5 basic investment strategies, are you ready to invest? Open a POEMS account to start trading or chat with one of our licensed representatives to find out more.

Alternatively, join our Global Markets Investment Community on Telegram to share your views and experiences with like-minded investors!


These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them.

The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries.

Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.

About the author

Ng Ming Qian (Intern) & Joel Lim (ETF Specialist)

Ming Qian is an intern from the Global Markets Desk at Phillip Securities and an Economics Undergraduate at the National University of Singapore. Outside of school, Ming Qian hustles as a freelance writer and blogger who simplifies complex topics for readers. When he is not writing or buried in his books, you can probably find him tending to his aroid plants or bingeing on Grey’s Anatomy.

Joel is the ETF Specialist from the ETF desk in Phillip Securities. He helps to provide sales support and trading ideas to retail investors, remisiers, in-house dealers, and fund managers. Joel also works closely with ETF issuers on new product and business development projects.

Contact us to Open an Account

Need Assistance? Share your Details and we’ll get back to you


This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.  

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

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


Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
Tel: (65) 6230 8133 Fax: (65) 65383066