Amid the post-pandemic recovery and volatile markets, Gen-Zs — defined as those aged 26 and below have entered the workforce, drawing their first salaries and investing their hard-earned money in hopes of building a portfolio that could eventually provide them with healthy returns.

However, given the vast amount of finance and investing information of varying quality readily available online, it can be hard to tune out the noise, warns Paul Ng, financial service director at PhillipCapital. This is especially on the back of constant reports of those making enormous returns on certain meme stocks and cryptocurrencies.

Back in 2021, betting on the shares of movie theatre chain AMC Entertainment gave investors a gain of some 800% while shares of Gamestop reportedly jumped from US$150 to US$380 overnight. The surge was driven by retail investors who gathered on social media platform Reddit to orchestrate a short squeeze against the big funds that were shorting the stocks.

Ng says the fear of missing out or “Fomo” on these opportunities can be dangerous to impressionable young investors. “This happens even among my clients. They fall prey to these meme stocks or cryptos that can provide double-digit returns in a single day. They should understand that it is just as easy to lose all the money invested in these assets,” he adds.

The problem, he says, is that humans are prone to be driven by greed, which may result in these novice investors losing their money — and even their family members. Greed is a hurdle in building a strong investment strategy for long- term success too.

Ng recalls meeting a prospective client who persuaded his grandfather to invest millions accumulated over a lifetime into a basket of cryptocurrencies and hyped-up stocks. In a mere 18 months, the grandson effectively lost more than half the money, which was intended as an inheritance for him and his siblings. “It is very sad because being a financial adviser, I know how hard it is to accumulate wealth over a lifetime just for most of it to be taken away in less than two years,” says Ng.

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He believes young investors ought to keep an eye on megatrends happening around them, which have a big bearing on investment trends. Yet, they should be more discerning and only use information that is too readily available online as a form of guidance and not as a definitive direction. As always, they also need to be cautious when money-making opportunities sound too good to be true.

“I’ll be honest, nowadays, it is between the person, their computer screen and their web browser. There are no foolproof workshops or communities that will tell you exactly what to buy and that is very dangerous. Because if you invest in something you do not understand, in times of turbulence, it’s really hard to continue investing in your conviction.”

“Additionally, It is important to note that a lot of people were also hurt and impacted by the eventual burst of the meme stocks or crypto bubble that is not truly reflected in the media or online. Not many people would want to share the sob story of losing their money or owning up to their mistakes,” says Ng. Are youths into high-risk investments? Ng understands that the young are often tempted to make high-risk decisions as a result of feeling pressured to lead a luxurious and jet-set lifestyle or to at least give an impression. “My observation is that the next generation often tends to compare themselves with what they can see on the internet subconsciously and that usually has a huge influence on how they view or want their quality of life to be,” he says. A study by the Ministry of Manpower notes that youths between the ages of 20 and 24 had a median monthly salary, including employer Central Provident Fund contributions of $2,691 in 2021, down from $2,730 in 2019. Furthermore, between 2020 and 2021 during the pandemic, the pay hikes they receive were outstripped by the inflation rate, further undermining their spending power.

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This may have resulted in youths becoming more inclined towards investing in risky assets and strategies to increase their spending power in the hopes of meeting their material demands. Ng strongly advises against this.

Cryptocurrency is one of the most popular asset classes among Singaporean youths. A study conducted this year by crypto exchange Independent Reserve showed that Gen-Zs had a crypto adoption rate of 39% while 62% of Gen-Zs cited the media as a significant factor in their decision to enter the crypto market, with 45% being influenced by friends and family.

This is not to say that youths are only investing in cryptocurrencies. A survey by asset manager Franklin Templeton in 2021 found that the top four preferred asset classes were stocks, bonds, cryptocurrency and exchange-traded funds. The firm polled 502 Singaporeans aged between 18 and 35 years. “From what I’ve seen from my sample size, my clientele, I would say that many people I meet are investing too much into high-risk areas and they cannot afford to lose what they are invested in. If you think that a particular asset class or security is going to achieve double-digit or triple-digit percentage returns in a short amount of time, you do not need to put a large percentage of your portfolio to benefit from this punt,” adds Ng. The climb to financial abundance Today, achieving prosperity for the everyday Singaporean can be separated into five different stages. Ng explains that these evolving stages are classified as financial stability, security, flexibility, freedom and lastly, abundance, in that order. Each stage takes a handful of years to reach and 32.3 years is the total number needed to achieve abundance.

Ng shares that financial abundance is defined as having enough income to sustain the desired lifestyle without trading time for money. “I believe this happens with years and years of financial prudence and a very healthy relationship with money,” he adds.

That said, not many Singaporeans have reached financial abundance. In fact, according to a study conducted in early 2022 by wealth manager St James’s Place, over half of Singaporeans or 55% do not consider themselves to be wealthy while 42% want to be wealthier. Of the latter, 51% surveyed were willing to give up work-life balance while 42% were willing to sacrifice family time in the hopes of generating more wealth. However, Ng says how each phase is defined is personal and dependent on the unique requirements of each person.”We are all trying to progress to the fourth stage, which is financial freedom. Freedom is such a powerful word and it could mean many things to many different people.” In advising the younger generation on what steps should be taken to progress through each financial stage, Ng believes that small habits have the biggest impact in the long run. “My strong belief would be to start with habits, form good habits when it comes to allocating money to pay yourself first because I believe that when we receive a salary or wage, it is really to pay for your time, so understand that you are trading your time and your skills for money in your early years,” he says.

Ng advocates a balanced selection of low-risk instruments for young investors. “Whatever you pay yourself, I would suggest having a mix of low-risk instruments that combat inflation, at the 2% to 3% range. Another portion can go into investing in globally diversified portfolios, which will give you exposure to the growth of economies around the world.”

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