Investing basics
What am I actually buying when I buy a stock, a bond or a fund?
A share
Where the money comes from: A slice of a company's profits, paid out as dividends or reinvested to grow the business.
What can go wrong: Profits aren't promised. A single company can shrink, or fail entirely.
A bond
Where the money comes from: A loan to a government or company, paying fixed coupons and the principal back at maturity.
What can go wrong: The borrower can default, and rising interest rates make old coupons worth less.
A fund or ETF
Where the money comes from: A basket of shares or bonds bought in one purchase; an index fund's basket simply copies an index.
What can go wrong: The basket still swings with its contents, and fees come off the return every year.
A REIT
Where the money comes from: Rent from a portfolio of properties, passed through to unitholders as distributions.
What can go wrong: Rent depends on tenants and debt costs, and the properties are valued by appraisal.
The test that covers all four: if you can say where the money comes from, you understand the investment. If you can't, that is the warning. REITs get a guide of their own, and the moat rating asks whether a company's profits are defensible.
What compounding does with time
S$10,000 left alone for 20 years, at steady illustrative rates. Real returns are uneven; these are arithmetic, not predictions.
| Steady rate | After 20 years | Growth |
|---|---|---|
| 1% a year | S$12,201.90 | 22% |
| 3% a year | S$18,061.11 | 81% |
| 6% a year | S$32,071.35 | 221% |
Small differences in the yearly rate become large differences over decades. That is also why fees matter: a fee is a difference in the yearly rate, compounding against you.
Risk is the price of return
Historically, the assets with higher long-run returns are the ones that fall hardest along the way — stock markets have repeatedly dropped by a third or more before recovering. Risk isn't a flaw in the deal; it is the deal. The question is how much swing a plan can sit through without selling.
Diversification and time
One company can go to zero; hundreds rarely stumble together, so spreading money across many holdings shrinks the damage any single story can do. Time does the other half: the longer the horizon, the more compounding dominates the swings. The portfolio builder shows how concentrated a mix really is.
How to read the result
Technical
Each instrument is explained by its cash flows: a share is a claim on profits, a bond on coupons, a REIT on rent.
Plain English
If you can say where the money comes from, you understand the investment. If you can't, that's the warning.
Technical
The growth table compounds S$10,000 for 20 years at steady illustrative rates of 1%, 3% and 6% a year — arithmetic, not market data.
Plain English
Small differences in the yearly rate become large differences over decades. That's compounding, and it's also why fees matter.
Technical
Diversification spreads money across many holdings so no single failure sets the result; a broad index fund holds hundreds of companies in one purchase.
Plain English
One company can go to zero. Hundreds rarely stumble together, so spreading out shrinks the damage any single story can do.
A worked example
S$10,000 left for 20 years grows to S$12,201.90 at a steady 1% a year, S$18,061.11 at 3% and S$32,071.35 at 6% — illustrations, not forecasts. The same 6% with a 1.5% annual fee ends at S$24,117.14, in the compound calculator.
What it can't tell you
- Past returns don't predict future returns, and steady illustrative rates hide the swings real markets take.
- Higher long-run returns have historically come with deeper falls along the way. The table shows none of that.
- Basics are general. They don't weigh your own goals or horizon.
Source: Growth figures are compound-interest arithmetic at illustrative rates chosen for the example, not market data or forecasts. Checked 29 Oct 2026.
For education only. Not financial advice.