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“I Don’t Have Time for Investing”

For some investors, investing is about owning many stocks.

Owning many stocks, in turn, could mean spending a lot of time researching or keeping up with the latest developments of different businesses. In this setting, the time needed may be a commitment too far for some folks.

But time need not be a limiting factor here.

Index your way to satisfying returns

The SPDR STI ETF (SGX: ES3) may offer investors an easy way to participate in the stock market.

The exchange-traded fund (ETF) mimics the fundamentals of the Straits Times Index (SGX: STI), Singapore’s most prominent market barometer. As the Straits Times Index consists of 30 major companies in Singapore’s stock market, the SPDR STI ETF also offers diversification from the get-go.

Furthermore, the SPDR STI ETF has generated a decent long-term return for investors. From its inception on 11 April 2002 up till the end of this August, the total annual returns of the ETF (including reinvested dividends) is 7.11%. At that rate of return, an investor would double his or her money every ten years or so.

Index plus a few

If there is more space on your timetable, another approach would be something known as “index plus a few”.

As the name suggests, the majority of your investable money – say, 80% to 90% – would be parked in funds tracking major stock market indexes. The remainder of your capital could be devoted to a handful of companies that you have interest in.

The idea here is to focus your limited time to just a few ideas that would be manageable. If the handful of stocks are well-selected, they may even serve to provide a small lift to your portfolio’s returns as well, helping ensure that you’d have a market-beating portfolio.

Here’s how the math works. Let’s say that the index portion of your portfolio generates an annual return of 7% while you have two stock picks that each return 15% annually. In this instance, your portfolio’s overall return would be 8.6%, assuming you have an 80/20 mix between the index-tracking ETF and you individual stock picks.

For the busy individual, I hope that these ideas can be helpful.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn't own shares in any company mentioned.