How to invest in Hong Kong | Investing for beginners
Let’s take a look at some tips and things you should consider before investing in Hong Kong, and what type of investments may be more suited for you. Interested in savings interest rates? You can read more in this link for the highest interest rates in Hong Kong.
How to buy stocks in Hong Kong
What broker platforms are there in Hong Kong? Traditional banks and other broker firms offer an international trading platform. Popular trading platforms in Hong Kong are:
- Futu (currently doing a promotion of $1300 welcome gift + through this referral link).
- Standard Chartered
Can I buy US stocks in Hong Kong?
Yes, brokers that offer trading platforms allow you to trade HK and US stocks. Some platforms also allow you to trade China stocks as well.
You can buy Tesla stocks, Amazon stocks, Apple stocks and more on these Hong Kong trading platforms. Through trading platforms like Futu, you can buy single shares, making it easy for beginner’s to start investing with little capital. Use our referral link and you’ll get $1300+ welcome gift.
Investing in Hong Kong: Tips
1. Assess the level of risk you're willing to take
- Remember, the goal of investing is to earn money (not to lose money)
- Assess how much of your savings you’re willing to risk: are you willing to risk 20% (or whatever amount) of your savings that you might not get back?
Stocks and funds
- Stable stocks: Energy, real estate and train transport stocks are relatively stable and safe stocks. It is almost impossible for these companies to go bankrupt so you won’t be risking 100% of your investments.
- Consumer good stocks: These are more volatile stocks that can be bullish and bearish depending on the news, politics and more.
- Trendy stocks: These are higher risk stocks that depend on trends and news – these stocks may not be profitable currently but the stocks are bullish because the outlook on the stock is profitable
- ETFs: These are a safe way of investing as it’s a fund that is a collection of many stocks so you are spreading out your risk into many baskets. They are stocks that are picked out by ‘professionals’ and are high performing companies. Even if one or more of these stocks go bankrupt, you would highly likely be still making profits from these ETFs
Bonds and time deposits
- Bonds: These are a safe way of investing, but the return per year is around 2-6%, depending on the economy’s inflation and interest rates.
- Time deposit: This is almost a risk free way of investing. The return in interest rates are slightly higher than normal savings. In time deposits, your selected amount of money is usually locked for 1-3 months and at the end of the period, you are rewarded with the interest rate. Some banks have penalties for withdrawing the money early. Some banks, like Inmotion’s opening account offer and Welab’s time deposit have no penalties when you withdraw the money (click here for Inmotion, Welab and virtual bank opening account offers: $1700+ cash rewards)
- Cryptocurrency: High risk investments – these are more like a gamble of trends as you never know when it will go sky high and when it will dip. Crypto investments are also affected mainly by news and politics – there is no income attached to the cryptocurrency so there are no predictable statistics.
2. Set aside savings and funds for investing
Setting aside savings means you’ll have disposable funds for daily life expenditures. Maybe you have expenses for food, rent, entertainment, transport and miscellaneous. You would probably want to set aside additional savings for random expenditures that you did not anticipate. Doing so means you are less likely to panic and sell your investments when they are going through a drop, causing you to lose money by selling early before it rises again.
Again, assess your risks and see what type of investments you are interested in. If it’s a lower risk, perhaps you have a bigger budget for investing as you can always sell the investments if you need more money on hand. Bank savings interest rates are so low in Hong Kong right now (less than 1%), your money may be better off invested into ETFs and funds that have higher rates (which you can then sell off when you need the cash).
3. Time management for investments: do you have the time for it?
If you don’t have a lot of time on your hands, it might be good to look into ETFs and stable stocks that doesn’t require you to study the stock and keep up with the news. You can sleep well at night knowing that even if something goes wrong, your investments will still be quite stable and bounce back.
If you have more time on your hands, you could look at more individual stocks. Perhaps you’re interested in technology or specific commercial goods? Something that interests you would be useful so it’ll motivate you to do research and you may already have some understanding of the industry.
4. Set an investment time frame
Have stocks that invest in the long run! Sure, you can have some stocks that you day trade or weekly/monthly trade, but it’s always good to have investments for the long run. Think about how you want to budget your investment funds and split into the short trades vs the long trades. Again, think of how much risk you’re willing to take.
5. Experiment and start small
- It’s very easy to start investing with a little amount of money as apps like Futu allow you to buy a single share (Sofi allows you to buy fractional shares).
- Start off small and invest $5000-$10,000 until you’re comfortable with stepping up your game. Don’t go too fast! Make sure it’s an amount of money that wouldn’t affect you if it has gone missing
- Start off with stocks that have low risk and are stable. Energy and real estate related stocks are usually reliable and pays dividends – even if the stock drops, it is highly likely you will breakeven and earn money even if it doesn’t rise again
- A portfolio of 1-3 individual stocks would be easy to manage when you first start off. You can increase the number of stocks as you go, but the general recommendation is to keep it up to 10 individual stocks as it will get hard to keep up with managing, studying charts and statistics. ETFs are easier to handle as you do not really have to do continuous research after you’ve bought into it.
6. Learn from a financial advisor
Speak to a financial advisor on what kind of stocks you should start off with as a beginner or get advice on specific stocks that you’re observing.
Take courses or learn from free Youtube videos on how to analyze each stock and all the vocabulary/jargon and statistics.
7. Don't put all your eggs in one basket
Spread your money into different streams of investments. If you’re purchasing stocks, you can spread it out to ETFs and several stocks so that even if one goes down, your portfolio helps you to balance it out. Be careful not to spread yourself too thin, buying more than 10 individual stocks may start to get hard to handle if you don’t have the time to analyze or keep up with the news.
8. Know what's happening but don't follow trends
Don’t buy your stocks based on ‘bait’ news and trends. Do your research! Do the articles or the people tweeting benefit from you buying or selling that stock? Switch on your critical thinking hat!
When the article is out about trends and stocks on the rise, you might have already missed the best opportunity and people are starting to sell the stock. Do more research and observe the scene and statistics.
Don’t rush! A missed earning opportunity is better than losing money fast.
9. Don't fall into the dividend trap
Stocks that pay dividends are great because you can receive passive income. If a stock drops a little, you’re highly likely to breakeven and earn money after holding on to it for a while, even if the stock doesn’t rise again. With stocks that have no dividends, you would be losing money if stocks drop and won’t rise again to the price you bought it at.
But…don’t fall for the dividend trap. Stocks that are paying a very high dividend may not be in the best interests of the company. If they’re not re-investing their profits into the company, how well can the company do?