PERSONAL INVESTMENT PLANNING FOR THE MALAYSIAN INVESTOR CONTENTS Part 1 - Understanding Investments What is an investment? Types of investments Part II - Financial Planning Assess your own financial situation Diversify your investments Your risk profile Rational thinking Monitor your investments Do's and don't of investing wisely Be mindful of some trading rules
Part 1 - Understanding Investments What is an investment? Many of us think of interest-bearing deposits or fixed deposits when we think of performing the Haj or saving for that down payment for a car or a house. But in today's world, there are several other options available that could make your savings grow or as commonly said, "make your money work for you." Savings in banks generally do not grow far above the inflation rate but possesses the great advantage of being almost risk-free. Investments, on the other hand, when wisely planned can bring higher rates of return but the associated risks are higher than leaving your money in the bank. What then is an investment? An investment is a commitment of funds to one or more assets that will be held over some future time period, in the hope that it will generate more income. The asset could be tangible like real estate properties or non-tangible monetary assets like securities and you would invest in them based on your financial goals and objectives. By investing your money wisely you can enjoy greater returns. Wise investors constantly look for investment opportunities that will make their accumulated money bring higher returns. Let 's say you have managed to save some money every month and now, you have a tidy sum. What do you do with it? How can you make your savings work for you to generate even more income? As you know, RM100 hidden under the pillow remains RM100 ten or twenty or infinity years down the road. Placing your money in the bank may be almost risk-free but both inflation and taxation constantly erode its purchasing power. You should look for alternative ways to spread your investments and plan wisely in order to reap the best returns. Types of investments The Malaysian capital market offers an array of investment products in the form of shares, loan stocks, bonds, warrants and unit trusts. The type of products chosen by an investor to commit his capital depends largely on his financial goals, time frame, and amount of capital available. There are generally two forms of investments. Physical investments comprise real property, plant, machinery and other forms of tangible assets. Financial investments, such as securities are non-tangible monetary assets. Securities are formal documents, which are evidence of financial investments and states the ownership and repayment rights between the parties. Financial investments mainly comprise equity securities and debt securities. Equity securities e.g. shares of a company, represent ownership of the whole or part of a particular company or productive asset. Owners of equity securities, however have no guarantee of any regular return on their investment. This means that the equity investor takes a risk that returns will be made some time in the future.
Debt securities have a fixed interest rate and a specific maturity date. Hence, everything is fixed except the market value, which fluctuates in accordance with the general level of interest rates in the economy. The risks you accept as a debt investor include whether or not the interest payments will be made and the loan repaid. Bonds are examples of debt securities. Hybrid Investments Stocks and Shares Bonds Warrants and Transferable Subscription Rights (TSRs) Forwards, Futures and Options Unit Trusts Advantages of investing in unit trusts Understanding the risks and costs associated with unit trusts Types of unit trusts
Part 2 - Financial Planning Assess your financial situation Before embarking on any investment plan, you need to assess your financial situation, and decide how much you can put aside...
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