Good investment strategies are the key to building your wealth and achieving your medium and long-term investment goals. Smart investing involves not only choosing the correct investment options but also monitoring individual investments, rebalancing your asset allocation, and replacing poor performing investment options with higher performing ones. Read on if you want to find out more about which investment options are suitable for you, which markets to invest in and where to seek financial advice.
A unit trust is an investing program that is designed for customers who want to invest under the guidance of an experienced financial professional in a varied range of securities, including bonds, mutual funds, stocks, exchanged-traded funds, options, annuities, gold, foreign currencies, foreign securities and others. A unit trust operates like a trust system where investors’ assets are entrusted to trustees. Compared to individual investments, investment risks in unit trust are minimized through investment in a portfolio of securities. Financial professionals will tailor the investment strategies for each individual investor.
Generally, unit trusts can be classified into two broad categories, Accumulation and Income. Under these categories, funds are divided into different sectors. Each sector invests in similar assets, same geographic region or same stock market sector. With so many dozens of different funds, it can be confusing to choose how to invest your money wisely but there are online tools that will help you find the right funds for you.
Mutual funds are invested in a basket of assets such as stocks, bonds and money market instruments. The portfolio is managed professionally by money managers in accordance with the investment objectives of the fund. Mutual funds are a good option if you can afford to save a certain amount every month that contributes toward your retirement. In contrast to a unit trust, a mutual fund is established as a limited liability company and investors are like shareholders in the company. When investing in mutual funds, look at the expense ratio to give you an idea of the operating cost of the mutual fund for which you have to pay.
Exchange-traded funds (ETFs)
ETFs have gained in popularity in recent years. Similar to a mutual fund, an ETF holds a basket of assets of equities, commodities and/or bonds which is bought and sold like a stock on a stock exchange. Rather than being actively managed, ETFs are designed to track an index. Therefore, choose ETFs that are widely traded on the market and designed to match well-known benchmarks. A benefit of ETFs is the exposure to a broader range of asset class at a minimal cost. While ETFs offer potential growth when the market price appreciates, they are subject to market volatility.
Stocks are financial instrument that allows investors to own a share of a company. There are many different kinds of stocks to choose from. Stocks are commonly classified by size and sector. It’s best to buy stocks from different industries. The costs to trading in stocks include the commissions, mark-ups by brokers and higher taxes for short-term trades.
One way to enhance your portfolio is to look beyond the mainstream markets and invest in emerging markets like Brazil, India, and China. According to HSBC’s latest investment outlook quarterly report, the global economy’s center of gravity is shifting to merging Asian economies like China, India and Indonesia. This geographic shift is fueled by the growing, affluent middle class in these emerging economies, the increase in demand for luxury goods among the very wealthy in these countries and the long-term currency appreciation of these emerging economies against the currencies of more developed countries. It is important to note that investments in emerging markets tend to be riskier and more volatile than those in established markets.
With stocks, you can choose locally-based and/or foreign firms that are listed on the stock exchange, including large multinational corporations (MNCs) and small and medium-sized enterprises (SMEs). Investing in emerging market stocks is also a good option. Besides U.S. Treasury bonds, you can invest in major emerging market bonds.
If you are a novice investor and/or have little time to monitor your portfolio, you should seek advice from professionals such as financial advisers. While financial advisers charge a commission or fee, they have the knowledge and experience to advise you on the correct investment options and appropriate asset allocation that will maximize your investments. The commission or fee charged generally ranges between 1% and 2% of your managed assets. In line with your risk tolerance level and investment objectives, your financial adviser will guide you on how to keep costs low through diversification and buying a mixture of unit trusts, stocks and bonds. If you want to sell off your high performing assets to reinvest in another asset class, your financial adviser will also work with you to rebalance your portfolio.
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