Here are some simple guidelines to follow for making wise investments:

Size: px

Start display at page:

Download "Here are some simple guidelines to follow for making wise investments:"

Elmer Rose
8 years ago
Views:

1 FAQ - Investment 1. What affects the value f mney? Mney has a tendency t lse its value ver time because the price f gds and services has an upward tendency. This is called inflatin. Here are sme factrs that culd eat away yur mney: Inflatin- Inflatin ccurs when the price f gds and services rises. When the price f gds and services level rise, each unit f currency buys fewer gds and services. Cnsequently, inflatin will result in a reductin in the purchasing pwer per unit f mney a lss f real value in the medium f exchange and unit f accunt within the ecnmy. That is why the mney yu earn tday will be wrth less 10 years frm nw. Fluctuatins in interest rates f depsit accunts - A drp in interest rates means a smaller return n yur depsits, and if the interest rate is lwer than the rate f inflatin, yur despsits lse value. But fr sme investments, such as equities and bnds, the value f yur investment may rise because f the drp in interest rates f depsit accunts. Internatinal ecnmic trends - What happens in ther ecnmies can affect the value f yur mney. Plitical circumstances, GDP grwth, and stckmarket indices in ther cuntries can all have an impact n the buying pwer f yur mney. 2. What are the basic rules t investing? Here are sme simple guidelines t fllw fr making wise investments: a. Set yur bjectives. b. D yur hmewrk befre investing. It is risky t rely n pure luck when making an investment. c. Ask yurself whether yu want t invest r speculate. d. Fr investment, make sure yu have a cut-ff pint in mind t prtect yur bttm line. e. In the case f speculatin, dn't make investment decisins ut f panic when the market becmes vlatile. f. Invest as much as yu can affrd, but n mre. g. Dn't leave mney lying arund in nn-interest bearing accunts except as stand-by cash. h. Make sure yur investment prtfli gives yu a big enugh return t beat inflatin. i. Always use a reputable investment firm r financial institutin. j. Diversify. Invest internatinally and spread yur investments ver a range f lw, medium and high-risk prducts in rder t hedge against lsses. k. Make sure yu understand exactly what risks are invlved with every investment yu make. l. If in dubt, seek prfessinal advice. m. Keep an eye n yur investments. Take pprtunities and shift prducts if it is beneficial t d s. Page 1 f 5

When the price f gds and services level rise, each unit f currency buys fewer gds and services.

2 3. When shuld I start planning fr the future? The sner yu start, the better. The example belw shws the difference in accumulative savings between Mr Early and Mr Late, wh started saving at different times. Mr Early saves fr 10 years and then stps. Mr Late starts 10 years later and saves fr 20 years. But Mr Early still get 87% mre than Mr Late (based upn an investment that gives 10% annual grwth, nt taking int accunt annual inflatin).. Year Savings by Mr Early Accumulatin Savings by Mr Late Accumulatin 1 1,000 1, ,000 2, ,000 3, ,000 5, ,000 6, ,000 8, ,000 10, ,000 12, ,000 14, ,000 17, ,284 1,000 1, ,213 1,000 2, ,334 1,000 3, ,667 1,000 5, ,234 1,000 6, ,058 1,000 8, ,163 1,000 10,436 Page 2 f 5

Mr Late starts 10 years later and saves fr 20 years. But Mr Early still get 87% mre than Mr Late (based upn an investment that gives 10% annual grwth, nt taking int accunt annual inflatin).

3 ,580 1,000 12, ,338 1,000 14, ,471 1,000 17, ,018 1,000 19, ,020 1,000 23, ,522 1,000 26, ,575 1,000 30, ,232 1,000 34, ,555 1,000 39, ,611 1,000 44, ,472 1,000 50, ,219 1,000 56, ,941 1,000 63, What shuld I d befre I start investing? Knw yur current financial situatin. Befre yu begin t think abut investing yur mney, yu shuld knw hw much yu culd spare fr investment each mnth. Naturally, the mre yu can put aside nw, the better it will be fr yur future. It's up t yu t achieve a balance between yur current lifestyle and yur expectatins. Calculate yur incme and expenses taking int accunt the fllwing: Hme financing repayments Persnal tax Lans and verdrafts Living expenses Emergency funds Car expenses Entertainment Hlidays Schl fees Family cmmitments Page 3 f 5

Knw yur current financial situatin. Befre yu begin t think abut investing yur mney, yu shuld knw hw much yu culd spare fr investment each mnth.

4 Generally speaking, whatever spare cash yu have after allwing fr all yur expenses is what yu can affrd t invest. Yu can cmmit a certain amunt each mnth and lk upn it as a mnthly expense. As yur salary increases, yu are encuraged t increase the amunt yu invest prprtinately. By ding this, yu'll be keeping up with inflatin and yur mney will be wrking harder fr yu. 5. What shuld I d next when I knw hw much I can invest? Once yu knw hw much yu can affrd t invest, yu can set yur bjectives - why yu are investing and hw yu are planning t use yur investments. Yur bjectives culd incrprate ne r any cmbinatin f the fllwing: Retirement Prtectin fr yur family Educatin fr yur children Wealth accumulatin Divide yur bjectives als int lng-, medium- and shrt-term gals. This will help yu chse the type f investment yu want t make. Fr example, if yu plan t send yur children t study abrad in three years' time and yu need t save fr their tuitin fees and living expenses, yu'll need a fairly lw-risk investment. Think abut when yu will need the return as it als helps t determine the time hrizn f yur investment. 6. Hw d I determine my risk level? Keeping yur bjectives in mind, determine hw much risk yu're prepared t take. D yu want t adpt a cnservative, mderate r aggressive investment strategy? Ask yurself the fllwing questins befre yu make yur decisin: Are yu prepared t make lng-term investments, which will allw yu t take greater risks fr higher returns? If yu're ging fr shrt-term, high-risk investments, can yu affrd t lse sme f the mney yu invest? If yu're married with children, what level f risk can yu take and still be certain f their future? If yu want yur mney t be safe, will yu be cntent with a mderate rate f return? If yu pt fr safe investments, will the returns be enugh t cver inflatin? Everyne has different reasns fr saving, and the purpse f yur investment can affect hw much risk yu re prepared t take with yur mney. If yur investment is t pay fr yur children s educatin, then yu may be investing ver a lng perid f time, and lking fr a higher return, as a result yu may be inclined t chse a higher-risk investment ptin. Page 4 f 5

What shuld I d next when I knw hw much I can invest? Once yu knw hw much yu can affrd t invest, yu can set yur bjectives - why yu are investing and hw yu are planning t use yur investments.

5 Cnversely, if yu re investing t pay fr an verseas trip, r a new car, yu may be investing fr a shrt perid f time and want certainty abut the utcme f yur investment, and yu may feel mre cmfrtable with a lwer risk investment ptin. 7. What type f financial prducts can I invest int? Yu can chse frm tw main financial prducts with varying degrees f risk: Depsits Investments Traditinally, savings accunts are the safest place t put yur mney. They prvide high liquidity - yu can quickly and easily retrieve yur mney - but ffer lwer rates f interest. Investment prducts ffer ptentially higher returns but with greater risk. 10. What investment prducts are available in the market? One thing t remember abut investments is that the level f return is generally prprtinate t the level f risk. Thus an investment ffering ptentially high returns will usually have a high-risk element. The prducts available in the market are: Securities/Stcks Bnds/Sukuk Freign currency Unit Trust Funds Structured Investment 11. What is Dllar Cst Averaging? Dllar cst averaging is an investment strategy whereby the investr invests a fixed amunt in a particular investment n a regular basis regardless f the price. Mre units are purchased when prices are lw and fewer units are bught when prices are high. Eventually, the average cst per unit f the investment prduct will becme smaller. Dllar cst averaging reduces the risk f investing a large amunt in a single investment at a wrng time. 12. Hw can I keep track f my investments? As a custmer f HSBC, yu may keep track f yur investment prtfli via Persnal Internet Banking under the Wealth Dashbard sectin. Page 5 f 5

Yu can chse frm tw main financial prducts with varying degrees f risk: Depsits Investments Traditinally, savings accunts are the safest place t put yur mney.

Retirement Planning Options Annuities

Retirement Planning Options Annuities Retirement Planning Optins Annuities Everyne wants a glden retirement. But saving fr retirement is n easy task. The baby bmer generatin is graying. Mre and mre peple are appraching retirement age. With