Real returns with smart investment strategies

Real returns with smart investment strategies
Posted on November 27, 2010, Saturday

SEE your nest egg flourish with smart investing. It’s all about how much you invest and how often.

Successful investing is not about taking big risks, but more about being able to balance risk and return by investing in a meaningful portfolio.

Use investment strategies that do work: a balanced allocation of your portfolio’s assets among securities that suit your individual needs, the use of Cost Averaging (CA) to lower the cost of overall investments and dividend reinvestment programmes, and a well disciplined, long haul approach to investing.

Most important factor you have in reaching your goals is time. The more time you have, the more chance you have of success. If you’re thinking of embarking on an investment strategy like CA, know your facts first.

For example, CA involves the regular purchase of units in a managed fund or shares over a period of time. It can be done automatically via an investment plan and you may reduce the risk associated with market fluctuations while giving your portfolio the best chance of long term profitability.

Here are options for you to choose from when it comes to investing in your future:

1.Direct investing

You invest directly in the share market, property or real estate investment trusts (REITs). The downside is that it generally requires market knowledge, plus regular monitoring of market trends, tax and legal changes. Many working adults don’t have access to the right market information or expertise to do direct investing well.

2.Buying bonds

The general principle of bond investing is that when you buy a bond, you are lending your money for a certain period of time to the issuer, be it a listed company or not. It’s a good choice for investors who require fixed horizon and steady income.

However, investing in bonds are usually for the high- net-worth and institutional investors as bonds are usually offered at a high entry cost, in hundreds of thousands or millions of ringgit.

Additionally, investors are advised to pay attention to total return, not just yield as bond prices fall when interest rates rise. An option for the retail investors to access the asset class will be to invest in unit trust bond fund due to its low entry cost and diverse holdings which allows for diversification.

3.Stocks/equities

Historically the best, but most volatile way to grow your money is through the stock market. On a short-term basis, stock prices fluctuate based on everything from interest rates to investor sentiment, to the weather. But on a long term basis, you could potentially make (or lose) a lot of your money in stock market. Bear in mind that risk and return come hand-in-hand.

4.Managed funds

If you only have a small sum to invest, a good option is to put your money in a managed or unit trust fund. These are funds which pool the investments from a number of investors, enable you to access markets and assets that may be expensive or difficult to buy directly into, such as the China’s restrictive A-share market, emerging markets and even the fixed income space such as government bonds.

Additionally, unit trust funds are a good alternative to buying individual stocks, where in exchange for a small fee you will have the advantage of participating in several stocks within a fund. What happens is that the fund manager trades the fund’s underlying securities, realising capital gains or losses, and collects the dividend or interest income. The proceeds are then passed along to the individual investors. Most funds require only moderate investments, ranging from a few hundred to a few thousand Ringgit.

This article is brought to you by HwangDBS Investment Management, your Asian Financial Specialists. Log on to www.hdbsim.com.my or call 1-800-88-7080 to find out how you can cost average your investment via the HwangDBS Smart Save Plan.

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