Making an investment means to purchase assets (things that have cash value) in the hope that they will provide you with an income or become more valuable over time. If they do you can sell them at a higher price. The amount you gain through investment is called 'positive returns' and what you lose is called 'negative returns'.
What kind of investment products should I choose?
There are many kinds of investment vehicles in the market. Here are some that you may want to learn more about.
Bonds are issued by institutions or government. When you buy a bond you become a creditor of that institution, which promises to pay you back with interest on a specified date.
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| Foreign currency options would give you the right to buy or sell a specific amount of foreign currency at a specified date for a specified price. |
Stocks (or equities) are issued by corporations. When you own stock you actually own a certain share of the corporation. For example, if the firm has issued 1000 stocks and you own 50 you have a 5% stake in the corporation.
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| Time deposits are savings accounts or CDs held for a fixed period of time on an agreed interest rate. |
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| Certificate of deposits (CDs) are savings certificates issued by banks. When you invest in a CD you agree not to take back that money until the specified date. On that day you receive your principal and interest. |
| Property is anything owned by a person or an entity. Property may be tangible or intangible, examples of a property include furniture, equipment, land, real estate, patents and rights. |
| Structured notes are like bonds with special features. For example, instead of receiving interest in the usual way you would receive interest based on an index (like the Hang Seng Index). This type of investment is used by sophisticated investors. |
| Unit Trust is a security that allows small investors access to a portfolio of equities, bonds and other securities. |
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- Investments with higher returns usually have a higher risk. However, investments with a higher risk don't necessarily bring you higher returns. So it is important that you assess your risk tolerance level before deciding to invest.
- You must consider the time factor when making investment decisions. Usually, you can afford to make investments with higher risks if the intended time horizon is longer. For example, at 25 you can invest in more higher risks products than a person who is going to retire in a few years.
- Remember the old saying - 'Don't put all your eggs in one basket!' Use the strategy of diversification to reduce risk by having a portfolio of different kinds of investment vehicles. So if one type of investment fails you will have others to depend on.
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