10 things to know
- Before you get started, set some investment goals
- Save and invest now!
- Invest early to beat inflation and to benefit from compounding
- Invest consistently
- Balance risk and return
- Invest in different products, not just one!
- Avoid high fees
- Do NOT sell in panic
- Do NOT take on debt to invest
- Beware of scams
- Quiz: Investing 101
Balance risk and return
All investments carry some risk but different types of investments have different levels of risk. Below you can see which investment types are low and high risk as well as their level of returns.
Investments with high returns, carry higher risk. Investments with lower returns, carry lower risk.
*Figures use returns for the last 10 years (2009-2018).
If you don’t feel confident or have the necessary financial knowledge then you might be better off investing your money in EPF and Amanah Saham to collect consistent returns.
If you have the knowledge and skills to invest, then you may be willing to take on the additional levels of risk by investing on your own in something like stocks in order to achieve higher returns; but remember, most of us don’t have the skills to achieve those levels of returns (even most professional money managers struggle to achieve large returns every year).
Remember, these aren’t investment recommendations nor are they complete. It’s just so you can get an idea of what the average investment portfolio would look like depending on your willingness to take on risk:
Conservative (less willing to take on risk)
This is where most of us might find ourselves. We aren’t willing to lose our money and would prefer steady consistent returns. In this case, your investments would probably be in the following:
- EPF savings (including additional amounts you can contribute)
- Amanah Saham
- The house that you are staying in
- You may have some money in FDs for short and medium term expenses such as education or emergencies
Moderate (willing to take on a bit of risk)
Your investments would still look like a conservative investor except maybe for a couple of changes.
You may have chosen not to put as much money towards your EPF savings and Amanah Saham. Instead, you may have been a bit more adventurous and invested in Unit Trusts, ETFs or REITs instead.
Aggressive or a more knowledgeable investor
Again you would still have your basic EPF savings and have money invested in your home, but the aggressive investor would also be more willing to risk their money in the hope of better returns.
This investor might have investments in stocks or equity based unit trusts rather than putting more money into EPF or Amanah Saham as compared to the conservative investor.
So you see, the three types of investors might have invested the same amount overall, but would have split their investments differently to suit their risk preference (but remember, these aren’t investment recommendations)
|Unit trust funds*||✓||✓|
*Risk levels differ depending on the type of ETF and Unit Trust Fund.
Does what I invest in change depending on my goals? Yes, it does!
Two things to consider:
- Ideal time horizon for various investment products. Equity investments such as stocks and unit trusts tend to generally be more mid to long term by nature. If your time horizon is shorter, one should consider other investments such as FDs.
- Access to your investment money. Depending on what you invest in, it might be easier or harder to access your money. For example, if you wanted your money quickly, then you could look to put money in FD accounts with short tenures. On the other hand, investments such as stocks or even your EPF savings would be harder to liquidate (convert assets into cash or cash equivalents by selling them on the open market) or access for short-term needs.
Below is a table that provides further detail for the investment products listed above.
|Product (link each name below to jump to the respective content)||Investment timeframe||Key characteristics||Risk||Average Returns|
|Fixed deposits||Fixed predetermined time frame||Returns are low but consistent||Low||3%*|
|Employee Provident Fund (EPF)||Long term investment as meant for retirement saving||Low risk profile and consistent returns
Savings may be withdrawn for specific items (e.g., education, buying a home) before age 55 subject to EPF criteria
|Amanah Saham (Fixed price funds)||Short-to-long term investment
Best returns will be seen when kept long term. However, no losses when only used as a short term investment.
|Low risk profile and consistent returns||Low||6.9% pa*|
|Real Estate Investment Trusts (REITS)||Can be a short term or long term investment||High dividend yields
Capital returns are still dependent on share price
|Low to Medium||Depends on portfolio of funds|
|Exchange-traded funds||Long term investment||Low fees
Returns are not consistent and dependent on market conditions
|Medium||Depends on portfolio of funds|
|Unit trust funds||Long term investment||High fees
Returns are not consistent, d
ependent on market conditions and managers skill
|Medium||Depends on portfolio of funds|
|Stocks||Can be a short term or long term investment||Returns are completely dependent on portfolio||High||Possibly medium to high depending on market and company|