Investment opportunity 101
Everyone is always looking for investment in some point of time in their lifetime when they have some extra cash. The value of cash will depreciated over a period of time if you just keep them under your pillow or mattress. Factors devalue your cash are no doubt caused by inflation and currency exchange.
With basic education a must in everyone life, we are encouraged to open saving account to save our money and gain some small interest maybe 1% annually. That is what I where taught during my schooling. However they did not pointed out there are actually better options lying out in the financial and corporate world. Below is some guide that I hope when the younger generation read it, can widen their investment opportunities :
- Saving Account : 1% of return annually - almost no risk
- Fix Deposit (FD) : 3.7% of return annually - almost no risk unless premature
- Mutual Fund : 5% to 10% of return for long term investment around 2 years - low to medium risks
- Share Market: 10% to 25% of return for mid to long term investment - medium to high risks
- Properties : 10% to 25% of return for mid to long term investment - medium to high risks
- Futures or Options : 20% to 35% of return for short term investment - high risks.
- Forex : 30% to 40% of return for short term investment - very high risks.
Among these seven choices, savings and FD have no risk or very minimum which is you lost your money when the bank you invest with go into bankruptcy. Both investment opportunities do not require any skills or knowledge to invest. However saving’s return is really too little which I do not encourage anyone to invest into. I would advice to invest into FD, although it requires a minimum amount. For example in Malaysia, you need minimum of RM500 to invest for 3 months in order to enjoy a 3% annual interest return, or minimum of RM5000 to invest for 1 month and enjoy 3% annual interest return. However, if you invest for 1 year, you will enjoy 3.7% annual interest return, provided you know in a year time you will not need that money, otherwise, if you take it out, you will lost the interest.
Next to FD, is Mutual Fund. It is a fund that manage by a group of people who invest into share market, properties, and currencies. Of course, you will need to pay some fees to these people who help you invest. In contrary, the history shows that in mid to long term, the return is around 7% to 10% (already minus the fees) which way more return compare to FD. Mutual Fund also requires very little knowledge to invest but it requires a larger modal compare to FD. For example, Public Mutual requires initial investment of RM1000, and following investment of minimum RM100. For each entry, 5.5% of entry fees will be charged, but there is nor exit fees like shares market.
For the rest of investment opportunities, it requires huge amount of study, mental preparness and also huge investment modal, and also the ability to accept the possibility of high risks. Each of them besides gaining return in terms of interest, investor can also gain return from capital gain. More of it will be discuss in later posts.
