What are Investments?
Simply put, an investment is the exchange of time, effort and/ or material for the expectation of future gain. It is no different from working in a company. Instead of a monthly salary, an investor seeks to earn capital appreciation, a stream of income or a combination of both from investing.
Read about: Missing out on compounding returns
What is an Investment Portfolio?
An investment portfolio is a collection of assets owned by an individual or an institution. It may consist of physical assets such as real estate or commodities such as gold and silver. Like any other investments assets, the valuation of such asset will increase or decrease based on market movements.
However, it would not be practical to only hold physical assets due to liquidity. This is where financial products such as Stocks, Bonds, Unit Trust, Exchanges Traded Funds and even annuities appealing to the retail investors.
Objectives of investing such financial products include and are not limited to:
Growth and Capital Appreciation – Maximise financial gains in line with market movement.
Income and Dividend Payout – Providing a regular income payout over time.
Balanced – To seek upsides in capital growth while having an income payout at the same time.
What about the risks involved in investing?
An investment will certainly involve risk. Think of financial returns as a potential compensation for the risk taken. Instead of avoiding risk, spread out your financial risk by having diversification in your Investment Portfolio. Remember:
“An investment in knowledge pays the best dividends.”
Having a diversified investment portfolio allows the investor to spread funds over a range of assets, minimising potentially heavy loss when the market is unfavourable while generating reasonable returns over time.
Read our Investing basic guide below:
Part 1 of 5: Investing Basic – Types of Investments
Part 2 of 5: Investing Basic – Diversification
Part 3 of 5: Investing Basic – Market Cycles
Part 4 of 5: Investing Basic – Risk Profile and Investment Portfolio
Part 5 of 5: Investing Basic – Rebalancing your Investment Portfolio
What are the best asset classes for an Investment Portfolio?
The market is to some extent balanced by supply and demand, and there is not a single best asset class. Higher financial returns may usually involve a higher risk that the investor must be willing to undertake.
Understand and work out your financial goals and objectives with an advisor to achieve a balance between the risks and returns you are willing to accept. Set aside a budget and stay discipline to reap long-term financial rewards.
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How can I achieve higher financial returns on my Investment Portfolio?
The objective of an investment portfolio should be for long-term financial gains and returns. It should be able to withstand heavy losses in a sudden market downturn while performing when market opportunities are available. Know the right timing to realise your profits or cut losses to achieve higher financial returns.
A long-term time horizon and financial commitment may be required for most financial products. Ensure your financial advisor explains it may help you towards reaching your financial goals and objective.
How can InterestGuru.sg help?
Be it wealth accumulation or wealth preservation, InterestGuru is with you on your financial journey.
We work with a team of Independent Financial Adviser to ensure you always receive proper financial advice and planning. Expect regular investment reviews and market updates to assist you in achieving your financial goals and objectives.
Simply drop us a message if there are any investment related enquiries you wish to know more about.