a simple investment guide for beginners

A SIMPLE INVESTMENT GUIDEA SIMPLE INVESTMENT GUIDEfor Beginners

PART 14 Tips for First Time Investors

PART 4Tips on Getting Some

Gold into your Portfolio

PART 3Tips on AlternativeInvestment

PART 2How to Handpick your Assets

PART 5Tips for Beginners onInvesting in Real Estate

CONTENTSCONTENTS

A SIMPLE INVESTMENT GUIDE - for Beginners

PART 14 Tips for First Time Investors


PART 1 4 TIPS FOR FRIST TIME INVESTORS

Most of us would probably answer no to that question, and it is not a surprise. Most schools don’t teach us one of the most important lessons in life, the art of managing our money. Here are some basic suggestions in what you can do to make your income more productive.

Does any of your FIRST SALARY have any part in GENERATING AN INCOME for you now?

DIVIDE YOUR INCOMETIP 1



GENERAL

EXPENSESAVING

INVESTMENT

Once you have received your income, divide it into three parts before engaging in any expenses. One part goes to general expense, one to saving and one to investment.

SAVING

RETURN

RISK

EXAMPLES

INVESTMENT

Low

Low

High

High

Bank saving accounts,Government bonds

Stock marketOnce you have received your income,

divide it into three parts

ANSWER SOMEBASIC QUESTIONS

TIP 2



The proportion you put into every portion of your income depends on your objectives with regards to your wealth.

HOW MUCH TO SPEND

HOW MUCH TO SAVE

YOUR RETURN REQUIREMENT &

YOUR RISK TOLERANCE LEVEL

HOW MUCH TO INVEST・ What is your monetary goal?・ How many years you have left to work?・ How much do you want to save?・ How much money are you willing to lose if you invest badly?・ What is your risk tolerance level?

All these questions will help you determine how you should go about your investments.

By setting an objective, you should determine...

A SAVINGS ACCOUNTIS NOT THE ANSWER

TIP 3



The return you get in a savings account in a bank is next to nothing. By observing the inflation rate in comparison to the interest rate, the inflation rate far exceeds the interest rate of saving accounts. The lesson is that an appropriate amount of money should be put into your saving account to ensure your liquidity, but not too much.

THE INFLATION RATE > THE INTEREST RATE

The money you place into a savings account islosing its value every day.

DIVERSIFYYOUR PORTFOLIO

TIP 4



This means that you need to allocate your money wisely and put it in different asset classes and sectors. This ensures that if some unpredicted factor hits one industry, resulting in a catastrophe, your whole portfolio does not collapse with it.Therefore, invest in different types of assets and think logically about whether they are highly related or not. You need to diversify your portfolio.

DO NOT PUT ALL YOUR EGGS IN ONE BASKET

PART 2How to Handpick your Assets


PART 2 HOW TO HANDPICK YOUR ASSETS

Assuming you have decided on your length of investment, amount of money and the required rate of return, the next step is selecting appropriate assets to match your investment portfolio. Your portfolio will contain all three of these assets in the perfect balance to help you reach your goals.

How can you HANDPICK your INVESTMENTS ?

#1AN EXAMPLE OFA FINANCIAL PLANStart off by deciding the amount of money you want in the end and the length of time you have in order to meet that goal.

How much do you need to set aside for investing? The answer depends on your required return rate.

THE AMOUNT OF MONEY THE LENGTH OF TIME

$ 5 million 10 years

You can average out the rate of return and keep a constant weighting asset allocation for your portfolio so that the risk and the return of your port are under control.



$32,066

$37,611

$24,207

10%

5%

2%

MUST INVEST (PER MONTH)INTEREST RATE

A lower return rate requires a higher amount to be invested per month and vice versa.

GOVERNMENT &CORPORATE BOND

#2

A bond is a debt instrument issued by both the government sector and private sector to acquire funds from investors.

A GOVERNMENT BOND THE CORPORATE BOND



・ Risk free investment tool

・ Investors are guaranteed that their money will not be lost as the government vouch for it

・ Lower return rate & risk

・ If you have low risk tolerance, this is the investment for you

・ When corporations require the use of money to fund projects, they can issue bonds to raise money from retail investors

・ Higher interest rate & risk

・ Corporate bonds have ratings that represent their default risk level.

・ This is an option for those who prefer the ‘in between’ option when it comes to risk tolerance

Bondholders agree to invest for a certain period of time in exchange for an interest rate

as agreed upon in the beginning.

&

GOVERNMENT BOND CORPORATE BOND

COMMON STOCKS#3Another asset choice that requires a small principal amount of money to be invested and can yet generate exceptionally high return, is common stock. There are two sources of income which are investing in stocks allows you to have.



DIVIDEND INCOME CAPITAL INCOME

・ Many companies pay dividend to investors

・ Dividend payment is not an obligated responsibility for corporations

・ Keep in mind that some companies may not pay dividends to investors

・ Capital income is acquired when you profit from selling stocks in your portfolio

・ The basic rule to make capital income is to buy low and sell high

・ The rate of return can go as high as 20% per annum or as disastrous as the total loss of your principal

・ If your plan requires a high rate of return you may need to have a portion for stock investment in order to lift up your portfolio’s average return.

You can yet generate exceptionally high return by investing small principal

amount of money in common stock.

STUDY CORPORATE WORKINGS

#4

Investing in bonds and stocks requires you to spend time studying corporate workings.



・ Educate yourself on the financial reports of the companies・ Observe historical prices of the stock・ Read the companies’ annual report・ See their dividend policy・ Check the management team’s record of defaults

Investing in bonds and stocks requires you to spend time studying corporate workings.

PART 3Tips on Alternative Investment


PART 3 TIPS ON ALTERNATIVE INVESTMENT

A Mutual Fund is an investment vehicle that is managed by a registered investment manager to collect a pool of money from retail investors and invest it money in bonds, stocks and commodities.

THE MUTUAL FUND: another alternative investment asset will be analyzed for you.

WHAT’STHE MUTUAL FUND?

#1

Investment in a mutual fund should provide a risk adjusted return to your investment portfolio.

Mutual funds are a suitable option for:・ Investors who would like to invest in securities but do not invest directly in the market ・ Investors who have a limited amount of money to diversify ・ Investors who have no time to research on investment choices・ Investors who simply would like to benefit from the advantages of economies of scale as the transaction cost would be lower



CLOSED-ENDED FUND

OPEN-ENDED FUND

There are two types of mutual fund:

・ Do not allow investors to sell out the fund before maturity

・ Allow investors to sell back their shares of investment to the fund itself・ Much more popular as the liquidity is higher

THINGS TO CONSIDERBEFORE INVESTING IN MUTUAL FUNDS

#2A SIMPLE INVESTMENT GUIDE - for Beginners


RISK LEVEL ・ High rate of return allocates a large portion to stock

・ Do not want to take high risk invest in bonds

・ Diversify your investment invest in commodities (gold, oil)

MUTUALFUNDS PAY

・ The total return of the fund

・ The cost of management fees

A WISE IDEATO LOOK AT

・ The historical performance of the mutual fund

・ Your fund manager’s performance

SUITABILITY

RISK LEVEL

MUTUAL FUNDS PAY

THE HISTORICAL PERFORMANCE

OF THE MUTUAL FUND

YOUR FUND MANAGER’S

PERFORMANCE

SUITABILITY

・ The suitability analysis test comes up with a risk level you can

accept and then the relationship manager will offer you

a suitable mutual fund that matches your risk level to you

Same as investment in general, you need to consider these before investing in mutual funds

BENEFITS OF MUTUALFUND

#3A SIMPLE INVESTMENT GUIDE - for Beginners


1 You do not need to closely monitor every single security in the portfolio.2 You only need a small amount of money for a diversified portfolio.3 It is professionally managed by a registered fund manager and therefore should provide a risk adjusted return.4 It allows you to invest in market that cannot reach by yourself easily e.g. Foreign bond or foreign stock market.5 There are tax advantages in some countries.

THINGS TO BE AWARE OF

・ Historical performance does not guarantee the future performance

・ It is not principal protected unless stated.

・ You cannot selectively pick securities by yourself.

So when you’re ready, go to the closest bank branch and see the mutual funds they have available.

Different banks sell different mutual funds so you will have quite a variety to choose from!

PART 4Tips on Getting Some Gold into your Portfolio


PART 4 TIPS ON GETTING SOME GOLD INTO YOUR PORTFOLIO

As we continue our discussion on investment choices, it’s now time to talk about this ‘old school’ investment. If you are looking for an inflation-hedging asset and you are not in a hurry to use your money, gold might be a suitable addition to your portfolio.

Let’s talk GOLD!

GOLD PRICE FACTORS



#1

US DOLLARS ・ Gold price moves inversely with US dollars.

・ When US dollars appreciate the price of gold drops

OIL PRICES ・ When oil prices steep up, gold price also move up consistently

・ However, this is merely an observation and not a proven fact

STOCK ・ Gold has a negative correlation with stock

・ Having gold allows you to create a diversified portfolio

When you are looking at investing in gold, you need to note that the spread between bid and ask prices can be high. It is not usually a quick profit making investment but rather a long-term investment product. It is considered to be a suitable inflation hedging investment too.

It is important to know that records have shown that the price of gold is dependent on other market factors.

The price of gold does not move randomly, but rather moves with correlation to other

significant market figures.

HOW TO INVESTIN GOLD



#2

The good thing about investing in actual gold is its high liquidity.

WELL FRANKLY, YOU CAN BUY ACTUAL GOLD

This is as direct as it can get. However, this method requires you the pay

for the whole amount of gold bar or coins. It is of course can be

purchased in the form of accessories and jewelry for you to use.

However, there are transactions fee to be paid in order to create it and

you also need to keep it safe. The good thing about investing in gold is its

high liquidity. When you are in need of cash, gold can be sold to shops

very easily.

1




#2

Like stock, gold is also available in mutual funds.

LIKE STOCK, GOLD IS ALSO AVAILABLE IN MUTUAL FUNDS

・ There are two types of gold investment funds; one is a kind of mutual

fund that invests in gold stocks or gold mine owners. Another one is

the Gold Exchange Traded Fund, which is traded in the stock market

just like common stock but gives returns identical to holding physical

gold.

・ These types of funds invest purely in gold by buying bullions of gold

and trade. This is a good alternative for investors who want to invest in

gold but do not want to pay a large amount of money to invest directly.

・ It is also more practical as you do not need to keep the physical gold

safe and it can be traded with high liquidity just like physical gold.

2




#2

Gold options can be held in your portfolio until gold prices move up favourably.

THE LAST CHOICE IS GOLD OPTIONS AND FUTURES

・ This is not recommended for beginners and even experienced investors

must be very careful in investing in this asset. This is because the options

market allows you to speculate the price of the gold in both rising and

falling directions.

・ A gold option gives the holder the right, but not the obligation, to

purchase or sell a specific quantity of gold at a specified strike price on

the option’s expiration date.

・ However, the value of an option expires with time, so if the option

matures but the gold price is not as expected, this investment simply

evaporates from your portfolio.

3

PART 5Tips for Beginners on Investing in Real Estate


PART 5 TIPS FOR BEGINNERS ON INVESTING IN REAL ESTATE

For centuries, we have always had landlord and tenants. Many an elite families’ fortune has come from their ancestors’ good vision in purchasing land that has seen an increase in value over time. So what about the rest of us with no land heritage? Fortunately there is also hope for us to reap the benefits of real estate investment.

REAL ESTATE INVESTMENT isn’t reserved for the billionaires.

REAL ESTATEMUTUAL FUND

#1

If you see this as a good way to receive return on your investment but do not wish to incur the full cost of purchasing property, you have the option to invest in a mutual fund with the return derived from the property. There are two types of mutual fund:

It may seem like Freehold is a better option, this may not always be the case as both types of mutual

funds can be sold at any time and investors can make a profit when prices are hiked up.



FREEHOLD MUTUAL FUNDS LEASEHOLD MUTUAL FUNDS

・ The fund purchases the property and rents it out to tenants

・ Investors will receive money from the rent

・ If the fund decides to sell the property afterwards, investors will receive money from the sale as well

・ The fund only purchases the lease of the property

・ Investors receive return from the profit

・ Investors do not receive any capital gain as the property is returned to the owner

REIT (REAL ESTATEINVESTMENT TRUST)

#2

REIT is an investment trust similar to mutual funds, but it is more flexible. 90% of taxable profit from the property must be paid to REIT holders.

REIT is an investment trust similar to mutual funds, but it is more flexible.



・ The return may be similar to other mutual funds・ The regulations on types of properties & their management scheme may differ・ REIT can also be sold at any time

INVESTMENT AS A DIRECT PROPERTY OWNER

#3

As the owner, you are responsible for the mortgage, taxes and other maintenance expenses incurred by the property. Property values in prime real estate areas can generate high rent income and may appreciate significantly over time.Compared to stocks or bonds, investment in physical real estate requires more funding and you also take on the risk that there will not be any tenants interested in your property.

Found a property that you likeFind out the selling price and contact a bank to get a mortgage loanBecome the owner of the propertyFind tenants to pay the rent to cover your monthly mortgage paymentIn the long run you may even consider selling the property when the price is high enough



THINGS TO CONSIDER AS A PROPERTY OWNER

・ The attractivenss of the expected profit

・ The risk of having to endure these potential burdens

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5

THE PROCESS OF INVESTING A PROPERTY

TIME TO PICK APROPERTY

#4

Whether you invest in the real property or in papers, the most crucial part of both is to study the properties.

Just keep in mind that like any other investment, you need to do some research first.



・ The location

・ The vacancy rate of the area

・ The construction company.

・ The property prone to natural disasters

・ Traffic jams

・ Other issues that only the people in the area would know

THINGS TO CONSIDER TO FIND UNIQUE SELLING POINT

A SIMPLE INVESTMENT GUIDEA SIMPLE INVESTMENT GUIDE - for Beginners

THE ENDTHE END

a simple investment guide for beginners

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