TYPE OF BASIC INVESTMENT

What are the types of investment out there?

1.) Bonds 

• Also known as fixed income securities.
• When you purchase a bond, you are lending out your money to a company or government. In return, they agree to give you interest on your money, and eventually pay you back the amount you lent out.
• Bond are practically have a guaranteed return and risk free if you are buying from a stable government, but due to little risk, it also gave small returns.
• Bonds is one of the lowest return on investment instrument due to low risk.

2.) Stocks (Saham)

• Also known as equities.
• Buying it would make you become part of the business owners.
• Entitled you to vote at shareholder's meeting and allows you to receive any profits or dividends allocated to it's owners.
• Very volatile, fluctuate on daily basis.
• No guarantee of profits when buying, not even dividends. Most of the profit source comes from the stocks value goes up.
• Relatively HIGH RETURNS, comes with the risk of losing some or all your investment.

3.) Mutual Funds (Unit Trust)

• A collection of stocks and bonds.
• When you buy a Mutual Fund, you are pooling your money with a number of investors, which enable you to pay a professional manager to select specific securities for you.
• Each mutual fund have their own strategies example large stocks, small stocks, government bonds, companies bonds, stocks and bonds, stocks in certain industries, and stocks in certain countries, etc.
• No time or experience needed to invest as you already have a professional manager to manage your funds.
• Relatively higher return than bonds, and lower return than stocks, but with a manageable risk.
• The risk will be lower the longer your investment period due to Dollar Cost Averaging (DCA)

THE SECRET TO WEALTH

Whether you want to invest in shares or across a broad range of asset classes, unit trust funds provide you with one benefit that can be very hard for individual investors to achieve - diversification. 

Many people invest but only some become wealthy. 

Why?

The mistake many people make when investing is that they treat their investment as saving. 

Saving Versus Investing

So what is the difference between saving and investing? Saving is what you do to build up funds for something, like a holiday, and when you have the amount saved you withdraw your capital from your investment and spend it on the holiday. After the holiday you have nothing left, and start the process all over again. 

But building wealth is different. People who want to build wealth invest their money for the long term in 'growth assets' such as shares and property. 

Their strategy is to spend the income that the investment produces, but to leave the capital invested. They don't withdraw the capital, so it stays there growing and compounding, and producing more and more income each year. 

If you do this it will take you quite a while longer initially to get to your investment goal , but in the long run you will find that the extra wait has been worth it. As the years go by, you will have an increasing additional income stream from your investments and your standard of living can rise accordingly! 

Should I continue to retain capital in retirement?

Retaining your capital is a good strategy to use for wealth accumulation. Of course when you stop working later in life, your strategy may change. At that point it can often be beneficial to start drawing on some of your capital as well, whilst still ensuring that it will last for as long as you need it.