Mutual funds and real estates

4) MUTUAL FUNDS

An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.

Investing in mutual funds offers benefits you won't get from trading individual stocks and bonds on your own. It has less risk through more diversification. One mutual fund can invest in hundreds and sometimes thousands—of individual securities at once. So if any one security does poorly, the others are there to help offset that risk. 

Beside that, it has professional management so that you don't have to keep track of every security your mutual fund owns. The fund is managed by experts who take care of that for you.

Moreover, it is convenient because you can buy and sell mutual fund shares online or by phone and set up automatic investments and withdrawals.

4) REAL ESTATES

Real estate investment is the most common investment that most Malaysian make. Real estate that generates income or is otherwise intended for investment purposes rather than as a primary residence. It is common for investors to own multiple pieces of real estate, one of which serves as a primary residence, while the others are used to generate rental income and profits through price appreciation. The tax implications for investment real estate are often different than those for residential real estate.

Common examples of investment properties are apartment buildings and rental houses, in which the owners do not live in the residential units, but use them to generate ongoing rental income from tenants. Those who invest in real estate also expect to generate capital gains as property values increase over time.

 References : http://www.investopedia.com/

Stocks and Bonds

1) STOCKS

Stocks represent ownership in companies, and stock markets are the places where stocks are bought and sold. When you own a company’s stock, you own part of that company. If it does well, your stock will do well. 

You can beat the market if your stock is good; if your stock is excellent, you can really beat the market. You can pick the stock in an industry you understand. Also, your money is liquid, meaning you can access it at any time by selling your stock.

Unfortunately, if a company does poorly, so does your stock. Because a stock isn’t diversified, that can mean disaster for you (although you can easily reduce your risk by picking bigger, solid companies).

2) BONDS

Bonds are typically seen as a lower-risk accessory to a stock portfolio. But bonds aren't just for those nearing retirement: They have a place in every portfolio. The question that confuses investors is just how much of their savings should be in bonds.

You know exactly how much you’ll get when you invest in a bond. You can choose the amount of time you want a bond for (1 year, 2 years or 5 years). Longer time periods yield you higher return rates. Also, bonds are extremely stable, especially government bonds. The only way you’d lose money on a government bond is if the government defaulted on its loans–and it doesn’t do that, it just prints more money.

Unfortunately, bonds have significant disadvantages. Because they’re so stable (lower risk), the reward on an excellent bond is dramatically less than an excellent stock. Investing in a bond also renders your money, meaning it’s locked away and inaccessible for a period of time. 

Actually, it’s old people and rich people who find bonds most attractive. Old people need to know exactly how much money they’re getting next month for their medication or whatever old people do; they can’t stand the volatility of the stock market because they generally don’t have much other income to support themselves.

Types of investment

Knowing how to secure your financial well-being is one of the most important things you’ll ever need in life. You don’t have to be a genius to do it. You just need to know a few basics, form a plan, and be ready to stick to it. There is no guarantee that you’ll make money from investments you make. But if you get the facts about saving and investing and follow through with an intelligent plan, you should be able to gain financial security over the years and enjoy the benefits of managing your money. There are many different ways you can go about making an investment. This includes putting money into stocks, bonds, mutual funds, or real estate.

Investment

Investment is an action that you put something (time, energy or matter) in to get more. For example in finance, if you invest money, you pay it into a bank or buy shares so that you will receive a profit. And in general, if you invest time, money or energy in something, you try to make it a success. For instance, our parents send us to the tuition centre is also an investment. They pay for or tuition fees and spend their time and energy sending us to the tuition centre so that we learn more and excel in our examinations and we can get a better job in the future. After getting a great job, we will earn more than the tuition fees which means that this investment is a succeed. (So remember to thank your parents sending you to tuition ;)   

Save smart

I ever read an article about a humpbacked old man years ago. The old man lived alone in a simple old house where nobody ever come to visit him. He was a scavenger and was living a poor life. The villagers did not know where he came from or even his name. 

One day, the old house came out with a strong rotten smell. The villagers called the police. They broke into the house and found his dead body. While the villagers was helping to clean up his house after his death, they found out that this old house contained a lot of containers where the old man kept an approximately 2 million ringgit in. These containers were separately hidden. The villagers felt shocked and were asking why should an old man with such amount of money kept his cash at home and lived such a hard life.

  

From the story, we should know that money is not for us to keep but for us to cycle it and know how to enjoy by using it. And of course enjoy using it does not mean we can squander our money. Hence, we must be smart in saving and be brilliant in spending.

How to 'grow' money in the bank~

We can just save our money in the piggy bank but we can't make the money 'grow'. In order to increase our savings, we may try few secure and simple ways of saving through the bank.

1) Savings Account

Save your money in a savings account in any bank. You may earn interest which usually credit in your account half yearly. The interest rate may be different depending on how much you have saved in your account. The interest rate for savings account is much lower than others (maybe 0.25% per year) It is suitable for those who may withdraw often (of course you have to deposit in your money XD) However, the interest rate for Junior Savings Account might be higher, which is approximately 3.10%. Hence, remember to train your kids to start saving when they are young.

2) Fixed Deposit Account

Fixed deposit is the most secure investment choice which almost contain 0 risk. It has high interest rate which vary on the amount you deposit too. The minimum placement is RM 500. The interest rate for fixed deposit account is usually 3.10% and above which might vary according to the economic status. You may choose the period you want to deposit in the account with a minimal of 1 month.  The longer the tenure, the higher the interest rate per year. During the period of tenure, you are not allowed to withdraw the money otherwise you might loss all the interest you have earned. It means that your money is temporarily bond to the bank and the time your money are 'released', they pay you the interest. For instance, Ali places RM 2000 in his fixed deposit account and he chooses a period of 12 months. The interest rate for a tenure of 12 months is 3.30% per year. Hence, after 12 months, he will return to the bank and withdraw an amount of RM 2066.