• Jearn Xiu Lee

5 Types of Investment to Consider When YOU Invest

Saving isn’t the way to go. Investments are!

You might have realised that if you were to just save what you earn from working, you wouldn’t be rich by the time you retire. If you had, congratulations on realising this; and for those who have not realised and wonder why, here’s why: Economically, if the inflation rate is higher than the interest rate that the banks are paying you, your purchasing power would be lower, even though you find your account balance to be higher.


Inflation rate is a measure of the rate at which the average price of the goods and services of an economy increases over time .


Hence, your rate of return should match or be higher than the rate of inflation otherwise you might not be able to buy the same amount of services.

Are savings essential? Yes, you definitely should have some money saved as you never know when you might need it, as some of your investments might not be converted back to cash easily. It is also wise to not put all your money into one investment as you might lose it all if it turns out to be a bad investment. Hence, diversify your investment portfolio to reduce the risk by going for multiple types of investments.

Here are a few types of investment which you could look into. The information below just scratches the surface of what you need to know; a detailed explanation might be posted in the future. Anyhow, always do your own research before investing.

1. Unit trust

Unit trust is a type of investment in which a fund manager pools up an investor’s money and invests it in the selected asset. There are many types of trusts such as equity funds, balanced funds and many more. Equity funds are basically stocks which are deemed to be risky while balanced funds are a balance of risky and risk-free assets.


Choosing the type of trust would depend on your risk tolerance; investors with a higher risk tolerance might consider equity funds, while a medium-risk tolerance investor could consider balanced funds which have both a balance of risky and risk-free asset.

This type of investment can be considered as a good start as some trusts may not require a huge starting capital to invest in. Since it is a pooled fund, there is more cash to diversify its investment portfolio which would decrease the risk. However, do the necessary due diligence on the investment to make sure it is doing well and not a pyramid scheme.

2. Invest in stock market

The stock market is a place in which you would be able to buy or sell the shares of a company. When compared to unit trust, this would be slightly riskier as you might not have the capital to diversify as much as unit trust would allow you to.

This investment might require you to keep yourself updated on how the market is performing and do the necessary research to select a company which you have confidence to invest in. For those who might not know what to invest in, you might consider buying some blue chip stocks (stocks of a huge company with great reputation) since it should be relatively stable.

3. Bitcoin

With all the hype in 2017 for having its all-time high and its 2020’s halving, I’m sure that most of you would have at least heard of what Bitcoin is. To simply explain, it is a decentralized digital currency with a limited supply that was created in 2009. Unlike traditional currencies which are backed by governments, Bitcoin is backed by blockchain. “Block” in this word represents the digital information, which is stored in public database as the word “chain”.

The high volatility of bitcoin makes it a very risky investment. It is so volatile that once, on 12th March 2020, it dipped by 39.5%. If you were to long (own) it without a stop loss with leverage (borrowed funds at multiples of what you deposit), you could have lost it all. However, according to an analysis, holding 3 years and 8 months will have a guaranteed return. These are historical data and whether history repeats itself will be up for you to decide.

4. Real Estate

I’m sure if you were asked to say the first word that came to your mind when talking about real estate investing, most of you will probably say “EXPENSIVE!” Yes, out of all the investments mentioned, real estate is one of the most expensive investments that you could go for.


The return on investment for real estate is relatively low, however you might have a steady stream of income if you have a loyal tenant. Do also take note that if you were to take up a loan, it would take more than 10 years if you only repay the loan using the rent received. As we know that land is scarce, this means that the value of the property or land will keep rising, giving you its capital gain.

5. Gold / Commodities

There are 2 ways to look at gold, it could either be a liability or an asset. You might be wondering how it would be a liability since it’s an appreciating item. Think again, when buying gold as jewelry it tends to be more expensive and if there is an urgent need of liquidation (turning into cash), the worth would be way lesser than liquidating gold coins or bars.

We know that gold is a limited item since there is limited land for gold to be found. Keeping some basic economics in mind, we know that if supply is limited and demand keeps increasing, price would go higher. Historical data has shown that most of the time, the price of gold has been increasing. It also tends to inversely correlate with the economical situations, as people lose confidence in bank notes.

Do note that I am not a financial expert, and what I have shared with you above is some knowledge that I have learned from the past few years. I hope you have enjoyed reading and have learned something new from this article. If you have any questions, the comment section is open for discussion and don’t forget to subscribe to stay updated on our new articles! Thank you :)


Sources:

1. https://www.investopedia.com/terms/i/inflation.asp

2. https://www.investopedia.com/terms/b/blockchain.asp

3. https://cointelegraph.com/news/new-analysis-every-bitcoin-holder-makes-a-profit-after-1-335-days


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