Monday October 16, 2006
YOU have RM500,000 cash in your bank and an array of investment managers, financial advisers and other intermediaries offering you a huge variety of investment options.
How much return do you want? Capital guaranteed? Which markets do you want to invest in? Is it a good time to buy or sell certain equities?
The decisions could be endless and daunting to many investors, said S&P NetWorth Advisors Sdn Bhd chief executive officer Paul W. Chan.
He said there were mainly two sources of ideas for investment decisions – external and internal.
External sources include current news, for instance high oil prices, events such as the North Korean nuclear test, magazine articles and brokers’ recommendations.
The internal-source investor, on the other hand, focuses on his own financial needs and a personalised long-term strategy designed to meet those needs.
His buy or sell decisions are based on what is required to ensure that his financial holdings are in accord with the game plan.
“Investment professionals are only used to assist in executing decisions already made. Thus, current market fads, trends and so-called expert opinions are largely irrelevant to such investors,” Chan said.
He said investment decisions were unlike other consumer spending decisions, which could be influenced by marketing and advertising activities.
One frequently asked question is a variant of “Oil prices and gold are sky high, and I’ve read that many experts are sounding an alarm about stocks. Should I sell my funds?”
Investor decisions on whether to cut stock holdings would depend on the market’s volatility, what the business magazines say or the direction of the interest rate regime, Chan said.
“External sources will never tell you whether it’s a ‘good’ time to sell stocks as no one knows what the market will do in the coming months,” he added.
While current events might provoke a review of one’s personal list of questions, they should not dictate the answers, Chan said, adding that investors should take ownership of their investments.
“Watch out for the high entry cost of investment, understand its goals and time-horizon, the investors’ risk appetite, their age groups and portfolio diversification. Have a simple personal checklist to jumpstart towards investing with peace of mind,” he said.
Singular Asset Management chief investment officer Teoh Kok Lin said investment products that used to be exclusive to certain investors were now “brought to the level of the laymen given market liberalisation.”
For example, retail investors could now invest in commercial properties – which were not so easily accessible in the past due to the high capital required – via real estate investment funds (REITs).
“Such a trend pushes investors to learn faster and adopt a better investment habit. While volatility risk is always present, investors have to understand their own risk appetite and improve on where and how to put their money,” Teoh said.
Aseambankers Malaysia Bhd chief executive director Surachet Chaipatamanont said products were “retailised” for better accessibility and this included Islamic offerings.
Islamic products are offered across the board for retail investors. The breath and depth of the market allowed “investors of all types to be offered Islamic alternatives,” he said.
Chaipatamanont added that Islamic products, compared with conventional ones, provided more competitive pricing and “in most cases, higher returns.”
HLG Asset Management chief executive officer Richard Lin Kwok Wing said the investment options for a fund of RM500,000 could include equity based unit trusts, bond based unit trusts and balanced funds.
Hong Leong Unit Trust has 19 unit trust funds under its management, offering a diverse product range including a selection of syariah-compliant unit trusts, growth funds, equity funds, balanced funds, sectoral funds as well as bond funds.
He said diversification was essential for any investment type to enable investors to customise the investments according to their objectives.
For example, an aggressive investor could have higher exposure to shares and lower exposure to bonds and money market instruments while an investor with moderate risk could opt for a very small degree of exposure to shares with bonds and money market comprising the bulk of their portfolio, he added.
Lin said investment decisions would depend on three factors – first, the risk appetite of the individual. “Risk averseness of investors varies in accordance to their age, income and marital status,” he said.
Second, the investor’s investment objectives would be taken into consideration, emphasising the creation of value, return or growth. The third factor would be the investment horizon – the investor’s short, medium or long-term goals.