A Unit Trust follows an unincorporated mutual fund or trust structure that allows funds to hold assets and pass profits thru the individual owners. Money is pooled with the money from other investors and it is managed by a fund manager. The portfolio of assets is set according to the fund’s investment strategy and objective. Hence the success of a unit trust depends on the capabilities, expertise, and experience of the management company.
In Singapore, local and foreign unit trusts offered are regulated as collective investment schemes.
WHY MUST YOU INVEST ON UNIT TRUSTS?
Since funds are invested in an array of assets, one advantage of investing in unit trusts is diversification. In the current unpredictable market, this potency helps investors to adjust with the ups and downs without having to worry too much about the performance of a single stock. Generally, unit trusts provide you with more safety in terms of the performance of your investment.
WHAT SHALL YOU CONSIDER BEFORE AND AFTER INVESTING?
Before investing on unit trusts, you must assess the type offered as well as its fees. Also, you must examine the fund manager himself. Determine if the fund manager has the sufficient experience, skills, and resources to lead you to success. Look beyond the short-term performance and look into one’s long-term track record.
After investing on unit trusts, you must regularly monitor if its performance meet your expectations. Then monitor the economic and political risks of the markets you invested in.
WHAT IS ITS NET ASSET VALUE?
The price of each unit is based on the net asset value divided by the number of units outstanding. It is typically calculated daily to reflect changes in the prices of the investments maintained by the fund.
HOW CAN YOU BUY THE UNIT TRUSTS?
Aside from cash, you can purchase unit trusts by the CPF Investment Scheme (CPFIS) and the Supplementary Retirement Scheme (SRS). Furthermore, some insurance companies offer investment-linked insurance policies.
Image Credits: Ken Teegardin via Flickr (CC Licence Attribution-ShareAlike 2.0 Generic)
More than just a sparkling indulgence, investing on jewelry is an embedded tradition in many Asian cultures. In fact in Indian and Chinese cultures, jewelry can be given as gifts as individuals approach the marrying age.
To these cultures, investing in gold jewelry is a sound investment. Truly, gold has continued to rise, up to five-fold in a decade, in value despite the worldwide economic slowdown.
However, anyone who is considering jewelry as a means of investment needs to carefully contemplate on its advantages and disadvantages.
Here are some of them:
LABELS
It is not just about what jewelry pieces you buy but where you buy them. Pieces with designer labels are more susceptible to the erosion of value (over time) as you are paying mainly for the marketing costs.
For example, a sterling silver necklace sold by a lesser known retailer in the third world country may cost about S$15 while a sterling silver necklace sold by Tiffany & Co. in the first world country may cost about S$400! They are made of the same material but the branding and craftsmanship attached to it makes the difference.
PORTABILITY
Jewelry is an investment that you can wear. Whether it be gold rings, silver necklaces, and diamond earrings, you can always carry your wealth around wherever you go.
Image Credits: pixabay.com (License: CC0 Public Domain)
PRICES
The craftsmanship can add up to 30% on the price of the actual jewelry pieces. So if you want to benefit from the full price of gold alone, you can invest in products and funds that are associated to gold. For example, you can consider SPDR Gold Shares as they are backed by gold exchange-traded fund.
VINTAGE
Some pieces from the past are still fashionable today. Vintage jewelry from 1920s to 1930s have strong linear designs incorporating diamonds and platinum that can very much look modern!
Furthermore, second-hand jewelry (e.g., at auctions) are less expensive than contemporary pieces as they are not affected by the mark-up of the retailers. If you purchase this from a source that has low costs, it can prove to be profitable to own.
TRADITIONS
As said above, a positive side in jewelry investment is keeping one’s heritage. In fact, India is one of the world’s largest gold market due to the cultural demands during Deepavali and wedding season (i.e.,jewelry may be offered as wedding dowry).
The embedded notion is that jewelry retains (if not increases) its value over a long period of time. Although, this is not always the case.
Image Credits: pixabay.com (License: CC0 Public Domain)
The value of investments and gains can go up as well as down. Sometimes your may get back a value lesser than the amount you have invested. This is why it is recommended that you seek expert financial advice first before making any investment decisions.
Stock investing is not for everybody. But with a little homework and planning it is possible to select a stock in a manner that reduces your risk and puts you in a position to benefit when its price rises.
There is a great deal of information available on publicly traded companies that can help you decide if its stock is worth buying. But it is a challenge to sift through all the data to arrive at the figures that tell you the real story about its performance and its prospects.
As an investor, the longer you keep your money on the account, the more you will make out of it. Elevation of your wealth each year is possible because of COMPOUND INTEREST.
With Compound Interest, you will not only earn interest on your principal deposit but also on any interest that is credited to your account. It helps your money to grow at an accelerating rate!
To better understand the concept, here is an illustration:
Say you invested S$50,000 to an account with a 5% interest per year. With the gains you made from compounding, how much would you earn in 3 years?
Year 1: S$50,000+ (S$50,000 x 5%) = S$52,500
Year 2: S$52,500+ (S$52,500 x 5%) = S$55,125
Year 3: S$55,125+ (S$55,125 x 5%) = S$57,881.25
Compounding adds up faster than you may think. As you can see, you earned S$7,881.25 in just three years!
Aside from its definition, here are some things you really need to know about Compound Interest:
1. TIME IS OF THE ESSENCE
The longer you keep your money invested, the greater the rate at which your initial investment produces returns. This is why it is advantageous if you started young. And if your “younger years” passed, the next best thing is to start now.
Calculate the possibilities of your accumulated wealth through a Compound Interest Calculator that is available here.
2. PEOPLE FROM ALL WALKS OF LIFE CAN BENEFIT FROM IT
You do not need to be as financially literate as the people on Wall Street or as rich as Bill Gates because almost any investment will earn a Compound Interest if you leave your account untouched. The same principle and rules apply whether you invested S$1,000 or S$1,000,000.
3. TAKE CALCULATED RISKS
Yes! Compounding is powerful in almost all the circumstances but, you must not fall into the temptation of getting higher returns through higher risks. Unless you know what you are doing, taking on the higher risks can potentially lead to a chain of bad decisions from now until you retire. It is important to take well-informed and calculated risks to prevent destroying everything you once built.
4. PATIENCE IS TRULY IMPORTANT
Compound Interest requires you to sacrifice today to obtain its benefits tomorrow. It only works if you allotted time and effort in growing investment. The results may seem small at first but, you must persevere.
Image Credits: pixabay.com (License: CC0 Public Domain)
Certainly, its future rewards are greater than the sacrifice.
Peter Lim is one of Singapore’s best known billionaires. Besides owning the image of Cristiano Ronaldo, the man is famed for his candid sharing and no nonsense remarks. Here’s some of the things we can pick up from him, even if we’re not high flying stock traders:
1. It’s Easier to Build than to Trade
“It’s very difficult to make money from trading. People who get rich are those who buy a company, build it, run it. Most of the traders, they come, they make money, because they have this gambling instinct. They take the money and spend it. The minute they lose money, they got no money to pay up.”
For those of you into equities, it’s a sober comment on stock trading. Most people won’t get rich doing it. If you have significant capital, maybe it’s better to consider setting up a small side business first – even if you don’t succeed, you’ll at least have a better understanding of how they operate.
For those of you who aren’t into equities, take it as a personal finance lesson. If you want to have a consistent income stream, don’t count on things like the resale value of your flat, or your gold and watch collection. You’ll have a more reliable shot at wealth by building a small side-business (however many attempts it takes).
2. Always be Braced for Losses
When you are holding stocks, if it goes up, don’t be too happy; when it goes down, don’t be too sad. Otherwise, how? Your life will also be fluctuating and you’ll die of a heart attack.
If you really lose sleep over it, maybe the best way is to keep the money in the bank.
What would happen if you bought S$5,000 worth of shares today, and you find they’re worth S$3,000 tomorrow? Would you have the ability to simply move on and chase the next dollar?
If the answer is no, you haven’t got the right mindset to get rich through trading. It is important that you have the psychological resilience to accept losses and gains (which carry their own perils, like overconfidence). It will also impact your career and happiness, if you feel a need to track your stock prices every 30 minutes.
If you don’t have the required sense of calm, then don’t get involved. Get a financial advisor to handle your investments, or keep it in your CPF (you’ll get better returns than from the bank).
3. Think Long Term When Investing
You have to invest with a longer-term mindset. You buy a good stock, leave it there for 10 years. Come 10 years, this dollar can be many, many multiples. I think the trick is really to think long-term. You may not have a lot of money, but you have a lot of time. The minimum length of my investments are five to six years, if not 10 to 12 years.
This is somewhat related to point 1. If you’re eager to trade and go for short term profits, you might get rich – but you’re making it much harder to do so. Remember, every trade requires two correct decisions: when to buy, and when to sell. Even if you get one right, you are likely to get the other one wrong.
For those of you who aren’t investing, this should be a call for you to start. Even a small amount of money, invested over 10 or 15 years in a reliable asset, can amount to significant sums.
If you invest just S$200 a month, at a return of 5% (achievable with most index funds and insurance policies), you would have over S$59,000 at the end of 15 years.
4. Don’t Just Work, Pay Attention to How Your Company is Run
Mr. Lim didn’t actually get a huge head start. Some of his early jobs were waiter, cook, and taxi driver. It was only much later that he became a stockbroker. During his rise, Mr. Lim learned a lot from the fast food chain Red Rooster, where he worked as a cook. Systems, management processes, logistics, accounting, etc. are all instrumental if you want to understand how well a business runs, and will come in useful when you want to invest or run your own.
So rather than just doing your job, poke your nose around. Find out how your company’s business model works, where it fails and succeeds, and which are the skills critical to its running.
5. It’s About Making a Good Deal, not a Good Sale
You make money when you buy, NOT when you sell.
Value investors already know this, but it’s worth a reminder. Rather than buy something and hope it grows in value, buy it cheaper and wait for it to return to its usual price. We especially love this one, because it’s so applicable in personal finance – taking the time to look for a better deal is the surest way to “make” money. Whether you’re buying a second hand car, or buying a melon at the supermarket.
One way to save money is to pay with a cashback credit card, which gives you a small discount on your purchases when you meet a minimum purchase amount. As long as your bill is paid in full each month, you always avoid paying full price. SingSaver.com.sg has a list of good cashback cards to get you started.
Anna Agoncillo
MoneyDigest
