Looking To Diversify Your Investment Returns? Here Are The Top Options

Achieving your financial goals through investing remains one of the most effective ways to build wealth. Whether you’re planning for retirement or just want to secure your future finances, having a diversified portfolio is key to delivering not only strong returns but also consistent, stable growth over the long term while protecting your investments from market uncertainties.

Most are aware of the traditional form of investments that people would recommend. This can be in the form of real estate/properties or equity shares (more commonly known as ordinary shares). But if you’re looking to diversify your portfolio further, there are alternative assets like P2P investing that you can explore.

In this article, we’ll go through some of these investment asset classes and how some can be an attractive option for you to add to your portfolio.

The 6 investment options to diversify your portfolio

Let’s explore the different investment options that you can add to your portfolio and how they compare to one another. It’s important to remember the risks that come with these types of investments, which is why you should always invest based on your risk tolerance.

1. REITs

A Real Estate Investment Trust (REIT) is a fund or a trust that owns and manages income-producing commercial real estate (shopping complexes, hospitals, plantations, hotels, and office blocks).

REITs work as an accessible option for investors who want to invest in a wider range of properties without tying up all their funds to purchase them. Additionally, they are more liquid than physical properties since you’ll be trading in shares which can be converted to cash easily.

However, some of the drawbacks include inconsistent returns as REIT performance is tied to the performance of the property market and their price can be affected by market factors such as changes in the interest rates.

For example, during the 2020 pandemic, the global REIT market experienced significant volatility and the iShares Global REIT ETF (REET) reported a total return of -10.59% for 2020, reflecting the market’s sensitivity to economic shifts.

2. Unit trusts and mutual funds

Unit trusts or mutual funds are a form of collective investment that pools together funds from other investors to invest in a portfolio or securities of other assets. It remains the most popular and accessible form of investment, especially for those who are just starting their investment journey.

One of the major benefits of investing in unit trusts and mutual funds is the steady returns they provide to investors. There is also a wide range of unit trusts available that can cater to different risk tolerances, such as Sukuks for conservative risks and Greater China Funds for more seasoned investors.

With trust funds or mutual funds, some of the drawbacks include needing to pay a fee to fund managers who manage your funds and lower returns at around 3% – 5% p.a. All this ultimately leads to you earning less compared to other investments.

3. Gold

Gold stands as the most popular precious metal to utilise as an investment and there are various ways that you can invest in it (purchasing physical gold, gold mining stocks, etc.).

What makes gold attractive as an investment vehicle is that it acts as a hedge against inflation and economic uncertainty. And due to the finite nature of gold, it will always have value as a precious metal.

A drawback of investing in gold is that, unlike other investments, it does not generate regular returns such as dividends or interest. While you can invest in exchange-traded funds (ETFs) that are gold-linked, owning gold as a tangible asset means you’re likely to generate profit by selling your gold at a higher price than when you bought it.

4. KLCI

The Kuala Lumpur Composite Index (KLCI), now known as the FTSE Bursa Malaysia KLCI, is a stock index that combines 30 of the largest companies listed on the Main Board of Bursa Malaysia.

If you’re someone who can understand the stock market, you have the potential to get high returns with KLCI. And as a liquid asset, you can easily trade and cash out to receive your funds quickly.

Investing in KLCI, however, makes you more susceptible to market volatility. Unless you have a high-risk tolerance and are familiar with stock market index calculation, it’s not advisable to put all your funds in it.

5. Fixed deposits

A fixed deposit is a type of bank account that promises investors a fixed rate of interest. In return, the investor agrees not to withdraw or access their funds for a fixed period of time. At the end of the investment period, the investor will receive their interest.

The guaranteed returns of fixed deposits make it a very stable and low-risk investment. It’s often a better place to keep your money in a fixed deposit as they generally offer higher interest rates compared to savings accounts.

Given its conservative nature, however, fixed deposits offer the lowest returns compared to other investments at 3% to 5% p.a. And there’s also the possibility of losing your interest returns if you were to withdraw your money before the tenure ends.

6. P2P investing

Peer-to-peer (P2P) investing is an innovative form of investment vehicle that lets you provide financing to Small and Medium Enterprises (SMEs).

P2P investing generally provides higher net returns compared to other investments, with some reaching as high as 10% p.a. It also serves as an alternative investment class that can help you diversify your portfolio beyond stocks, bonds, and real estate.

Just like any other investment, there are risks associated with P2P investing. However, depending on the platform, there are ways to mitigate these risks.

Why P2P investing platforms stand out for investors

As a modern alternative to traditional investment, P2P investing allows you to invest in local businesses directly through online and digital platforms. And as the industry continues to mature, it’s worth investing or including P2P investments in your portfolio.
But to give you a better understanding of why P2P investing, and platforms such as CapBay P2P, stand out compared to other investments, here’s a quick overview.

Better protection for investors against market volatility

Traditional asset classes such as equities, bonds, or commodities are vulnerable to market volatility. In comparison, P2P investments offer some protection against such fluctuations as they primarily rely on the payment capabilities of SMEs rather than broader market trends.

Platforms like CapBay P2P use rigorous, AI-driven credit assessments to identify trustworthy borrowers who can consistently meet their repayment obligations. Their proven track record, with a 0.3% default rate—the lowest in the industry—highlights the effectiveness of these assessments, offering investors greater confidence in the borrower’s ability to repay.

Potential for higher returns on your investment

In addition to portfolio diversification and security features like credit checks, P2P investing can offer competitive returns compared to other forms of investment.

Using CapBay P2P as a benchmark, the platform has consistently achieved average net returns of 8.4%* per annum, after accounting for all fees associated with P2P investing. The table below illustrates how P2P returns compare to other asset classes.

	Jan - Nov 2024	2023	2021 - 2023	2020 - 2024 Nov	2021 - 2023
Asset Classes	YTD	1 Yr	3 Yr*	Cumulative	3 Yr-Cumulative
CapBay P2P	8.40%	8.26%	8.19%	41.97%	23.46%
KLCI	9.72%	-1.31%	-3.68%	-0.51%	-10.60%
Maybank 12-month fixed deposit	2.41%	2.85%	2.31%	11.57%	6.94%
Gold	27.09%	4.35%	-2.21%	37.13%	-4.84%
Money Market Fund	3.15%	3.62%	2.62%	13.89%	8.06%
S&P 500	27.19%	24.73%	11.19%	85.17%	28.89%
REIT	-15.18%	-5.17%	-0.52%	-22.76%	-0.90%

*Average 
Total Returns % through Nov 2024, Asset classes ranked by 3-year average returns

It’s important to note that past performances are not indicative of future results and that you should always do your due diligence before making investment decisions.

Diversify Further with Alternative Investment Options

Beyond the conventional avenues of diversification like stocks and real estate, P2P investing offers a unique opportunity to spread your investment across multiple industries and businesses. Not all P2P platforms provide this flexibility, but certain platforms enable automated features that diversify your portfolio across various sectors with minimal effort.

For instance, some platforms, like CapBay P2P, offer an Auto Invest feature that automatically allocates your funds across 30-40 financing notes in diverse industries such as construction, hospitality, and more. This ensures your investments are not only diversified but also strategically reinvested to maximise potential returns while reducing sector-specific risks.

Shariah-Compliant Investing: Aligning With Your Principles

For investors seeking ethical or Shariah-compliant investment options, some P2P platforms cater specifically to these needs. Shariah-compliant P2P investing adheres to Islamic principles, ensuring transactions are free from elements such as interest (riba) and excessive uncertainty (gharar). This makes it an appealing choice for those who value investments that align with their religious beliefs.

CapBay P2P further enhances this by offering the option to invest in financing notes that strictly adhere to Shariah guidelines. Investors can support businesses operating in ethical sectors while avoiding those involved in activities prohibited by Islamic principles, such as gambling or alcohol production. This tailored approach provides peace of mind for investors seeking both financial returns and alignment with their values.

Trust in a Licensed and Regulated Platform

In today’s digital world, the rise of investment scams has made it more critical than ever to carefully vet the platforms you trust with your money. P2P investing, however, stands on solid ground as a legitimate and regulated option, provided you choose platforms that are licensed by the Securities Commission Malaysia (SC).

Currently, there are over 13 registered and recognised P2P operators under the SC, each adhering to strict regulatory standards to protect investors and ensure transparency. One of the largest and most trusted among them is CapBay P2P. With its SC approval, CapBay P2P provides investors with the confidence and security to diversify their portfolios without the worry of falling victim to scams.

Building your future wealth with diverse investments that can provide stable returns

To build sustainable wealth and achieve your financial goals, you’ll need a diverse portfolio of investments that prioritise stable returns.

Through platforms such as CapBay P2P that offer the potential for high returns without excessive risk, it’s the best place to start your investment journey or further improve your portfolio diversification.