As with any task you embark on, the first step is to understand your goals, which in this case is your target returns. What range of ROI are you looking to build in your portfolio?<\/p>\n
If you expect to get 8% on your annualized investment returns, you don\u2019t want to put all your units into bonds and money market funds. A portfolio like this is very unlikely to give you an 8% return over the long run.<\/p>\n
Instead, your portfolio should comprise at least 50% equity funds. This may sound like obvious advice, however, you\u2019d be surprised to discover how many investors are holding a unit trust portfolio that is not at all aligned with their target ROI.<\/p>\n
<\/span>2. Determine your asset allocation<\/span><\/h2>\nWhile deciding the breakdown of the asset allocation of your investment portfolio, it is important to ask yourself the following questions:<\/p>\n
\n- What is the split among the key asset classes such as equities, bonds and REITS?<\/li>\n
- Is this ratio suitable for your risk profile and age?<\/li>\n
- What is your exposure to local, regional or global equities?<\/li>\n
- Should alternative assets such as gold or commodities feature in your asset classes?<\/li>\n<\/ul>\n
Once the ideal asset allocation has been determined, the next question one should ask is, \u00a0does it fit in the current environment?<\/p>\n
If the ringgit is weakening, it may be better to widen your exposure to foreign investments. This diversification may increase your risk-reward ratio. By diversifying overseas, investors are also able to capitalise on stronger currencies while tapping into the growth potential of multinational corporations with access to larger markets.<\/p>\n
For example, a client once invested RM200, 000 mainly in Malaysia small cap funds which has seen its performance fluctuate up and down. Following our advice to diversify to more asset classes overseas, my client is now able to tap into more opportunities and enjoy better return.<\/p>\n
<\/span>3. Invest only in best-of-breed funds<\/span><\/h2>\nThis is a very important step for amateur and novice investors to ensure you\u2019re capitalising on your return potential. Many are unknowingly duped into picking the best fund from one unit trust management company, instead of picking from a wider selection across all the different unit trust management companies in the market.<\/p>\n
If you are investing in one category of investments, you should aim to select the best option available (with similar risk levels) from across all the different unit trust management companies in the market, rather than the best performer in just one unit trust management company..<\/p>\n
To be certain that you choose the best-of-breed financial products, a little basic knowledge about your options is needed.<\/p>\n
\n- Know what category the investment option falls into<\/strong><\/li>\n<\/ul>\n
Is it equities, fixed income, commodities, real estate or alternative assets? From there, list down a few available investment funds from that same category. The key word here is same category<\/strong>, not same unit trust management company.<\/p>\nFor example, if you wish to invest in a Malaysian equity growth fund and you approach an agent at company \u201cP\u201d who highly recommends Product \u201cM\u201d as the best performing fund in the company \u2013 is that really the best fund available in the category of Malaysian equity growth fund?<\/p>\n
However, if you were to compare other funds from other companies in the same category as Fund \u201cM\u201d, you may realise that Fund \u201cM\u201d is mediocre at best when compared to Fund \u201cK\u201d from a different company, over the same period. Therefore, what looked like the best option initially, can turn out to be otherwise when you make the right comparisons.<\/p>\n
Once the ideal asset allocation has been determined, the next question one should ask is, \u00a0does it fit in the current environment?<\/p>\n
If the ringgit is weakening, it may be better to widen your exposure to foreign investments. This diversification may increase your risk-reward ratio. By diversifying overseas, investors are also able to capitalise on stronger currencies while tapping into the growth potential of multinational corporations with access to larger markets.<\/p>\n
For example, a client once invested RM200, 000 mainly in Malaysia small cap funds which has seen its performance fluctuate up and down. Following our advice to diversify to more asset classes overseas, my client is now able to tap into more opportunities and enjoy better return.<\/p>\n
<\/span>3. Invest only in best-of-breed funds<\/span><\/h2>\nThis is a very important step for amateur and novice investors to ensure you\u2019re capitalising on your return potential. Many are unknowingly duped into picking the best fund from one unit trust management company, instead of picking from a wider selection across all the different unit trust management companies in the market.<\/p>\n
If you are investing in one category of investments, you should aim to select the best option available (with similar risk levels) from across all the different unit trust management companies in the market, rather than the best performer in just one unit trust management company..<\/p>\n
To be certain that you choose the best-of-breed financial products, a little basic knowledge about your options is needed.<\/p>\n
\n- Know what category the investment option falls into<\/strong><\/li>\n<\/ul>\n
Is it equities, fixed income, commodities, real estate or alternative assets? From there, list down a few available investment funds from that same category. The key word here is same category<\/strong>, not same unit trust management company.<\/p>\nFor example, if you wish to invest in a Malaysian equity growth fund and you approach an agent at company \u201cP\u201d who highly recommends Product \u201cM\u201d as the best performing fund in the company \u2013 is that really the best fund available in the category of Malaysian equity growth fund?<\/p>\n
However, if you were to compare other funds from other companies in the same category as Fund \u201cM\u201d, you may realise that Fund \u201cM\u201d is mediocre at best when compared to Fund \u201cK\u201d from a different company, over the same period. Therefore, what looked like the best option initially, can turn out to be otherwise when you make the right comparisons.<\/p>\n
Is it equities, fixed income, commodities, real estate or alternative assets? From there, list down a few available investment funds from that same category. The key word here is same category<\/strong>, not same unit trust management company.<\/p>\n For example, if you wish to invest in a Malaysian equity growth fund and you approach an agent at company \u201cP\u201d who highly recommends Product \u201cM\u201d as the best performing fund in the company \u2013 is that really the best fund available in the category of Malaysian equity growth fund?<\/p>\n However, if you were to compare other funds from other companies in the same category as Fund \u201cM\u201d, you may realise that Fund \u201cM\u201d is mediocre at best when compared to Fund \u201cK\u201d from a different company, over the same period. Therefore, what looked like the best option initially, can turn out to be otherwise when you make the right comparisons.<\/p>\n
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