Savings and investments

• Invest your money


  Want to ensure it will earn good interest & grow in value
• Reputable financial institution


  • Choose to invest your money with
• Some companies offer very high interest rates


  But at high risk
• Stock market


  • High risk (can make large sums of money if invested wisely)
• Unit Trust


  • Investing as a group in the stock market (lower returns but less risk than if investing on your own)
• Experienced investors


  • Usually spread their money between low, medium and high-risk investments to ensure a mix of both safety and high growth rates
• Risk levels of investments

  • Low risk - Bank, Government Bonds
  • Medium Risk - Unit Trusts
  • High Risk - playing the Stock Market
• Relationship between risk & return on investments

  Higher the risk, higher the potential return
• Ways to Invest / Save

  • Saving with a Bank - Call Accounts, Notice Deposit Accounts, Fixed Deposit Accounts
  • Investing - Shares, Unit Trusts, Endowment Policy, Retirement Annuity, Insurance - Short Term
• Asset


  A possession one owns (e.g. home that is not on a loan – fully paid for)
• Liability


  Debts one has incurred (e.g. home loan)
• Net worth


  Assets - Liabilities
• Depreciating Asset


  Limited effective life, expected to decline in value over the time it is used (e.g. brand new car, computer, equipment, furniture)
• Appreciating Asset


  Increase in the value of an asset over time, increases - increased demand/ weakening supply/ result of changes in inflation or interest rates (e.g. Property bought in the right area)
• Main Asset Classes - Investments

  • Shares (Stocks/ Equities)
  • Bonds
  • Cash
  • Property
  • Unit Trusts
  • Endowment Policy (Life Insurance)
  • Short Term Insurance
  • Fixed Deposit
  • Notice Deposit Account
  • Savings Account
  • Call Deposit Account
• Shares


  • Pay cash to buy tiny slice (portion) of listed/private company, Equal distribution of profits, Shares traded on the stock market, Value subject to external forces, Unit of Ownership of a company – "Share", Owners of Share – "Shareholders", Share's Value – is based on the price at which a share is sold in the market
• Bonds


  • Issued by governments/large companies who want to borrow money from members of the public, Comes with a contract stating the interest rate & when the loan will be returned, If you leave a bond until it matures – you will know exactly what you will get in return, Bonds can be traded on the market
• Cash


  • Short term loans, Pay a fixed interest rate for a short period, Usually > 12 months
• Property


  • Homes/Rental Properties (You rent out) / Commercial Properties (for own business/ rental), Real Estate Investment Trusts, Property Unit Trusts, Property purchased purely for investment, Could be for Capital Investment (Provide a regular income or both), Recent years – many people have chosen to invest in property rather than shares/savings to provide an income for retirement
• Unit Trusts


  • Fund to invest money, Invest through Financial Services providers such as a broker/investment management company/bank, Unit Trust Fund – pooled resource (group of investors to combine their cash and invest it), The Fund's Assets – shares taken altogether, Unit Trust Fund is made up of shares called "Units"
• Endowment Policy (Life Insurance)


  • Life Insurance contract designed to pay a lump sum after a specific term (on its "maturity") or on death, Typical Maturities are 10/15/20 years up to a certain age limit, Some policies also pay out in the case of critical illness
• Short Term Insurance


  • Short term insurance is the insurance you take out on your assets such as your car, your house and your household contents. Businesses also require cover for stock-in-trade, plant and machinery etc. Protects you when you experience unexpected loss/damage to your personal belongings
• Fixed Deposit


  • With a Bank, Low risk (safe investment), Provides Investors with a higher rate of interest than a regular savings account, Has a given Maturity Date, Cannot touch money until Maturity Date
• Notice Deposit Account


  • Give bank notice to access your funds after a fixed period (e.g. 32 days' notice), Less risk than Fixed Deposit, Can add money at any stage without notice, Can choose how much you want to withdraw after giving notice (all/a portion)
• Savings Account


  • Low interest earned, Very low risk, Money easily accessible, At a Bank/Financial Institution
• Call Deposit Account


  • Bank Account – Investment Funds – offers the advantage of both a savings and a Cheque Account, Call Deposit Account – no fixed deposit period, Provides instant access to funds, allows unlimited withdrawals and deposits, Benefit of savings account – compounding interest
• Don't put all your eggs in one basket (Age-old Investment Principle)
• Choose assets carefully – variety of asset classes – build up a Diversified Portfolio
• Many packages – already put together by Fund managers
• Unit Trust


  • Pool together the money of many investors – invest it in a variety of underlying assets (shares, bonds, cash, perhaps property) – according to Unit Trust's Investment Objectives
• Money Market Funds


  • Invest solely in cash, Low risk, low reward, Ideal for Short Term Investments
• Balanced Funds


  • Variety of Asset Classes, Healthy Equilibrium – risk & reward, Perfect – Medium Term investing & Retirement Funds
• Equity Funds


  • Invest heavily (or exclusively) in shares, Increases risk and reward, These Unit Trusts – ideal for long term investing
• Funds of funds


  • Invest – Portfolio of different Unit Trusts (according to their Investment Objectives), Make their circle even bigger
• Anything is possible – have enough time to play with
• Compound Interest (growth on growth of your investment for supercharged profit) – relatively small monthly contribution – become large lump sum – if leave money for a few decades without touching
• Need to "beat" the inflation rate (rate at which the cost of goods and services increases) – Portfolio must outperform inflation
• More time – take greater risks – return for higher potential rewards
• 15% of income to be saved – starting at 25 years old
• Your business/ you privately – contribute to a Pension Fund – tax free growth