Source: BURSA ACADEMY | Published: August 2020
All of us have hopes and plans for a better future. But very few of us put much thought into it. In fact, the average person spends more time picking out a dress or selecting a birthday cake than thinking about a retirement plan or how to invest their savings wisely and beneficially.
Investing is the art of putting your money to work so that it makes more money for you. In today's world, investing is not merely a good idea but a necessity.
Investing is not a ladder to quick riches, nor is it a gamble. Investing is the end result of careful study and analysis of a wide range of factors and possibilities. It is, after all, your money; you should understand and care deeply about what happens to it. This makes it all the more important to know what you are doing and why you are doing it.
Investment avenues are aplenty and investment types number in the hundreds. The key here lies in understanding what their features and characteristics are, so that you can decide which among them are best suited to you and the goals you have set for yourself. Once you are able to define what kind of investor you are, it becomes easier to make the choices that are appropriate and useful for you.
In general, investments fit into one of four categories called 'asset classes'.
Cash is the money you have in your bank account, while 'cash equivalents' are investments that allow a quick conversion to cash. In other words, they enable liquidation of the investment into cash.
Cash equivalents investments include money market funds, treasury bills and savings bonds. Although such instruments are considered to be very safe, their rates of return are relatively low compared to other types of investments.
Investments based on debt are fixed-income securities. An example is a bond; through where you lend your money to a company or the government for a fixed length of time. What you get in return is a promise to pay you interest plus the bond's issue value at the end of the term.
Although most fixed-income securities are wrapped in guarantees and are seen as relatively safe investments, variants like 'junk' bonds, which promise higher rates of return, offer no guarantees and can be very risky investments.
Buying equities or stocks is essentially buying partial ownership of a company. This entitles you to receive dividends, which are the profits allocated by the company to its shareholders and allows you to vote at shareholder meetings.
Owning equities allows you to benefit in two ways. You profit when the price of the stock goes up and when the company pays out a dividend. Unfortunately, neither of these outcomes is guaranteed. In fact, stock prices might fluctuate frequently. Equities generally provide higher returns than fixed income securities given the risk of loss is also correspondingly higher.
The alternatives to the other asset classes comprise the more complex types of investment products, including currencies, hedge funds, gold, real estate and various forms of derivatives like forwards, futures, options and swaps.
Alternative investments usually carry above-average risk, which is expected because of their above-average return potential. This asset class usually draws interests from sophisticated and expert investors who know how to manage and have higher risk appetites.
Bursa Marketplace – Learn, Try & Apply
For investors enthusiastic about experiential learning, please visit Bursa Marketplace (https://www.bursamarketplace.com/) – it is Malaysia's one-stop portal to educate retail investors in their share investment journey by providing information such as market data, stock ratings, analysis, trading tools as well as virtual trading features.
The practical nature of the learning opportunity available on Bursa Marketplace is amplified by an exciting and interactive tool called MLT – Mirror, Learn & Trade. Launched in 2019, MLT is a stock ideas tool that allows you to mirror and monitor the professional trading approach of a licensed investment adviser(s) who builds, strategizes and manages a virtual stock portfolio.
This is experiential learning at its best.
MLT places you right in the middle of the action as you own a virtual portfolio, learn from a professional analyst about setting goals and weighing risks, analyse and understand the pros and cons of different strategies, and interact with other learners and licensed traders. Explore it today -
https://www.bursamarketplace.com/mlt/
Given the authoritativeness of the knowledge available on Bursa Malaysia's learning platforms, there is little reason for any investor to listen to hearsay or rely on unverified tips about what the market holds in store.
The best way to protect your money is to be an informed investor. Never invest in what you do not know or fully understand. Allow yourself plenty of time to understand your investment needs before deciding your next course of action.
With free, reliable stepping-stones like Bursa Academy and Bursa Marketplace paving your road to investing, you could turn yourself not only into an informed investor but also into a confident and successful investor.
Go ahead and take advantage of these free tools and resources.
Empower yourself with genuine expertise.
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Tags: DAY TRADING, STOCK TRADING, VOLATILITY
