A Simple Investment Guide for Beginners

AA SSIIMMPPLLEE IINNVVEESSTTMMEENNTT GGUUIIDDEE
for Beginners

PART 1
4 Tips for First Time Investors
PART 4
Tips on Getting Some
Gold into your Portfolio
A SIMPLE INVESTMENT GUIDE - for Beginners
PART 2
How to Handpick your Assets
PART 3
Tips on Alternative
Investment
PART 5
Tips for Beginners on
Investing in Real Estate
CONTENTS

PART 1
4 Tips for First Time Investors

PART 1 4 TIPS FOR FRIST TIME INVESTORS
Does any of your FIRST SALARY
have any part in GENERATING
AN INCOME for you now?
Most of us would probably answer no to
that question, and it is not a surprise. Most
schools don’t teach us one of the most
important lessons in life, the art of
managing our money.
Here are some basic suggestions in what
you can do to make your income more
productive.

TIP 1
DIVIDE YOUR INCOME
GENERAL
EXPENSE
SAVING
INVESTMENT
Once you have received your income, divide it into three
parts before engaging in any expenses. One part goes to
general expense, one to saving and one to investment.
SAVING
RETURN
RISK
EXAMPLES
INVESTMENT
Low
Low
High
High
Bank saving accounts,
Government bonds
Stock market
Once you have received your income,
divide it into three parts

TIP 2
ANSWER SOME
BASIC QUESTIONS
The proportion you put into every portion of your income
depends on your objectives with regards to your wealth.
HOW MUCH TO SAVE
HOW MUCH TO SPEND
HOW MUCH TO INVEST
YOUR RETURN REQUIREMENT &
YOUR RISK TOLERANCE LEVEL
・ What is your monetary goal?
・ How many years you have left to work?
・ How much do you want to save?
・ How much money are you willing to lose if you invest badly?
・ What is your risk tolerance level?
All these questions will help you determine how you should
go about your investments.
By setting an objective, you should determine...

TIP 3
A SAVINGS ACCOUNT
IS NOT THE ANSWER
The return you get in a savings account in a bank is next to
nothing. By observing the inflation rate in comparison to the
interest rate, the inflation rate far exceeds the interest rate
of saving accounts.
The lesson is that an appropriate amount of money should
be put into your saving account to ensure your liquidity, but
not too much.
THE INFLATION RATE > THE INTEREST RATE
The money you place into a savings account is
losing its value every day.

TIP 4
DIVERSIFY
YOUR PORTFOLIO
This means that you need to allocate your money wisely and
put it in different asset classes and sectors. This ensures
that if some unpredicted factor hits one industry, resulting
in a catastrophe, your whole portfolio does not collapse
with it.
Therefore, invest in different types of assets and think
logically about whether they are highly related or not. You need to diversify your portfolio.
DO NOT PUT ALL YOUR EGGS IN ONE BASKET

PART 2
How to Handpick your Assets

PART 2 HOW TO HANDPICK YOUR ASSETS
How can you HANDPICK your
INVESTMENTS ?
Assuming you have decided on your length
of investment, amount of money and the
required rate of return, the next step is
selecting appropriate assets to match your
investment portfolio.
Your portfolio will contain all three of these
assets in the perfect balance to help you
reach your goals.

#1
AN EXAMPLE OF
A FINANCIAL PLAN
Start off by deciding the amount of money you want in the
end and the length of time you have in order to meet that
goal.
THE AMOUNT OF MONEY THE LENGTH OF TIME
$ 5 million 10 years
How much do you need to set aside for investing? The
answer depends on your required return rate.
You can average out the rate of return and keep a constant
weighting asset allocation for your portfolio so that the risk
and the return of your port are under control.
A lower return rate requires a higher amount
to be invested per month and vice versa.
$32,066
$37,611
10%
$24,207
5%
2%
INTEREST RATE
MUST INVEST (PER MONTH)

#2
GOVERNMENT &
CORPORATE BOND
A bond is a debt instrument issued by both the government
sector and private sector to acquire funds from investors.
A GOVERNMENT BOND THE CORPORATE BOND
・ Risk free investment tool
・ Investors are guaranteed that
their money will not be lost as the
government vouch for it
・ Lower return rate & risk
・ If you have low risk tolerance, this
is the investment for you
・ When corporations require the use
of money to fund projects, they can
issue bonds to raise money from
retail investors
・ Higher interest rate & risk
・ Corporate bonds have ratings that
represent their default risk level.
・ This is an option for those who
prefer the ‘in between’ option when
it comes to risk tolerance
Bondholders agree to invest for a certain
period of time in exchange for an interest rate
as agreed upon in the beginning.
&
GOVERNMENT BOND CORPORATE BOND

#3
COMMON STOCKS
Another asset choice that requires a small principal amount
of money to be invested and can yet generate exceptionally
high return, is common stock. There are two sources of
income which are investing in stocks allows you to have.
DIVIDEND INCOME CAPITAL INCOME
・ Many companies pay dividend to
investors
・ Dividend payment is not an
obligated responsibility for
corporations
・ Keep in mind that some
companies may not pay dividends
to investors
・ Capital income is acquired when
you profit from selling stocks in your
portfolio
・ The basic rule to make capital
income is to buy low and sell high
・ The rate of return can go as high as
20% per annum or as disastrous as
the total loss of your principal
・ If your plan requires a high rate of
return you may need to have a
portion for stock investment in
order to lift up your portfolio’s
average return.
You can yet generate exceptionally
high return by investing small principal
amount of money in common stock.

#4
STUDY CORPORATE
WORKINGS
Investing in bonds and stocks requires you to spend time
studying corporate workings.
・ Educate yourself on the financial reports of the companies
・ Observe historical prices of the stock
・ Read the companies’ annual report
・ See their dividend policy
・ Check the management team’s record of defaults
Investing in bonds and stocks requires you
to spend time studying corporate workings.

PART 3
Tips on Alternative Investment

PART 3 TIPS ON ALTERNATIVE INVESTMENT
THE MUTUAL FUND: another
alternative investment asset will
be analyzed for you.
A Mutual Fund is an investment vehicle that
is managed by a registered investment
manager to collect a pool of money from
retail investors and invest it money in
bonds, stocks and commodities.

#1
WHAT’S
THE MUTUAL FUND?
Investment in a mutual fund should provide a risk adjusted
return to your investment portfolio.
Mutual funds are a suitable option for:
・ Investors who would like to invest in securities but do not
invest directly in the market
・ Investors who have a limited amount of money to diversify
・ Investors who have no time to research on investment
choices
・ Investors who simply would like to benefit from the
advantages of economies of scale as the transaction cost
would be lower
There are two types of mutual fund:
CLOSED-ENDED FUND
・ Do not allow investors to
sell out the fund before
maturity
OPEN-ENDED FUND
・ Allow investors to sell back
their shares of investment
to the fund itself
・ Much more popular as the
liquidity is higher

#2
THINGS TO CONSIDER
BEFORE INVESTING
IN MUTUAL FUNDS
RISK LEVEL ・ High rate of return allocates a large portion to stock
・ Do not want to take high risk invest in bonds
・ Diversify your investment invest in commodities (gold, oil)
MUTUAL
FUNDS PAY
・ The total return of the fund
・ The cost of management fees
A WISE IDEA
TO LOOK AT
・ The historical performance of the mutual fund
・ Your fund manager’s performance
SUITABILITY
RISK LEVEL
SUITABILITY
MUTUAL FUNDS PAY
THE HISTORICAL PERFORMANCE
OF THE MUTUAL FUND
YOUR FUND MANAGER’S
PERFORMANCE
・ The suitability analysis test comes up with a risk level you can
accept and then the relationship manager will offer you
a suitable mutual fund that matches your risk level to you
Same as investment in general, you need to
consider these before investing in mutual funds

#3
BENEFITS OF MUTUAL
FUND
1 You do not need to closely monitor every single security in
the portfolio.
2 You only need a small amount of money for a diversified
portfolio.
3 It is professionally managed by a registered fund manager
and therefore should provide a risk adjusted return.
4 It allows you to invest in market that cannot reach by
yourself easily e.g. Foreign bond or foreign stock market.
5 There are tax advantages in some countries.
THINGS TO BE AWARE OF
・ Historical performance does not guarantee the future performance
・ It is not principal protected unless stated.
・ You cannot selectively pick securities by yourself.
So when you’re ready, go to the closest bank branch
and see the mutual funds they have available.
Different banks sell different mutual funds so you
will have quite a variety to choose from!

PART 4
Tips on Getting Some Gold into
your Portfolio

PART 4 TIPS ON GETTING SOME GOLD INTO YOUR PORTFOLIO
Let’s talk GOLD!
As we continue our discussion on
investment choices, it’s now time to talk
about this ‘old school’ investment.
If you are looking for an inflation-hedging
asset and you are not in a hurry to use your
money, gold might be a suitable addition to
your portfolio.

#1
GOLD PRICE FACTORS
It is important to know that records have shown that the
price of gold is dependent on other market factors.
US DOLLARS ・ Gold price moves inversely with US dollars.
・ When US dollars appreciate the price of gold drops
OIL PRICES ・ When oil prices steep up, gold price also move up consistently
・ However, this is merely an observation and not a proven fact
STOCK ・ Gold has a negative correlation with stock
・ Having gold allows you to create a diversified portfolio
When you are looking at investing in gold, you need to note
that the spread between bid and ask prices can be high. It is
not usually a quick profit making investment but rather a
long-term investment product. It is considered to be a
suitable inflation hedging investment too.
The price of gold does not move randomly,
but rather moves with correlation to other
significant market figures.

#2
HOW TO INVEST
IN GOLD
The good thing about investing in
actual gold is its high liquidity.
1
WELL FRANKLY, YOU CAN BUY ACTUAL GOLD
This is as direct as it can get. However, this method requires you the pay
for the whole amount of gold bar or coins. It is of course can be
purchased in the form of accessories and jewelry for you to use.
However, there are transactions fee to be paid in order to create it and
you also need to keep it safe. The good thing about investing in gold is its
high liquidity. When you are in need of cash, gold can be sold to shops
very easily.

#2
HOW TO INVEST
IN GOLD
Like stock, gold is also available in
mutual funds.
2
LIKE STOCK, GOLD IS ALSO AVAILABLE IN MUTUAL FUNDS
・ There are two types of gold investment funds; one is a kind of mutual
fund that invests in gold stocks or gold mine owners. Another one is
the Gold Exchange Traded Fund, which is traded in the stock market
just like common stock but gives returns identical to holding physical
gold.
・ These types of funds invest purely in gold by buying bullions of gold
and trade. This is a good alternative for investors who want to invest in
gold but do not want to pay a large amount of money to invest directly.
・ It is also more practical as you do not need to keep the physical gold
safe and it can be traded with high liquidity just like physical gold.

#2
HOW TO INVEST
IN GOLD
Gold options can be held in your portfolio
until gold prices move up favourably.
3
THE LAST CHOICE IS GOLD OPTIONS AND FUTURES
・ This is not recommended for beginners and even experienced investors
must be very careful in investing in this asset. This is because the options
market allows you to speculate the price of the gold in both rising and
falling directions.
・ A gold option gives the holder the right, but not the obligation, to
purchase or sell a specific quantity of gold at a specified strike price on
the option’s expiration date.
・ However, the value of an option expires with time, so if the option
matures but the gold price is not as expected, this investment simply
evaporates from your portfolio.

PART 5
Tips for Beginners on Investing
in Real Estate

PART 5 TIPS FOR BEGINNERS ON INVESTING IN REAL ESTATE
REAL ESTATE INVESTMENT
isn’t reserved for the billionaires.
For centuries, we have always had landlord
and tenants. Many an elite families’ fortune
has come from their ancestors’ good vision
in purchasing land that has seen an
increase in value over time. So what about
the rest of us with no land heritage?
Fortunately there is also hope for us to reap
the benefits of real estate investment.

#1
REAL ESTATE
MUTUAL FUND
If you see this as a good way to receive return on your
investment but do not wish to incur the full cost of
purchasing property, you have the option to invest in a
mutual fund with the return derived from the property.
There are two types of mutual fund:
It may seem like Freehold is a better option, this
may not always be the case as both types of mutual
funds can be sold at any time and investors can
make a profit when prices are hiked up.
FREEHOLD MUTUAL FUNDS LEASEHOLD MUTUAL FUNDS
・ The fund purchases the property
and rents it out to tenants
・ Investors will receive money from
the rent
・ If the fund decides to sell the
property afterwards, investors will
receive money from the sale as well
・ The fund only purchases the lease
of the property
・ Investors receive return from the
profit
・ Investors do not receive any capital
gain as the property is returned to
the owner

#2
REIT (REAL ESTATE
INVESTMENT TRUST)
REIT is an investment trust similar to mutual funds, but it is
more flexible. 90% of taxable profit from the property must be
paid to REIT holders.
REIT is an investment trust similar to mutual
funds, but it is more flexible.
・ The return may be similar to other mutual funds
・ The regulations on types of properties & their management
scheme may differ
・ REIT can also be sold at any time

#3
INVESTMENT AS A
DIRECT PROPERTY
OWNER
As the owner, you are responsible for the mortgage, taxes
and other maintenance expenses incurred by the property.
Property values in prime real estate areas can generate high
rent income and may appreciate significantly over time.
Compared to stocks or bonds, investment in physical real
estate requires more funding and you also take on the risk
that there will not be any tenants interested in your
property.
Found a property that you like
Find out the selling price and contact a bank to
get a mortgage loan
Become the owner of the property
Find tenants to pay the rent to cover your
monthly mortgage payment
In the long run you may even consider selling
the property when the price is high enough
THINGS TO CONSIDER AS A PROPERTY OWNER
・ The attractivenss of the expected profit
・ The risk of having to endure these potential burdens
1
2
3
4
5
THE PROCESS OF INVESTING A PROPERTY

#4
TIME TO PICK A
PROPERTY
Whether you invest in the real property or in papers, the
most crucial part of both is to study the properties.
Just keep in mind that like any other investment,
you need to do some research first.
THINGS TO CONSIDER TO FIND UNIQUE SELLING POINT
・ The location
・ The vacancy rate of the area
・ The construction company.
・ The property prone to natural disasters
・ Traffic jams
・ Other issues that only the people in the area would know

AA SSIIMMPPLLEE IINNVVEESSTTMMEENNTT GGUUIIDDEE - for Beginners
THE END

A Simple Investment Guide for Beginners

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