Whether you’re a new investor or a seasoned one, there lies both risks and opportunities when it comes to investing. Done right, however, your investments can lead to long-term wealth building, promising you a secure financial future.
Rounding off yesterday’s list, here are two more investment instruments for you to consider, as well as what you need to know before kicking off your investment journey.
1. Unit trusts
A unit trust allows individuals to invest in a portfolio of securities managed collectively by a fund management company. This portfolio includes stocks, bonds, money market instruments, and other assets.
Unit trusts allow you to access various asset classes such as bonds and stocks that may be difficult to achieve when investing individually. As such, they are a popular choice among Malaysian investors who seek diversification in their investments.
2. Alternative investments
These are vehicles that aren’t included in “traditional” investment categories such as stocks, bonds, and real estate. Alternative investments can provide opportunities for investors to generate high returns, but they also involve a higher investment risk.
- Gold and metals
Gold and precious metals are alternative investments known as “stores of value”, especially in unstable economic situations.
As the prices of gold and metals are usually influenced by supply and demand as well as geopolitical factors, investors can buy them to protect their wealth from inflation and currency instability.
- Cryptocurrencies
Cryptocurrencies such as Bitcoin and Ethereum are gaining popularity among investors, who can buy and trade in them through crypto-exchange platforms.
Note, however, that while cryptocurrencies offer potential for high profits, they are also highly volatile.
Dos and don’ts before you start
Before you consider making any form of investment, there are several preparations you need to undertake.
1. Ensure monthly cashflow surplus
If you have limited cash flow, it is advisable to avoid investing for now. Instead, focus on improving your monthly cash flow.
Remember, investments are meant for the long-term and are not a get-rich-quick scheme that promises immediate returns.
2. Avoid using your emergency fund
As its name implies, this fund should be reserved for contingencies. Avoid using it for investing as you might end up in dire straits should you incur losses and an emergency occurs.
3. Know the risks of each investment
Every type of investment has advantages and disadvantages, so it’s important to select those that align with your goals and risk tolerance. Evaluate the risks involved and assess the potential benefits of your investment choices.
It’s also crucial to select your investment vehicles bearing in mind your financial situation to avoid being burdened with high monthly commitments.
Fundamentally, risks are unavoidable, but there are ways you can minimise them. Insurance, for example, is a form of investment that provides financial protection and mitigates risks in the face of uncertain events or losses.
Good luck on your investment journey!
This article was written by Shafiq Wahab for Qoala Malaysia.