CHAPTER 6:

1. ROSELIZA HAMID/UITM KELANTAN/2010 CHAPTER 6: INVESTMENT PLANNING

2. ROSELIZA HAMID/UITM KELANTAN/2010 CHAPTER OUTLINE Introduction Types of investment Equity Debt security Unit trust Property/real estate Financial planning

3. ROSELIZA HAMID/UITM KELANTAN/2010 INTRODUCTION An investment is a commitment of funds to one or more assets that will be held over some future time period, in the hope that it will generate more income. The asset could be tangible like real estate properties or non-tangible monetary assets like securities and you would invest in them based on your financial goals and objectives.

4. ROSELIZA HAMID/UITM KELANTAN/2010 INTRODUCTION…. Cont. The Malaysian capital market offers an array of investment products in the form of shares, loan stocks, bonds, warrants and unit trusts. The type of products chosen by an investor to commit his capital depends largely on his financial goals, time frame, and amount of capital available.

5. ROSELIZA HAMID/UITM KELANTAN/2010 TYPES OF INVESTMENT Two forms of investments: Physical investments comprise real property plant, machinery and other forms of tangible assets. Financial investments, such as securities are non-tangible monetary assets. Securities are formal documents, which are evidence of financial investments and states the ownership and repayment rights between the parties.

6. ROSELIZA HAMID/UITM KELANTAN/2010 Equity Investment Gives an ownership interest in the corporation issuing the stock. If the corporation does well, your investment should do well. If not, you could lose some (or all) of your money. The advantages: potential for higher returns over time than those offered by most other investments returns that historically have outpaced inflation. 

7. ROSELIZA HAMID/UITM KELANTAN/2010 Debt Security pay a set income over a set term. At the end of the term, the amount you have invested is returned to you. Fixed-income investments offer a steady income stream and historically less volatile price fluctuations than stock investments..  bond prices move up and down, largely in reaction to interest-rate swings. Investors in individual bonds who don't plan on holding them until maturity, face the possible risk of losing principal.

8. ROSELIZA HAMID/UITM KELANTAN/2010 Money Market Like fixed-income investments, money market investments pay a defined income over a set term. (The income may be fixed or variable.) The advantage: many of them are backed by the Malaysian government, so return of your principal is practically guaranteed. This makes money market investments an attractive choice for investors with short-term goals. The major disadvantage : the investments historically have not produced returns much greater than the inflation rate.

9. ROSELIZA HAMID/UITM KELANTAN/2010 Unit Trust A professionally managed investment fund which pools your money with that of many other investors with similar investment objectives. The aggregate sum is then used by the fund to build a diversified investment portfolio which comprises stocks, bonds and other assets in accordance with the investment objective of the fund. 3 parties involved: Unit holder Management company Trustee

10. ROSELIZA HAMID/UITM KELANTAN/2010 Unit Trust…. Cont. Types: Equity: Income, growth, aggressive growth Fixed Income funds Islamic funds Property trust funds Benefits: Diversification Professional fund management Liquidity Hassle free Affordability

11. ROSELIZA HAMID/UITM KELANTAN/2010 Investment-Link Fund A professionally managed investment fund, normally by an insurance company, which pools your money with that of many other investors with similar investment objectives. The aggregate sum is then used by the fund to build a diversified investment portfolio which comprises stocks, bonds and other assets in accordance with the investment objective. Helps in your investment planning by giving you a choice of placing your money in a diversified investment options. Provides investors with an opportunity to attain medium to long term capital growth by investing primarily in equities.

12. ROSELIZA HAMID/UITM KELANTAN/2010 Benefits Opportunity to participate in the growth of dynamic economy through a professional investment team. The investment fund will endeavor to provide above-average returns in the long term. Diversification of investment portfolio Different Investment Funds Options Professional expertise Liquidity Ease of transactions Flexibility

13. ROSELIZA HAMID/UITM KELANTAN/2010 Real Estate/Property Investments in shop houses, standard lots, condo, flats or residential home. Benefits/Advantages: Less volatile compared to equities Asian like physical asset due to less developed investment market Govt. bonds are not readily available to small investors Opportunities for growth Perceived intrinsic values of properties

14. ROSELIZA HAMID/UITM KELANTAN/2010 Issues to consider To decide how much to be invested To look for the location Who is the developer? The track record? To look for infrastructure To evaluate the sources of financing To evaluate the cycle/timing of entry and exit.

15. ROSELIZA HAMID/UITM KELANTAN/2010 Factors to determines return Population growth Scarcity of land Income growth Economic activities Supply & demand Speculation Risk Physical & obsolescence

16. ROSELIZA HAMID/UITM KELANTAN/2010 REITs Real Estate Investment Trust is a trust fund that holds/ invests in RENTAL properties. major incomes is rental income and it is required to distribute most of its profit as dividend to its holders 2 unique features: its primary business is managing groups of income-producing properties It must distribute most of its profits as dividends.

17. ROSELIZA HAMID/UITM KELANTAN/2010 FINANCIAL PLANNING Assess your financial situation Diversify your investments Your Risk Profile Rational thinking Monitor your investments Do's and don'ts of investing wisely Be mindful of some trading rules

18. ROSELIZA HAMID/UITM KELANTAN/2010 Assessing Financial Situation Before embarking on any investment plan, you need to assess your financial situation, and decide how much you can put aside for investments, in addition to your cash savings. Some questions you could think about might include the following: What is your current income? How much savings do you have? How much can you save each month? What do you need to save for? What are your liquid assets such as savings in cash or shares? What are your fixed assets, such as properties? What loans have you taken out and how much are the interest charges you are paying or principal you are repaying?