AVAILABLE INVESTMENT ALTERNATIVES

Cash & Fixed Deposits
Investing in unit trust funds in general could potentially yield a higher return compared to return on bank deposits. However, the investment risk is higher for unit trust funds than that of bank deposits. The range of deposit products available is quite extensive, ranging from simple overnight deposits at a cash rate, to more long term, structured deposits, like a two (2) year fixed deposit. Whilst deposits with a financial institution carry a lower risk than other investment products, there is however a risk of default. Cash and fixed deposits are generally deemed as short-term investments.

Direct Share Investments
Owning and trading shares directly have been extremely popular with the average Malaysian investor. Holding a direct investment portfolio of shares can easily be misconceived by some retail investors who think that they can make their fortune overnight by investing in a portfolio of shares. The problem arises when retail investors have to choose which stocks to purchase, given the large number of individual stocks on the exchange.

Holding a small portfolio of direct investments does not provide the benefit of diversification offered by unit trust investments. The investor has “all his eggs in one basket” and is therefore exposed to the risk of either making or losing a fortune. The return in direct shares is only attractive if the investors can hold shares for a longer term and invests only in fundamentally sound companies.

Direct Property Investments
Many investors have enjoyed the benefits of making a direct investment in property. Many have also experienced the downturns in the property market over the years and have understood the cyclical nature of the property market.

Whilst property can be a good long term “storehouse” of wealth, it is generally difficult for retail investors to gain access to, given that large amounts of capital either have to be at hand or borrowed before an investment property can be purchased. In addition, the property market can be extremely illiquid at times, so realising the gain (or loss) may take longer.

Unit trusts, which have exposure to property related companies, and which are listed on the stock exchange, can often be a viable alternative for the small investor. With a small capital outlay, investors can obtain exposure to the property market. They can rely indirectly on the skills of professional money managers, experienced in the management and development of property.

Offshore Investment
Seasoned marketing staff for global investment products will always maintain and focus their destination for investment on their home markets. Therefore, these investors are losing out on 99% of the world’s investment opportunities.

Whilst offshore investments can provide a suitable haven in times of difficulty with the local investment markets, there are some considerations, which need to be kept in mind: -

  • Tax and other regulations affecting the investment of offshore funds
  • Managing and taking into account the currency exposure of an offshore investment
  • Where to begin the 99% of market opportunities (i.e. the need for information is even greater with offshore investments)

Financial Derivative Products
Another development avenue for investments is the derivative market in Malaysia. It can provide an avenue to earn very high returns without large capital outlays. The problem is that the “man in the street” is not really equipped to analyse financial derivative products. He needs to have sound knowledge and understanding of the products before he invests.