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Diversification |
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Varying your investments is an effective way of minimising risks and protecting you from volatility. Different
investments are exposed to different risks and by diversifying, the losses from some investments can be
offset by other investment gains. |
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Time Value of Money |
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The earlier you invest, the greater your returns will be.
The chart on the right is an example of how a RM1000
investment will grow over a period of 40 years with different
rates of return. |
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Impact of Inflation and Taxes |
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Although you may earn a return on your investments, the actual value of your investments may be reduced
due to the effect of inflation and taxes unless your investments are tax exempted. Therefore ensuring a
minimum average rate of return in the longer term is crucial. |
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Maximising Returns |
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Use the rule of 72 to help determine how many years it will take to double your money. The formula is as
follows: |
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72 |
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interest rate you can get |
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Years to double investment |
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If the return calculated is unsatisfactory, you may consider other options that pay a higher return. |
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Ringgit Cost Averaging |
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Widely practiced in the unit trust industry, this technique involves investing a fixed amount of money for
specified interval such as monthly, quarterly or yearly regardless of how the stock market performs. |
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Risk-Return Relationship |
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It is important for you to consider the level of risk associated
with different type of assets and choose the appropriate asset
to invest. “Safe” investments may have lower returns but your
original investment is preserved. However, investments with
higher returns will have higher risks. |
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Understanding Risk |
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Long term investments pose lower risks as compared to short term investments because as the time period
of an investment becomes longer, the variation and volatility in returns tend to be lower. |
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