The very word “investments” brings about thoughts of exotic financial products, complex stock market transactions and teams of highly qualified professionals handling substantial portfolios. Fear not. Here we will look at “ordinary” banking products and how you can use them to build yourself a viable investment portfolio:
We all know about savings accounts and the low rates of interest offered on them. But, you may not be aware of ways to make more on savings accounts than the standard rates on offer. We will show you two such ways: Junior Savings Accounts and Senior Savings Accounts. Junior and Senior Savings accounts tend to offer more interest that standard savings accounts. Open Junior / Senior accounts in your kids’ or parents’ names and split your savings account corpus into these accounts.
Take a look at foreign currency fixed deposits for their higher earning potential vis–à–vis conventional fixed deposits. Of course, they carry higher risks and they do not give you guaranteed returns. Cooperative bank fixed deposits also pay higher interest rates at shorter tenors vis–à–vis conventional FDs. These deposits do not enjoy PIDM protection.
Consider hybrid current accounts that combine features of current and savings accounts and offer interest unlike standard current accounts that do not offer interest. Just watch out for minimum deposit and balance requirements. If you are going in for a “conventional” current account go in for one that offers you immediate overdraft facilities at low cost.
Savings and Current Accounts and FDs are sometimes offered through promotions with great rates attached to them. It makes sense to avail of these products at such times. But, go through the terms and conditions well especially the ones that will apply after the promotional period.
Precious metals like gold and silver form a great investment avenue. As a Malaysian you have the option of investing in gold and silver in physical form (bars, coins, gold bullion coins issued by Bank Negara etc) and in paper form through Gold and Silver savings accounts where your holding is measured in terms of grams of gold or ounces of silver.
Unit Trusts, Exchange Traded Funds and Real Estate Investment Trusts
Unit Trusts, ETFs and REITs are collective investment vehicles where many investors pool in their funds for investment. Unit Trusts and ETFs invest in the capital market while REITs invest in real estate assets.
Unit Trusts and ETFs enable investors with limited time and knowledge to take advantage of the higher returns from capital markets. ETFs also invest in the capital markets by simply tracking an index; since they involve passive investing, they have lower costs than Unit Trusts.
REITs whose shares are traded on a stock exchange give small investors the opportunity to invest in real estate with the added advantage of liquidity. As REITs own rental properties and as rent is a consistent source of income, investors can potentially look forward to steady and consistent returns.
Insurance products can help you meet untoward expenses and emergencies. Consider a sudden medical emergency and how a comprehensive medical insurance can help you cover it. Pure term life insurance can provide financial solace to your family in case of your death / permanent disability. Whole life and endowment insurance provide you with insurance as well as having an investment component attached to them to help you build wealth.
Although loans are not traditionally associated with portfolios, we consider them wealth builders and hence fit to be included in an investment portfolio. When going in for loans, avoid unsecured loans (like personal loans) which are high-interest and go in for specific loans which are usually secured, have lower interest rates and help you acquire assets. Think home loans, renovation loans or car loans.