When it comes to
investing, it is important for you to be familiar with the various
investment asset classes. When you understand the pros and cons of
each asset class, you would be able to make more informed investment
decisions that suit your wealth management goals. We shall briefly
discuss some of the common asset classes.
Shares
A share
represents part ownership in a publicly listed company. The share
price growth and dividends income are highly dependent on the
company’s performance. The pros of share investment include
liquidity and accessibility. While shares can yield high returns,
share prices can be volatile and subjected to short-term market
conditions.
Fixed Interest
These investments
include debentures, government and corporate bonds. The return is
generally in the form of regular interest payments over the life of
the investment with the capital amount repaid when the investment
matures. Although they usually offer lower potential returns, they
have potentially lower risk than shares. The attractiveness of the
return depends on the interest rate movements.
Cash
Cash include bank accounts, bank deposits and similar securities
which have a short investment time horizon. They provide stable and
low-risk income in the form of regular interest payments. They are
highly liquid and have low capital risk. However, they have one of
the lowest potential returns of all asset classes, particularly in a
low interest rate environment.
Property
This asset class
includes direct investment in physical property as well as
investments in listed real estate investment trusts (REITs) and other
property securities. The value of property can increase substantially
over the medium-to-long term, generating higher returns than cash or
fixed interest. This illiquid investment usually involved high
capital outlay and on-going costs.
Whatever your
wealth management goals are, it is important not to put all your eggs
into one basket.
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