Embarking on the investment path can appear daunting, particularly when financial resources are limited. Nonetheless, this shouldn’t deter you.
Insights from three financial strategists shed light on commencing investment endeavors across varying income brackets.
- Kuah Soo Yee, Seasoned Associate at IPP Financial Planning Group Malaysia
- Ian Wong, Visionary Founder of Uno Advisers
- Linnet Lee, Director at Resolute Planning Sdn Bhd
- Define Your Personal Objectives
Ian Wong underscores how income levels significantly shape individual aspirations. Wong articulates, “As earnings increase, so do expenditures.”
Within the B40 segment, commonplace objectives include fostering financial security and establishing ample emergency funds. The M40 cohort often prioritizes homeownership, children’s education, and retirement provisions.
Conversely, the T20 demographic typically directs attention towards preserving wealth and devising future inheritance strategies.
- Establish a Robust Financial Framework, Especially for Fresh Graduates or Individuals in Lower Income Brackets
Linnet Lee stresses the significance of laying a sturdy financial groundwork, particularly for those in the lower income echelons or recent graduates entering the workforce.
Lee advocates concentrating on financial and debt management to fortify financial resilience against unexpected circumstances.
“Financial planning serves as the nucleus and essence of an individual’s wealth and financial well-being,” she articulates, accentuating the pivotal role of financial consultants in ensuring not only monetary success but also familial harmony.
- Assess the Suitability of Your Investment Tools and Risk Preferences
Delving into investment apparatus suitability and risk propensity, Kuah Soo Yee advocates tailored considerations.
For individuals with limited financial resources, expertise, or time, unit trusts may serve as a suitable investment mechanism.
Conversely, those with greater resources and time for monitoring investments might opt for securities—financial instruments denoting ownership or debt responsibilities of an entity. Examples encompass stocks, bonds, and derivatives, facilitating returns on investments through financial market transactions.
Kuah underscores the imperative nature of harmonizing investment choices with individual risk tolerance, delineated through conservative, moderate, and aggressive portfolio allocations.
- Customize Your Investment Approaches Based on Present Financial Circumstances, Risk Appetite, and Investment Horizon
Lee recommends tailoring investment strategies in sync with financial conditions, risk profiles, and investment durations.
For individuals with modest incomes, avenues like EPF or unit trusts with lower investment outlays may prove beneficial.
Medium-income earners could delve into stocks or alternative investments, while high-income counterparts might contemplate private equity or overseas investments.
Private equity entails investing in non-public companies to secure ownership interests and propel growth, whereas offshore investments encompass investing in assets or financial markets beyond domestic jurisdiction.
- Harmonize Risk and Return
Wong underscores the necessity of balancing risk and return, advocating for a diverse portfolio tailored to individual risk appetites.
He proposes adjusting portfolio compositions according to income levels and affordability, with the objective of optimizing returns while mitigating risks.
A diversified portfolio integrates a spectrum of investment categories. Consider the following:
- Stocks: Diversify investments across various company stocks from sectors such as technology, healthcare, finance, and consumer goods, spanning large-cap, mid-cap, and small-cap stocks.
- Bonds: Allocate a segment of the portfolio to bonds, incorporating government, corporate, and municipal bonds with varying durations and credit quality.
- Real Estate Investment Trusts (REITs): Participate in REITs managing varied real estate portfolios for exposure to real estate markets without direct property ownership.
- Mutual Funds or Exchange-Traded Funds (ETFs): Include funds tracking diverse indices or sectors.
- Commodities: Explore investments in gold, silver, oil, or agricultural products for further diversification.
- International Investments: Distribute a portion of the portfolio to foreign stocks and bonds for exposure to international economies.
- Cash or Cash Equivalents: Preserve a portion in cash or cash equivalents like money market funds for liquidity and seizing timely opportunities.
By diversifying across these asset classes, investment risks are spread out. In scenarios where one sector or asset underperforms, others may offset losses, potentially bolstering overall returns.
- Harness Government Initiatives and Incentives
Lee sheds light on assorted government initiatives and incentives fostering investment and financial planning.
These encompass tax incentives for Private Retirement Schemes (PRS) investments and education saving incentives through programs like the Skim Simpanan Pendidikan Nasional.
Bursa Malaysia also extends programs aiding investors at various stages, such as the Mirror, Learn & Trade initiative.
