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Key learning points:
Investment types, or asset classes, come in different shapes and sizes. Some offer higher returns (and higher risks), and others offer lower returns (and lower risks). The smartest way to invest is to spread your money across a variety of different investment options. As a retail investor you can easily invest directly in Singapore-listed equities (company stocks and shares traded on SGX) but it can be difficult to directly buy and sell shares in other markets around the world. Further, it's not possible for the general public to directly invest in every asset class - such as bonds and fixed income instruments.
Large financial institutions like AIA provide retail investors with indirect access to various asset classes (including equities, bonds and money market funds) through products like ILPs (investment-linked policies) which invest in unit trusts, or other funds that are professionally managed.
But the ability to access a wide variety of different investment opportunities around the world is only part of the story. The greatest advantage is the ability to diversify your risk exposure, and to adjust it over time. Professional fund managers are able to invest in many different asset classes. Accordingly, they can create funds from a choice of equities, bonds, cash and other financial instruments, such that each fund has its own risk profile. So it is possible for you to find a fund that's appropriate for your goals and your risk appetite.
Next - What's the smartest way to invest? |
