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Is the money I invest
in an Investment Fund insured?
No. Investment Funds are typically not insured and
the unit price will fluctuate. An investor's shares
may be worth more or less than their purchase price
at the time of the sale. It is recommended that you
read the Prospectus carefully before investing.
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When is the best time to invest?
..when the unit price is high? ..when the share price
is low?
While traditional market wisdom says "buy low,
sell high", that is easier said than done. As
people tend to be optimistic in good times and pessimistic
in bad times, many do just the opposite. The best
time to invest depends more on your goals and financial
situation than on market conditions.
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How much do I need to start?
You start by investing a minimal amount of US$10,000
(or equivalent). Investment Funds offer you convenience
at low cost, cover a spectrum of investments and are
run by professional managers.
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What is asset allocation?
To put it at its simplest, asset allocation means
choosing the right mix of regional and global equities
and bonds (we call them "asset classes")
to give you the best possible chance of reaching your
targets.
The rationale behind asset allocation is that different
assets perform differently, even in response to the
same economic event. For instance, when equities are
not performing well in one country or even globally,
bonds may be performing well. With asset allocation,
you are actually trying to reduce the fluctuations
in the value of your investments.
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What is diversification?
Diversification is the investment strategy of spreading
money into a number of different investments in order
to reduce overall investment risk. The aim is to offset
losses in one or more investments by gains in others.
In other words, you seek to reduce the impact of
market ups and downs on your investments. And invest
in shares that are spread across several countries
and industrial sectors which do not move in the same
economic cycle and do not respond to the same events.
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How many funds do I need to create
a diversified portfolio?
You may need as few as 5 or as many as 15 or more
equities. The key is to spread your risk by picking
equities from different kinds of companies across
several industries. A diversified portfolio may contain
stocks from small companies with unique products,
some medium-sized growth companies and some large,
blue-chip corporations.
Investment Funds are intended to diversify your holdings
for you. Even then, you should moderate your risk
by holding a handful of different types of funds.
An investment in a growth fund, for e.g. may be balanced
with smaller holdings in international and bond funds.
The proportion of each stock or fund you hold should
depend on your age, investment goals and tolerance
for risk.
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How often should I review
my portfolio?
Assuming your portfolios is following a well-defined
strategy that's appropriate for your personal situation,
you should review it at least once a year.
If you are not following a specific investment attuned
to your goals, time horizon, risk tolerance and financial
situation, then you should review it immediately.
A good way to start is to complete a Financial Needs
Analysis and Personal Investment Profile questionnaire
from Citibank.
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What are the time-tested
investment strategies that work?
In short, slow and steady is the way. Start as early
as you can to invest a set amount of money every month
in equities of equity investment funds. Historically,
the stock market has outpaced inflation and every
other type of investment. Even a relatively small
sum will grow over the course of your working life
into a substantial nest egg.
Regular payments make market volatility work in your
favor because when the market is down, you buy more
shares at a lower price than when the market is up.
You can further protect yourself against market movements
by spreading your risk over different companies and
industries. Holding some other investments such as
bonds and real estate, will also smoothen out the
ride.
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What is a good Investment
fund to reach my goal?
Whatever your goal is, you would want an Investment
Fund (or a collection of funds), with good returns
and an appropriate level of risk.
First, pick the category of fund that fits your goal
and stage of life. If you are just starting out, for
e.g., think about a growth fund. If you are saving
for a down-payment on a house or are planning for
retirement, you may want to invest in a more conservative
fund.
Generally, the higher the returns, the higher the
risk. Once you have narrowed down the categories,
compare the performance of the funds in the group
for at least over a 5-year period.
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How will inflation and taxes affect
my investments?
Your money has to work hard to beat inflation and
taxes. Over the years, equities have outperformed
inflation by an average of more than 7%, while Treasury
bonds have edged out inflation by less than 2%. Bonds,
certificate of deposits and other stable but low-yielding
investments have little to show after taxes. Hence,
it is a good idea to make stocks part of your portfolio
no matter what stage of life you're at.
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