Ask the right questions
Why do you invest?
Investing is not about picking the top-performing asset or the highest ranking fund. The purpose of investing is to make your money work for you. This requires investors to make informed, important and conscious decisions. Here are the questions that you must ask yourself before investing:

Why invest?

  • This refers to the intention that drives you to invest. 'Why invest' is just as important a question to ask as 'what to invest in'.

What to invest in?

  • 'What to invest in' encompasses all activities associated with selecting the fund or asset to buy. What to invest depends on your personal financial goals, investment duration and preferred asset choice. Your risk tolerance should also determine your choice of investment.

When do you need your money (capital and returns)?

  • This is your investment horizon or duration. Your investment horizon influences the asset that you select.
  • The longer the investing duration, the more risk can be taken as you can ride out short-term market volatility. Shorter investment duration increases the amount of risk your portfolio has to absorb as markets may turn unfavourable. Holding risky assets for a short time-frame increases the likelihood of selling at a discounted value.
  • Using your investment duration as a guide also prevents emotional decision making such as a selling out when markets fall without a change in fundamentals.

How are you going to invest?

  • Investing is not a one-off activity. Once selecting your investments, you need to actively manage your assets from time to time, whether it is monitoring or rebalancing your asset allocation.
  • Ask yourself if you prefer to employ the DIY method or be actively involved in the investment process. Then ask if you rather self-manage all ongoing portfolio management activities or use a professional fund manager.
  • Both approaches are acceptable, it is a matter of which is a better fit for you.

Who to invest with?

  • You can choose between local and foreign investment managers.
  • Find out who does the investment firm partner with as this gives you more investment options and to leverage on.
  • Investment experience, track record and investment process are also important considerations when deciding who to invest with.

Where to invest?

  • 'Where to invest' refers to the geographical market. Investors can invest in Malaysia, regional markets or developed markets. Markets do not move in tandem. Holding assets based in different countries increase diversification and lowers the overall risk for a portfolio.
  • Foreign markets also provide better opportunities for returns and offer sophisticated alternative asset classes that are not readily available in the country.
  • Consider where to invest, once you have decided on What, Why, When, Who and How to invest.
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