Your Financial Guardian

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SIX ways to turn Savings into Investments

Many people thinking of how to SAVE their money efficiently and where to invest. There are a lot of investment instruments in the market. Each and everyone has its pros and cons. Based on my knowledge I listed down the Pros and Cons of each investment instruments. Hope my readers do understand and pick the right instrument after reading this post. Thanks!

 

Saving Accounts

Pros

–          Easy to open and maintain.

–          Minimum requirements. Very reasonable.

–          Flexible access to cash.

Cons

–          Ease of cash withdrawal can disrupt your savings programme.

–          Relatively low interest rate.

 

Fixed Deposit

 Pros

–          Higher interest rate than savings account.

–          Money cannot be spent on impulse purchases.

Cons

–          Interest may at times be outpaced by inflation.

–          Withdrawal less flexible.

 

Property

 Pros

–          A good “forced-savings” plan.

–          A good hedge against inflation.

–          Can bring good returns in “boom: economy.

Cons

–          As a starting point for savings, it is difficult; high “start-up” down payment, and you must qualify for a bank loan.

–          Long-term, inflexible mortgage repayment scheme.

–          Not readily converted to cash.

 

Life Insurance

 Pros

–          A useful saving-cum-protection vehicle.

–          As many policies have a penalty for premature break, it acts as a mechanism to promote saving.

–          Proven as an effective “forced savings” plan.

Cons

–          Relatively lower returns compared with other long-term investment vehicles.

–          Lack of flexibility.

 

Unit Trusts

 Pros

–          The perfect investment vehicle for regular savers.

–          Starting amounts are not as small as for savings accounts, but are reasonable.

–          Investments are easy to build up on a regular basis.

–          Benefit derived from dollar-cost averaging.

–          Unit trusts give a well-balanced investment portfolio that you do not need to manage yourself.

–          You can sell your units when the price is right at any time.

Cons

–          Affected by ups and downs of share market or other markets that the funds invested in.

 

Share Market

 Pros

–          More exciting than operating a current account.

–          Can bring spectacular returns when timing is right.

Cons

–          You need a lump sum to get into the share market.

–          Not for the regular saver investing a couple of hundred ringgit per month.

–          You need vast amounts of market information, time and luck in order to manage your investment successfully.

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March 9, 2010 - Posted by | Uncategorized

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