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It has been said to get potentially higher return, one must take risk. This is not entirely correct. There are two main sources of risks namely systematic and non-systematic risk. Systematic risks are those which affects the entire broad market. Examples are interest rate risk, money supply, political risk, etc. Non-systematic risks are those which are peculiar to the company concerned and … [Read more...]

Most people will exaggerate earnings from investments due to the following reasons: a) It is shameful to tell others you have lost a lot of money. Thus people will tend to exaggerate earnings when it is actually quite small b) People tend to "write-off" past investment mistakes and pretend it never happen and so they don't tell people about their shameful past c) Earnings are exaggerated … [Read more...]

Property investment appears to be a better investment due to the following reasons: The property value appears to be less volatile than the stock market The capital gain seems to be larger compared to stock investments  For (1), the property value appear to be less volatile is due to the fact that property are illiquid assets that are seldom traded on the open market. At any one … [Read more...]

Research has shown that 90% of the portfolio return variability can be explained by asset allocation. By mixing a combination of bonds and equities, it is possible to adjust the risk of the portfolio and at the same time determine the potential return. A greater proportion to equities increase the risk of the portfolio but provide a potentially higher return on a long run. On the other hand a … [Read more...]

The market return refers to the performance of the broad equity market. For Singapore, the STI index is commonly used as a market return. For US, the S&P 500 is often used. For global but developed countries, the MSCI World Index is commonly used. For emerging market, the MSCI Emerging Market Index is often used. When refer to an index, it is important to ask when is the index merely … [Read more...]

A "benchmark" is the how a fund manager is judged against. It is often a market index such as S&P500, STI or MSCI World index, etc. If a fund manager can consistently outperform the index, it means the fund manager is good otherwise the investor is better off investing in the benchmark itself using index funds. … [Read more...]

For unit trusts, the cost of investment is sales charge, management fee, soft dollar commissions, bid-ask spread, impact cost and brokerage fee. My estimate of these cost is between 4.55% pa to 9.2% pa. The cost is even greater if the fund size is small. For ETFs, the cost of investment is bid-ask spread, brokerage fee, management fee, impact cost. My estimate of these cost is between 0.90% pa … [Read more...]

The duty of the investment adviser is to determine a) The clients' financial goals and time horizon b) Determine the clients' risk appetite c) Determine the clients' ability to take risk d) Construct and recommend a suitable portfolio e) Make adjustment to the portfolio based on any changes to the clients' financial situation … [Read more...]

Because investment entail risks, it is not necessary to take such risk if you are not required to do so. For example if you are a high income earner and a good saver and do not mind a modest retirement lifestyle, you do not need to take risk as your savings could be sufficient to support your retirement. You should check with your financial adviser to determine whether is your current savings … [Read more...]