5 Investing Strategies

5 Investing Strategies

If you read all the books on investing strategies, you would be thoroughly confused. There are just too many. Here we would like to outline just 5 broad ways of looking at investing in unit trusts.

1. Don't do anything

Don't do anything. Don't do anything. Don't do anything. Reason:

i. Cost savings. Every time you decide to sell a unit trust and replace it with another, you incur additional costs - initial sales fee for the new fund, switching fees from the old fund and so on. Add these costs together and you would be losing quite a bit.

ii. It's hard to catch the right timing. If you're buying and selling, it must mean that you are trying to time your investments, hoping to catch the momentum of each unit trust. The truth is that it is very hard to catch market timing.

iii. You won't be able to maximize your returns.

Unit Trust XYZ has raked in 20% in 3 months.

You think "Lets Sell".

You sell and 2 months later, discover XYZ has performed up to 60%.

You think "$@#!"

• Invest regularly
• Compound
• LET TIME BE YOUR ALLY

2. Actively Pursue Growth

You want some excitement in your investing life and insist on timing the market. You CAN make profit...but if you are a novice like me...DON'T. As mentioned earlier, Unit Trusts are mid to long term investments. Minimum recommended period to stick to one is a year.

If it adds more stress to your life consider other strategies. I only recommend it if you find it exciting and fun to chase growth.

3. Do the opposite

When other sell, you buy. Why? Prices will fall and you can purchase more units for $1000.
For example, if each unit had cost $1.70, and the prices fell to $1.00 during the down market cycle, you would have purchased 1000 units.
Remember, markets work in cycles. So when the prices go up...you can sell and make a tidy profit. For example, when the prices go back up to $1.70 during the up market cycle, you can sell it for $1700. That is $700 profit.

4. Investing in a Recession.

With unit trusts, there is a way to make money even in a recession, and that is through Bond Unit Trusts. This is how it works. Recall that interest rates falls lead to higher bond prices. In a recessionary environment, interest rates generally tend to fall. This is because borrowing activity decreases dramatically, and banks have to lower their interest rates in order to attract loans. Consequently the rates which they pay out have to be lower as well. In such a scenario, bonds which pay a fixed coupon become extremely attractive.

Managers of bond unit trusts will sell a part of their bonds when there is a huge capital gain to be made, thereby return handsome rewards to the holders of such unit trusts. In recessionary times, bonds have been known to give 20% - 30% returns in a year.

If you are a long term investor employing strategy 1, you would have a small exposure to bonds in your portfolio. If you are a growth investor employing strategy 2, you would shift all your money out of equity funds and into bond funds when a recession starts to hit. If you are contrarion investor, employing strategy 3, you may increase your bond exposure when everyone in the market seems to be euphoric, and you think a recession might be coming.

So isn't it great investing in unit trusts? There's always something to do!

Probably the best strategy of all

Dollar Cost Averaging (Highly Recommended)

You start a savings plan with a unit trust and you devote a fixed dollar amount towards purchasing it every month (or week, or quarter, whatever the predetermined period may be).

Month 1: 1 unit =$1.80 You buy $200 = 111 units

Month 2: 1 unit =$2.00 You buy $200 = 100 units

Month 3: 1 unit =$1.50 You buy $200 = 133 units

Total Spent: $600

Total units bought: 344 units

If you had spent all $600 in the first month, you would only have purchased 333 units.

Make Volatility work for you

So instead of stressing out over the volatility of the market, you can rest assured knowing that your savings plan actually works for you in those volatile conditions! That's what unit trust investing is meant to do. Give you more money and less stress!

7 Reasons to Invest in Unit Trust

My 7 Reasons for Investing in Unit Trusts

1. They are already well-diversified : Unit Trusts buy into a good variety of stocks and bonds thus, risks are well diversified

2. Less Stress : They are managed by professional Fund Managers. You go about your daily life without stressing over the ups and downs of the market cycles

3. You can invest all over the world. Long Story short: unit trusts = invested all over the world in various business sectors = more opportunities

4. You only need a small amount of investment to start with. Investments start mostly at $500 and $1000 to buy you into a well-diversified portfolio. You may have tosell your kidney before venturing into stocks

5. Redemption is immediate. If you sell your stocks, it joins the queue awaiting to be bought by other investors.The price may be different from the price you quoted. With Unit Trust, the issuer is bound by agreement to buy from you at the day's prevailing price...no matter what.

6. It is relatively safe. Long story short: they are well diversified, thus risks are smaller. Fixed Income unit trusts are super safe and in the long run, these still perform better than your fixed deposits.

7. Most important of all, you can reap tremendous returns. Over the long term, unit trust investment can reap very handsome returns. Some good unit trusts have returned more than 200% in a year. That means that an investment of $1000 at the beginning of the year would turn into $3000 at the end of it! Many have given about 15% - 20% average annualized returns every year.

How to Set Goals Before Investing

Setting Goals

Every trip needs a destination. Every marketing plan needs an objective. Similarly, every investment plan needs a Goal.

What are you saving for? Is it for retirement? A trip to Europe with the family? A down payment on a house? Your child's education? Or maybe a second home?

Prioritize

There are many different goals that you want to achieve. However, due to physical limits and time constraints, some kind of choice must be made regarding which goals to pursue. You have to Prioritize.

Prioritizing simply means deciding which of your goals are the most important. Financial goals -- more often than not-- collide with one another. Paying for the family trip to Europe may take away money that can otherwise be used as down payment for a new car. The principle is this :

You should work towards the lesser goals only after the really important ones are well provided for.

After you have prioritized your goals and know which ones you should be working towards first, assign a dollar value to these goals. For example, a trip to Europe for the whole family would require at least $10,000. Or, a new car would require a down payment of about $20,000.

Be as accurate as possible with these estimations. Some of you might get scared by the large sums of money that some of your goals require. DO NOT WORRY. All it takes is a little planning. If you've planned for it, your chances of earning the money by the time you need it improves dramatically.

Compounding

TIME is the most important ally when it comes to setting your goals. With time on your side, any investment goal can be reached by virtue of the power of compounding -- which is basically small amounts of money, properly invested over long periods of time, growing into very significant sums.

Lets take a very simple example to show the power of compounding. If you save $20 every month in an investment that gives you a 15% return, in 30 years time, your savings would be worth $141,947.20!

The point is that to put time on your side, you need to decide early which of the many possible financial goals are really worth pursuing -- and start working toward them.

The goals you set would give you a rough idea of how much money you'll need. Then you can start to think about which unit trusts might be right for you and what kind of returns you can reasonably expect.

You should plan your finances and spending around these goals. Each time you spend money on a purchase or investment that doesn't help you reach one of your main goals, ask yourself whether the spending is really necessary.

I set aside $500 every month to invest in my Unit Trusts. I will have $6k invested in unit trusts in one year. I am too lazy to do the calculations now as to how much I will save when I compound my monthly investment over 30 years. You do it for me. Use a calculator. Once you recover from the shock...proceed to the next section :)

Hardest Part About Investing

Hardest Part About Investing-Getting yourself to the starting line

Stare at this... ********** .... as I attempt to read your mind

OK, this is what you are thinking.

"I need more money in my life".

Good, aren't I?

Maybe you need money to pay off your loans and bills. Maybe you want to start a family and provide for your children. Hell! Maybe you just want to take an expensive vacation for ONCE IN YOUR LIFE and pamper yourself.

I know that I DO.

By investing wisely now, all of us can generate enough cash to deal with all of the above, and more. but before you do that, ask yourself these important questions.

• How much do you really need?
• How much risk can you take?
• How long are you willing to wait before you see profits?

How much do you really need?

Determine your financial goals. This is important or else you will be constantly worrying about 'needing more' money

How much risk can you take?

Different unit trusts have different levels of risk. Long story short:

1. High risk = high returns: advisable if your time horizon is long.
2. Low risk = low returns: advisable if your time horizon is short (that is to say' less then 8 years)

Of course, typically, it is the more volatile 'growth' unit trusts that generate the higher returns. So the more risk you are willing to take, the better your returns can be.

What the hell is a time horizon? That is, how long you are willing to wait before you see profits

How long are you willing to wait before you see profits?

Again' long story short;

1. longer the time horizon = afford to take more risks = higher the profits
2. shorter time horizon = invest in less risky funds = lower your profit

As markets are unpredictable, prices may fall and if you do not have the luxury of time, chances are, you will have to sell at a loss.

TIME IS YOUR BIGGEST ALLY in generating cash for unit trusts.

Why Choose Unit Trust?

Why I Chose Unit Trusts- You Should Too

Why unit trusts are the best forms of investment :

1. They are well-diversified instruments, and so have less risk than individual stocks.
2. They are invested globally and in different financial instruments so there is a good range to meet different investment objectives.
3. They are managed by professional fund managers whose job is to generate a good return for your money.
4. With the right funds, you can reap tremendous returns. Invested over time, these returns can compound to very attractive sums unlike savings.
5. Investing with unit trusts is one of the best ways to attain the financial goals in our lives.

WELCOME

Welcome

I shall keep this short and sweet so you can go on to fulfill the reason why you are really here; If you are like me, not sure when or where to invest in, stay tuned to my blog. Mind you...I am a beginner myself and I appreciate any comments or suggestions that visitors leave behind. As much as possible, I shall try to keep my posts in point form to save you the hassle of going through a whole bunch of words.

My infant attempts in investing (to be honest, I did not earn too well and at times, made a loss):

1. Autosurf Industry- was doing well at Studiotraffic but they closed unexpectedly, was doing well at 12DailyPro until the advent of the Stormpay fiasco which forced them to close, thus, making me lose my money. I have tried almost a hundred autosurf programmes online (most of which require some initial capital) just to find that most are unreliabble or are merely pyramid schemes.
2. MLM (multi-level-marketing)-I found out the hard way that most MLM sites on line require you to create affiliates of your own to earn bigger commissions. I do not have the time to do this and am not sure of the certainty that I will be paid
3. Fixed Deposits-Long story short-> You need a HUGE amount of money sitting in an account and best part, you cannot touch it for a specified period of time in order to earn the interest. Too rich for my blood (but I WILL BE)

Instead of wasting more time and effort in these areas, I decided to tread into the unfamiliar territory of Unit Trusts and Stocks and Shares.

Right now, I have accumulated 6% in profits from my Unit Trusts (in a matter of months). I shall frequently post in this blog any new funds which I recommend and the methodology I based my recommendations on. I shall also update my portfolio of unit trusts thus far in subsequent posts.

Recently, I have opened an online trading account to trade in stocks and shares. Once I have a grasp of it, I shall update my blog in this form of investment.

Let us waste no more time...........Unit Trusts, HERE WE COME