Monday, November 29, 2010

Are You Diversifying and Growing Your Money?

Growing your money

How do you generate more regular income from your investment and fight inflation at the same time? Banks are offering very low interest rate for fixed deposit. It is prudent to look for alternative vehicles to beat inflation and generate income for your investment. Here are some ways to diversify and maximize income from your investment:

  • Dividend stocks: Look for stocks that give you steady streams of income. One such stock in Malaysia is Public Bank. It is a trusted brand with very consistent dividend payments.

  • Dividend unit trusts: These are unit trust funds invested in a diversified range of dividend stocks. Unit trust investors receive income distributions instead of dividends. Examples of such local funds are AvenueEXTRA Dividend and Hong Leong Dividend.

  • REIT: These are real estate investment trusts which are formed by companies that purchase and manage real estate using funds collected from shareholders.  The largest REIT in Malaysia is Sunway REIT (SunREIT). Like stocks and unit trusts, you also collect dividend through frequent income distributions from REIT.  The returns of REITs are around 7%

  • Rental income: Unlike REIT, you are actually the owner of the property and you collect monthly rental from the tenant: However you bear the cost of maintaining the real estate.

  • Bond funds: Like unit trusts, you collect regular income from their distribution. You can expect a return of around 4% to 5%.  

  • Investment-link insurance policies: It is a combination of protection plus investment. A portion of the premium is used to purchase units in the investment linked funds managed by the insurance company.

  • Alternative investment: It is not related to traditional investments such as stocks and bonds. Alternative investments consist of land, fine wine, gold, silver, valuable arts and antiques. This kind of investment will not be affected by financial institutions going bust or threat of war

Not all investments that give you income are the same. There are risks involved and you have to be cautious. The key is to diversify your investments to avoid total loss.

Reference: Personal Money October 2010 issue

Carnival of Traders and Investors

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