Sunday, April 28, 2013

a quick guide to the various asset class

Where to invest? Here's a quick guide:

CASH
-immediately available and value is universally recognized
-very low returns
-very low risk and insured up to a certain amount in banks

STOCKS
-earns dividends, a real passive income
-reduction of 50% is possible
-returns of 1000% is possible
-requires time for research
-you can hand over management to professionals in mutual funds or UITFs but in hindsight, my personally managed stock portfolio beats my equity mutual funds' returns two out of three times

BONDS
-earns interest
-low risk; governments and corporations have a better track record of paying debts than most people
-requires a high initial investment (unless you invest indirectly through mutual funds or UITFs)

PRECIOUS METALS
-gold is the "last man standing" during crises like the recent GFC
-if central banks hold gold and silver as reserves, it is prudent that you should hold them as well
-volatile, price goes up and down frequently and in a wide range
-does not earn income; exposed to theft

BUSINESS ENTERPRISE
-offers the greatest possible returns on investment if the business succeeds
-be prepared to lose 100% of the investment if the business fails

REAL ESTATE
-earns rental income
-not easily liquidated if you need the money
-it is a real, tangible asset one can enjoy; which is better? a stock certificate or this:
   (BTW, we do not own this island in Palawan but I wish we did!)

Happy investing!

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