| -> | | | | US dollar, even if the shares stay unchanged you |
| For those who have just started the long journey | | | | are already better off with a foreign exchange |
| of investment and financial planning, the obvious | | | | gain. |
| question is: What are the products out there? | | | | ETF (exchange traded funds) |
| Here is a brief introduction. | | | | - ETF is a basket of securities that tracks the |
| Cash and money market funds | | | | performance of a stock, bond, or commodity |
| - Cash or CDs (certificate of deposit) generate | | | | index. |
| returns in terms of interest income. Money | | | | - It can be easily bought and sold in the market |
| market funds, which comprise of high-quality, | | | | (same as stocks), gives you diversity (exposure |
| short-maturity debt instruments, give a yield | | | | to different industry/regional indices), and generally |
| similar to CDs but can be traded once a day. | | | | incur lower cost than mutual funds. |
| While they are the safest instruments, the return | | | | Mutual funds |
| may not be high enough to compensate for | | | | - Mutual fund is a portfolio of stock or bonds |
| inflation. | | | | created for a particular industry, country or |
| Stocks / Equities | | | | product. It can be traded once a day based on |
| - Owning a stock means owning a piece of a | | | | the price (called NAV, net asset value) calculated |
| company. As an owner, you get the most benefit | | | | at the end of the day. |
| at good times, but take the most risk when bad. | | | | - Unlike ETFs, mutual funds are actively managed |
| Statistically, this "high-risk-high-return" investment | | | | by fund managers and their performance could |
| gives the best investment return on a long-term | | | | vary greatly. |
| basis. | | | | Real estate / REIT |
| Bonds / Fixed-income products | | | | - The investment can be in the form of: (1) owing |
| - A bond is a loan made to the bonds' issuer (e.g. | | | | a physical property, (2) owning stocks of a |
| government or corporations) by an investor (e.g. | | | | publicly-listed property companies, or (3) owing |
| an individual). In return, the investor receives | | | | shares in REIT (real estate investment trust). |
| regular interest payment (the rate is called the | | | | - Real estate is an interesting and complicated |
| yield) until the bond is matured, at which point the | | | | type of investments and has a lot of unique |
| issuer repays the principal. | | | | properties; but in general, we can expect its |
| - At the same time, bonds can be traded in the | | | | investment return to fall between stocks and |
| market. Similar to stocks, bond prices go up and | | | | bonds on a long-term basis. |
| down depending on many factors, and this | | | | Commodities |
| fluctuation affects the effective yield. | | | | - Commodity products were once open to private |
| - Therefore, although bonds give fixed, regular | | | | wealth clients only. |
| interest income, they are by no means a riskless | | | | - As energy and commodities kick into a big |
| financial instrument. | | | | upward cycle, the products have become very |
| FOREX (foreign currency exchange) | | | | popular and related funds /ETFs are being |
| - Economies around the world use different types | | | | introduced to the mass market. |
| of currencies, creating the need to trade and | | | | Apart from the above investment products, |
| exchange currencies. | | | | sophisticated investors may include structured |
| - When we buy a stock or bond from a foreign | | | | products, hedge funds, private equity |
| country, we are inherently buying into FOREX. For | | | | investments, and collectibles (e.g. antiques, fine |
| example, you live in US and own shares in a | | | | arts, special editions) in their portfolios. |
| French company. If euro is strengthening against | | | | |