Tools to get started

STEP 1

Set your goals

Have goals that are specific, measurable and realistic. You are more likely to stay focused and achieve them.

Writing your goals down can increase your success rate.

STEP 2

Work out your risk appetite

Some asset classes fluctuate more than others but may offer higher returns.

Having a variety of assets helps smooth your investing journey.

You may also take on more or less risk, depending on how your financial circumstances change. For instance, a large pay rise or windfall may increase your risk tolerance. A job loss or new baby potentially reduces.

STEP 3

Choose your investments

Different types of investments serve different purposes.

Bond or equity mutual funds can give you lump sum payouts in the form of capital gains and investment income.

If you need regular payouts, annuities can provide a fixed stream of payments.

STEP 4

Keep an eye on your portfolio

But don’t over-do it! Over-monitoring may cause you to sell at the wrong time, especially when markets fall.

Stay the course if your initial reasons for investing have not changed.

Avoid panic and emotional decisions. Remember why you are investing and stick to the plan.

STEP 5

Fine tune

Fine tune your portfolio at least once a year.

This is useful as your financial circumstances may have changed due to unexpected expenses, a windfall, job loss, new goals, etc.

You can also speak to your financial adviser on the new opportunities and risks in the market.

Dividends make up a big part of equity returns in Asia

In the last 10 years, dividends make up a whopping 46% of total returns in Asia, much more than in the US¹. Don't miss out.

Source: Bloomberg. MSCI Asia Pacific ex Japan Index. Past performance is not a guarantee of future returns. December 2018.

Dividends have been steadier than earnings in Asia

Dividends offer an important source of stability, especially during times when earnings are uncertain.

Asian dividends offer diversification

Although utility and telecoms sectors typically pay out high dividends, you can get dividends from many other sectors in Asia like financials, information technology, materials, industrials, etc.

Asian dividends have been growing

From 2001, Asian dividends per share grew 304%². This is due to stronger cashflows, healthier balance sheets and lower debt levels.

Source: Bloomberg. MSCI Asia Pacific ex Japan Index. Past performance is not a guarantee of future returns. Jan 2019.

Room for even more

While dividends are not guaranteed, Asian companies can pay out more dividends. They are only paying out 34% of their earnings in dividends, below the 44% average of developed markets³.

Demand for diversified income from retirees will keep demand for dividend stocks high. By 2050, over 40% of the population from Korea, Taiwan, Hong Kong and Singapore will be 60 years and above⁴.

Source: Bloomberg. MSCI Asia Pacific ex Japan Index. Past performance is not a guarantee of future returns. July 2018.

How bonds suit your investment needs

If you prefer to receive steady and regular payouts, bonds offer a predictable income stream at fixed intervals. Moreover, if held to maturity, bondholders get back the entire principal assuming the bond issuer does not default due to financial difficulties.

Types of bonds you can invest in

You can choose to buy a government or corporate bond depending on your risk appetite. If you are risk averse, government bonds are regarded as a less risky option, but you may have to contend with lower returns versus a corporate bond with similar features.

Bonds are also rated according to their creditworthiness. The rating assigned to a bond will help you to choose between the financially stronger issuers from the weaker ones.

Decide your investment time frame

It is important to fix a time frame for any new investment as your needs will vary with time. As a bond typically comes with a maturity period, it can match your future lump sum cash outlay requirement if it coincides with the bond’s maturity date.

A complementary role in your investment portfolio

Bonds can bring significant diversification benefits to your investment portfolio. The steady income from bonds can mitigate the volatility of equity price movements.

Moreover, bond prices may not move in the same direction or of the same magnitude as equity prices.

Factors affecting the price of bonds

Bonds have a reputation for being safe investments, but are by no means risk-free. The most keenly watched factor that affects bond price is interest rate. Bond prices move in the opposite direction to interest rates.

If you choose to hold your bonds to maturity, you will be less affected by the daily price movements caused by changes in interest rates.

All-weather

A multi asset strategy aims to deliver stable returns across all market conditions, even when the market falls.

Broad-based

A multi asset strategy is diversified across a range of asset classes which can include cash, bonds, stocks, commodities and real estate; as well as across markets and styles.

Convenient

By combining different asset classes across multiple regions in one portfolio, multi asset strategies potentially offer investors a quick and simple way to gain exposure to a diverse mix of investments globally.

Dynamic

To improve returns, the fund manager can adjust exposures to different asset classes depending on economic cycles.

For example, an active multi asset manager will typically put more money in cash and bonds if he feels that the economy is going to slow down, and more into stocks when the economy is booming.

Diversification

Mutual funds allow you to gain exposure to assets and markets that may not be easily available to an individual investor. Additionally, they cater to a diversity of investing styles, be it growth, momentum, quality, dividend, etc.

Choice

There are several types of mutual funds and investors have ample opportunity to choose funds that best meet their investment objectives and risk appetites.

Affordability

Many mutual funds can be purchased with small initial and subsequent outlays. Investors only need to set aside small amounts and yet still be able to construct an efficient and diversified portfolio.

Expertise

Tap into the power of expert and collective wisdom of a team of professionals. This eliminates the need for individuals to perform detailed and ongoing analysis on the underlying investments.

Factors affecting the price of bonds

Bonds have a reputation for being safe investments, but are by no means risk-free. The most keenly watched factor that affects bond price is interest rate. Bond prices move in the opposite direction to interest rates.

If you choose to hold your bonds to maturity, you will be less affected by the daily price movements caused by changes in interest rates.

What they include

Alternatives are wide-ranging and include commodities (e.g. grain, oil and gas), derivatives, hedge funds and tangible assets like precious metals, rare coins, wine, art and antiques.

For diversification

Alternative investments tend not to move in tandem with conventional investments and are said to have lower correlations with equity and bond markets.

Which is why sophisticated investors often include them in their portfolios for greater diversification.

A good alternative?

Alternative investments are not for everyone. They tend to be more complex (e.g. derivatives), less liquid (e.g. art), difficult to value (e.g. rare coins). Some alternative investments require a larger amount of initial outlay compared to traditional mutual funds.

Speak to your financial adviser to find out if alternative investments have a place in your portfolio.

Affordability

Unlike buying physical properties, REITs can be purchased with small initial outlays. They offer a more affordable investment proposition.

Diversification

You can diversify your risk exposure by different geographic locations and property types from apartments and offices, to shopping centres, hotels, hospitals and warehouses.

Low correlation

REITs tend to have low correlation to equities, largely due to their more predictable income stream which in turn reduces their share price volatility.

Income generation

As REITs are required by law to distribute at least 90% of taxable income to shareholders each year, you can be assured of receiving a regular dividend income, although the amount may vary each year.

Liquidity

The ability to easily buy and sell units in REITs makes them a liquid proxy to physical real estate.

Make an impact

Green Bonds are used to finance or refinance activities that help environmental sustainability. This includes renewable energy, green building/energy efficiency, and infrastructure projects.

Green doesn’t mean new

The first Green Bond was issued by the European Investment Bank in 2007. Since then, the global Green Bond market has grown rapidly to which Asia’s Green Bond market accounts for 27% of the global Green Bond market ¹. It is expected to continue to grow rapidly as concerns over climate change rise and policymakers incentivise issuances.

¹ HSBC calculations, Dealogic, as of 20 January 2020.

Different shades of green

There is currently no universally agreed criteria that determines whether an economic activity is environmentally sustainable and what can be classified as a “green” bond. Standardised definitions will help achieve consistency and aid progress in investing in Green Bonds. Various policymakers e.g. the European Union, are working towards developing a common language.

Diversified universe

Over the years, the global Green Bond market has become more diversified, attracting companies, banks and governments from different countries to issue in multiple currencies.

Green Bonds can also be issued by companies regardless of the nature of their activity. For example, an energy generation company that relies heavily on coal may issue a Green Bond to fund its transition to renewable energy sources.

The issuer risk still matters

Similar to conventional bonds, Green Bonds carry the credit risk of the issuer. Investors need to pay attention to the issuer's credit rating as well as other financial data.