What is investment? What is the difference between investment and savings?

Investment is part of your overall financial planning. Investment differs from savings.

In savings, you will generally get back your savings, plus some interest.

However, in an investment, you may or may not get back the sum invested or you may get much more than the initial amount invested. The potential higher return is to compensate you for the higher risks undertaken by you.

If you have some savings, you may want to invest them to maximise your return.

This Knowledge Base category aims to provide you with some guidance on the factors to consider before investing as well as the do's and don'ts when investing.

Contents

• Planning your investment
• Financial planning and life cycle strategies
• What is your risk profile?
• Getting financial advice and sources of information
• Protect your interests
• The don'ts in investment

Glossary

1. Bursa Malaysia Securities Berhad: The exchange where stocks and shares are traded in Malaysia.


2. CDS (Central Depository System) Account: It is an account opened under the investor's name (applicant must be at least 18 years old) with a stockbroking company. This account will enable the investor to buy and sell shares and to carry out activities on other non-equity counters (i.e bonds, warrant, loan stock, etc) which are under CDS.


3. Financial Goals: What a person intends to do with his/her money within a certain period of time. Goal setting is crucial to help in planning of expenses and in spending wisely.


4. Financial Planning: To organise your finances to meet your goals. These goals can include buying a house, financing your children's education or planning for retirement through proper management of your finances.


5. Investment risks: The risk that the value of an investment may be low due to factors like movement in asset prices arising from changes in the market sentiment, business cycles, company revenue performance and changes in credit ratings.


6. Liquidity: The ease at which you can convert your assets to cash at current market value.


7. Returns: What an investor can earn from his investments.


8. Securities: Investment instruments traded on the stock exchange. They can be shares, warrants or fixed income securities.


9. Separately Managed Equity Portfolio: A portfolio managed by fund managers where investors own the securities individually.


10. Yield: Similar meaning as returns. When you talk about bonds, the term used is yield.

Reprinted with permission from BankingInfo (A Consumer Education Programme by Bank Negara Malaysia)

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