The Importance of Investing for Your Future Brought to you by: www.expatmoney.com

1. Investing
Investing for your future
Investing can be a daunting proposition, simply because investments carry a degree of risk. This could
result in you losing money as the value of the investment and any income they produce, can go down as
well as up.
Why Invest?
As we all know, money doesn't grow on trees, so in order to be financially secure for the future we need
to create wealth. Unless we are fortunate enough to experience a substantial windfall such as winning
the lottery, the only real option left is to create our own wealth. This is where constructive investment
comes in. By identifying our needs for the future, we can build an investment process which enables us
to create a secure and balanced approach to achieving this goal. The reasons people invest are varied,
but some of the main ones are school / university fees, down payment for a house or other large
purchases, a holiday, and the obvious one, retirement.
Investment Principles
One of the principles of investing is to spread risk and to diversify your investments. Diversification is the
process of investing in areas that have little or no correlation to each other. Diversifying your assets
helps spread risk and should therefore reduce the potential for any losses. If you had all of your money
invested in to one asset, sector, or region and it began to drop in value, your investments would suffer
significantly.
By i esti g i assets that a e t elated to ea h othe , if o e pa t of you i est e t po tfolio is falli g
in value, then the othe s should t e goi g the sa e ay. So e assets ill a tually go up i alue he
others decrease.
You can diversify through investing in different markets, countries, companies and asset type.

2. Diversification is an essential part of building your investment portfolio. It can give you peace of mind
that your investments will sustain in adverse market conditions and cushion losses. It will not however
mitigate the form of risk involved with any one particular investment.
Types of asset classes
There are three main asset classes which are, cash, fixed income and equities. In addition some
investors would also include commodities and property. Each asset class is expected to reflect different
risk and return investment characteristics, on the basis that they perform differently under the same
market conditions. It is for this reason, that having diversification in asset classes is of paramount
importance to building any successful investment portfolio.
Cash investments
Cash investments are best suited for the funds you may need immediately, for your rainy day or
emergency fund. Cash investments may have a lower rate of return than fixed interest investments, but
they offer easier access to your funds.
Fixed interest investments
The term Fixed Interest Investments covers a broad range of investment options, ranging from a local
bank's term deposit, through to government and corporate bonds. These investments are for a fixed
period of time, in which you lend to the institution funds, and they agree to pay back that sum (or
principal) at the end of the term (or maturity date). They also agree to pay you interest (or coupon
payment) at regular intervals.
The range of fixed interest investment options includes term deposits, debentures, corporate and
government bonds.
Equities
E uities also k o as o di a y sha es , o sha es , a e issued y a pu li li ited o pa y, a d a e
traded on the stock-market. When you invest in an equity,, you buy a share in a company, and become a
shareholder. Equities have the potential to make you money in two ways: you can receive capital growth
through increases in the share price, or you can receive income in the form of dividends. Neither of
these is guaranteed, and there is always the risk that the share price will fall below the level at which
you invested.
Commodities
Commodities are fundamentally different from stocks and bonds. Whilst they are investable assets, they
are not capital assets. Commodities do not generate a stream of dividends, interest payments or other
forms of income that can be discounted in order to calculate a net present value. Rather, commodities
are valued because they can be consumed or transformed into something else that can be consumed.
There are many routes that clients can use to gain exposure to commodities. However, the most
common route is via a collective investment or fund. The benefits of investing into commodities this way

3. is that, the investor can gain exposure to a broad range of commodities, which tends to enhance
diversification and reduce volatility.
Property investment
Relative to shares, cash and fixed interest investments, property is a medium risk investment,
potentially offering medium returns over the longer term. Property investments can be used to achieve
either capital growth or income, or a combination of the two.
Risk
You can't plan financially without understanding risk. Many people, when they hear the word 'risk',
automatically think about the chance of being defrauded or not getting all of their money back. This is
'capital' risk and whilst it is important, it isn't the only form of risk.
When you make an investment, it can be difficult to say with any certainty what return you will receive
he you fi ally o e to ash it i , this is k o as i est e t isk. Sha e prices fluctuate, interest
rates vary and inflation is a risk too.
There is also shortfall risk which means failing to reach your investment goal because the return you
make on your investments is too low. Just concentrating on capital risk and ignoring these other risks
can mean that you take too much of a cautious approach to investing.
How to invest
Now having identified the need to invest and understood and identified our attitude to risk, there are
two simple ways to invest, you can either employ the services of an advisor or if you are comfortable
with your own investment decisions you can take control and invest yourself.
Cautious
Cautious growth is intended for investors who are risk adverse and value capital protection over capital
growth.
Balanced
Balanced growth is intended for investors who are looking to benefit from global growth with some
defensiveness.
Aggressive
Aggressive growth is intended for investors seeking growth who are willing to accept a greater degree of
risk. Once this has been identified then we can start to build a portfolio of investments to suit the risk
profile.

4. Portfolios
Now having identified the need to invest and understood and identified our attitude to risk, there are
two simple ways to invest, you can either employ the services of an advisor or if you are comfortable
with your own investment decisions you can take control and invest yourself.
Cautious growth is for the more risk adverse investor looking for steady growth with low volatility. The
portfolio is constructed with approximately 1/3 large cap dividend producing equities, which tend to be
less volatile.1/3 fixed interest, which are less volatile than equities and 1/3 Multi Asset absolute return
funds which aim to produce steady uncorrelated returns.
Balanced growth offers a medium level of risk and is aimed at investors looking to benefit from global
equity markets. The portfolio has the majority of its assets being invested in developed markets covering
defensive companies along with more dynamic mid and small cap companies, about 1/6 of the portfolio
is invested in fixed interest assets.
Aggressive growth is for the investor looking for pure growth, is comfortable with a higher degree of risk
and is willing to have exposure to Asian and Emerging Market equities. The Aggressive growth is an
unconstrained global equity portfolio, with exposure to large, mid and small cap companies. It has the
potential to produce greater returns by investing in faster growing regions and more dynamic
companies but does come with a greater degree of risk.
The Income portfolio is for investors seeking a regular income with the potential for moderate growth.
The portfolio is invested across fixed interest assets within the credit quality spectrum including
defensive dividend paying companies. This combination aims to provide moderate growth over the long
term whilst paying dividends throughout the year.
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