Laying the foundation

Before you start investing, regardless of the kind, you should first make sure that you have enough to sustain yourself as well as your dependents.

SO, you have decided to invest your money to safeguard your future. What now?

The road between deciding on something and taking action is filled with uncertainty, especially if you are not financially savvy. Here is a little insight into how you can build your investment portfolio from scratch.

Start by saving

Before you start investing, regardless of the kind, you should first make sure that you have enough to sustain yourself as well as your dependents.

Because every kind of investment has a certain amount of risk associated with it, you should have a cushion that you can fall back on in case of losses.

The excess money that you have after expenditure and saving is what you should be investing.

Private retirement schemes (PRS) must not be considered an option for investment but a retirement saving tool, similar to your Employees Provident Fund (EPF) account. Consider PRS as a mandatory investment tool that you need for securing your retirement.

“Presently in Malaysia, only PRS are specifically designed for retirement, compared to other products,” emphasises Husaini Hussin, chief executive officer of Private Pension Administrator Malaysia.

“Generally, two-thirds of your last drawn earning is what you should aim to have monthly to sustain your lifestyle after retirement. To have the two-thirds for later, you need to save one-third of your present earning. As the 23% is taken care of by your EPF, putting aside an additional 10% of your earning in PRS will fill the gap.”

Any amount of money you have in excess can be utilised for capital appreciation and monetary gains with other available investment tools.

Before you start planning your investment portfolio, ask yourself the following questions:

• What is my goal for investing? – People either invest for capital preservation or capital appreciation.

• How much can I invest? – You need to determine the amount you can spare, whether it is a small monthly amount or a yearly lump sum. • How much can I stand to lose? –Can you stand to lose all your invested money without hampering your future or your livelihood?

• How long am I planning to invest? – Suppose you lose your job, can you get by financially until you find a new one without having to tap into your invested money? If you choose to invest in funds that offer high returns, you should invest for at least five to ten years.

Create a balanced investment portfolio

A balanced portfolio ensures optimum returns against reduced risk exposure. It also depends on the risk appetite and investment goals of an individual.

The illustration above provides an example of how balanced portfolios might look like according to individual risk profiles.

Ideally, if you are in your 20s, you might consider having a more aggressive portfolio. You can rebalance it to a moderate and eventually conservative portfolio as you progress towards retirement.

By having an aggressive investment portfolio early on in your life, you can mitigate losses, if any, by reinvesting. You also have your regular earning to fall back on.

That said, if you have money that you can afford to lose without negatively affecting your retirement, you can opt for an aggressive portfolio even in your 50s.

If you are unsure about how to create a balanced portfolio based on your risk appetite, age, earning and your investment goals, seek the expertise of a professional financial advisor.

With proper planning and a little help from professionals, you can safeguard your future and accumulate good returns.

Even if you do not make any profit from your investment, you would at least be able to retire with peace of mind, and that is saying something.