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How To Grow Your Money

Of course, you can always leave your money in the savings account. But unless you're a stickler for security, you'll probably have more fun watching your toenails grow. For starters, with most savings rates earning less than 2 per cent per annum, and inflation rates at around 2.8 per cent in recent decades, you don't have to be a rocket scientist to figure out that you'll end up poorer eventually.

Blame it on our longer life expectancy. With life expectancy for females at 82 years (compared to males at 78 years), we could even outlive our savings. So it is important to learn to manage our wealth and make it grow efficiently. Therein lies the crux of investing.

As Evelyn, an independent financial adviser, explains: "The higher the rates of returns we can get on our savings, the earlier we can reach our wealth accumulation goals". For instance, most of us require about $1 million for retirement. Assuming that we save $24,000 every year, we can hit our target in 17 years at an interest rate of 10 per cent. On the other hand, we will take 27 years to do the same at an interest rate of 3 per cent.

Personal Wealth Options

Catering to different financial objectives and preferences are a host of wealth management products. Speak to your financial adviser to find out which is most suitable, suggests experts. The chief options can be categorised into two broad categories, investments and bancassurance (a combination of banking and insurance). Included in the former are unit trusts, which come in the forms of equity funds (stocks), fixed-income funds (bonds), money market funds  and asset allocation funds.

For individuals not familiar with investments and those who do not have time and resources to invest, unit trusts are a good option. For new investors, unit trusts are good because you leave the investing to experienced fund managers, says experts. Another form of investment is bonds. Buying a bond basically means you lend money at a fixed interest rate to the bond issuer for a specific period, and investors get back the invested amount with interest.

More risky but more profitable than bonds is shares, as its rate of return depends entirely on stock price and therefore is not guaranteed. On the other hand, the second category - bancassurance - focuses on accumulating wealth for the future and deals more with protection. This category includes endowment plans, which pays the sum insured and bonuses built up at the end of maturity date, upon death or disablement during the period. Some may prefer investment-linked plans, which allows you to choose where to invest. In these plans, the premiums go towards life insurance protection and investment in a managed fund.

Start Slow And Steady

Not enough savings or not ready to empty what you have into an ambitious investment plan? You can still take that first step towards wealth accumulation, with these low-risk options. 

If You Have No Savings But Want To Start Putting Down Some Money Every Month..

Savings are important as they ensure you have enough funds to tide you over in unforeseen emergencies such as medical treatment. Try to set aside at least six months of your monthly salary as an emergency fund.

If You Have Savings Of Up To $5,000 And Are Looking At A Low-Risk Investment...

The objective in this case is to beat inflation with low volatility, says experts. A good choice is a global bond fund. It gives decent return over the long run with little volatility. Others are like the bank fixed deposits and money market funds, which are considerably low-risk.

If You Have One Or Two Basic Saving Plans Or Unit Trust But Want To Diversify Your Investments...

A wise wealth growth strategy advocates not putting all your eggs into one basket, so it is best to diversify your investments. If you have a starting amount like 520,000, a good investment is a unit trust, with a diversified portfolio across global equities and global bonds, says expert At the end of the day, whatever wealth accumulation plan you pick, it should come with a financial planner you trust.

A good financial planner will help you determine your goals, resources required to achieve them, assess the level of risk you can undertake, construct a suitable investment portfolio and most importantly, monitor the portfolio for you. Ongoing monitoring advice is a significant part of the financial planner's responsibility, Most people tend not to know what to do after purchasing the funds, so the financial planner's advice will be crucial in avoiding market pitfalls or making use of market opportunities. It will affect the potential growth of your portfolio and therefore, your profits.

Choose Your Wealth Management Tool

Experts tells you how you can start considering your investment options:

Risk Profile

If you are conservative, stick to less volatile wealth instruments such as bonds. If you have an appetite for risk, add more volatile ones such as stocks.

Life Stage

Where you are in your life stage also determines if you can afford to take the risk. For instance, if you are young and single, you can take more risk. But someone who is near retirement should focus on protection and stability.

Liquidity Need

If you are saving up for, say, an apartment, don't take too much risk.

Time Horizon

If you have a longer time frame, you can afford to take more risk as you will have time to ride out the market volatility.

 

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