Four investments to consider for a diversified portfolio
Congratulations on starting your investment journey!
Investing can be a significant source of income alongside your job or side hustle, and it’s worth taking the time to learn and grow your skills.
Professional investors often build diversified portfolios to balance returns and risks. What assets are commonly included in a diversified strategy? Today, we'll introduce four investment types that are suitable for most people. Let's dive in!
1. Cash Plus
Cash Plus is a beginner-friendly, relatively low-risk investment in a money market fund. It generates daily returns and offers easy redemption, making it accessible for almost any investor.
Risk Level: Very low
Expected Returns: Low, around 1.5% to 4% over the past three years. (BTW: moomoo Cash Plus provides new users with a 30-day 6% p.a. guaranteed returns)
Source of Returns: Interest from short-term financial products
Investment Horizon: Highly liquid; suitable for short, medium, or long-term investments
Complexity: Low
2. Bank stocks
Investing in bank stocks is a way to invest in the overall economy. As the economy grows, bank stock prices generally rise, making this a lower-risk option for long-term.
Risk Level: Moderate to low
Expected Returns: Moderate to low (averaging 4% to 7% annually over the past decade)
Source of Returns: Value appreciation and dividends
Investment Horizon: Best for long-term investments (short-term risks can be significant)
Complexity: Medium. Investors need to select top-performing bank stocks from a range of options.
3. Index ETFs
Market indices reflect overall stock performance and tend to rise over time. Investing in indices through Dollar-Cost Averaging could lower costs and risks while allowing your wealth to grow.
Globally, U.S. stock indices are the choice of many investors, with corresponding index ETFs such as $SPDR S&P 500 ETF (SPY.US)$ and $Vanguard S&P 500 ETF (VOO.US)$ that track the S&P 500 index.
Risk Level: Moderate
Expected Returns: Moderate (S&P 500 averaged 11% annually over the past decade)
Source of Returns: Value appreciation and dividends
Investment Horizon: Best for long-term investments (short-term risks can be significant)
Complexity: Low
4. IPO investments
Investing in IPOs involves buying shares of newly listed stocks and selling them on their first trading day. In Q3 2024, Malaysian IPOs had an average first-day gain of 75.9%.
Investing in IPOs is not always a guaranteed profit. While there is often a price difference between the primary and secondary markets, some newly listed stocks may also decline after their debut. Investors can increase their chances of success by analyzing the fundamentals and valuations of new stocks.
Risk Level: Moderate to low
Expected Returns: Moderate to low
Source of Returns: Price differences in primary and secondary markets
Investment Horizon: Best for short-term (sell on the first day); long-term holding carries higher risks.
Complexity: Medium. Investors need to pick new stocks from a range of options.
Last Words
One investment principle is that lower risk typically comes with lower potential returns.
The four types of assets mentioned vary in risk and expected returns, allowing investors to choose which ones to include in their portfolios based on their individual circumstances.
Wishing you a successful and rewarding investment journey ahead!
This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. Read more