I just came across a neat little guide to investing on the Boston Funds Direct (offshore mutual funds company coming to Malaysia shortly) website.logo.gif

The first step in the investment process as with everything else in life is goal-setting. This is one of the most crucial factors to successful investing. These may be long-term goals like saving for children’s education and retirement planning or something less distant like saving for one’s wedding or buying a car.

Once a specific goal has been determined, such as saving for an overseas holiday or deposit for house purchase, it is then possible to work out the time frame over which the investment will be made and then to define the level of risk to be tolerated.

The time frame determines HOW the money should be invested, whether in medium to long-term growth assets like equities and property or in short-term liquid assets like fixed deposits and money market instruments.

The article goes on to say that “potential returns are much higher in growth investments, and if held over the long term, the risk of losing money is often reduced” which is consistent with evidence gathered from academic studies. Think about it, and test it out if you need to. But once internalized, it will be one of THE MOST most important investment wisdom breakthroughs you’ll ever have!!

In short, if the time frame is long, then buy and hold to maximize returns. As the world’s most famous investor Warren Buffett puts it “My favourite holding period is…forever”.

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But then again he’s a billionaire – he can afford to hold on! 🙂

On risk, there is a quick questionnaire provided on the website that will help you to determine your risk profile, whether it’s Very Conservative, Conservative, Moderate or Aggessive.

You probably have a rough idea already on your level of risk tolerance and how much loss you can stomach on your investments (if at all!). Still it’s interesting to take the “test” and see if the results match with your guessed profile. I scored 86 points which makes me a Moderate investor – pretty much expected. Which one are you then?? Haven’t met many Aggressive’s amongst my own circle of friends and acquiantances, actually. Generally, I’ve also found that those who are less investments-savvy are more risk averse than they need to be i.e. usually not willing to take risk even though in fact given the time frame they have available they can probably earn a whole lot more from their investments. Hence one of the reasons for me doing this blog!!

You can read more and also take the risk profiling questionnaire by clicking this link, htps://bostonfundsdirect.com/boston/20041201/investing.cfm.

I notice the company is setting up shop in Malaysia too and targeting high and mid-wealth Malaysians for their products – offshore mutual friends managed by the big fund houses like Templeton, Henderson, Fidelity, Schroders and Merrill Lynch. Oohh…more competition for the local boys. Great for us investors!! And according to their website they will refund the sales commissions too (which should be around 3.4% after deducting an admin fee of 0.6%). Must check this out!