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Chapter 6: INVESTMENT PLANNING, Islamic > profit sharing - Coggle…
Chapter 6: INVESTMENT PLANNING
Islamic FD
Based on al-Mudharabah
FD can be opened by:
Individuals
Joint holders
Societies
Associations & clubs
Companies
No Interest
Shares
Stock Market
Shares are traded on the market.
Investors can own part of a company.
Provides extra income opportunities.
Companies raise funds by issuing shares.
Done via IPO.
Why Invest In Stocks?
Easy to buy/sell anytime.
Easy to track.
Low cost.
Many choices available.
High return potential with lower risk.
Can be managed by professionals.
Flexible, can work anywhere.
Investing Tips
Do some research about the stocks
Do not pay too much on a single stock
Do not be afraid in selling losing stocks
Admit your mistakes
Seek for assistance from professional advisor
Past performance is no guarantee
Keep an eye on your investment
Exchange Traded Funds (ETFs)
Funds that track an index, commodity, or assets.
Traded like shares on stock exchange
Priced in real-time during market hours
Combine features of funds & stocks
Bonds
Definition
Corporate debt sold as tradable assets.
Fixed or floating interest rate (coupon).
Bond prices move opposite to interest rates.
Repaid at maturity or risk default.
Types
Malaysian Government Securities (MGS)
Government Investment Issues (GII)
Private Debt Securities (PDS)
Convertible Bonds
Secured Bonds
Characteristics
Par Value
Coupon Rate
Maturity Period
Asset Claims
Fixed Income, no voting rights
Residential Homes & Real Properties
Definition
Small investment in property, rented to cover loan, then sold or refinanced for profit.
Types
Residential House
Condominium
Flats
Standard Lots in Shopping or Office Complex
Managing A Residential Property
Maintenance of the property
Responding to tenant complaints
Obtaining appropriate insurance for the property
Improvement of the property
Purchasing Residential Investment Property
Risk of depreciation
Surrounding development
Socioeconomic factors
Factors To Consider In Property Investment
Price
Location
Developer
Physical Condition
Infrastructure
Sources of fundings
Market Timing
Factors that influence rate of returns
Population growth
Land scarcity
Income growth
Economy
Supply & demand
Speculation
Renting Residential Property
Owner rents property to tenants or via management.
Real Estate Investment Trust (REITs)
Companies owning or financing properties.
Pool money from investors
Provide dividends but little price growth.
Publicly traded, highly liquid.
Cover many property types (apartments, malls, offices, warehouses, etc.).
Why Invest in Property
Less volatile than shares
Limited bond options for small investors
High growth potential with development
Long-term value appreciation for retirement goals
Preferred physical asset in Asia
Preparing for Investment
GOALS
specific & measurable
Purpose, amount, time, risk
Realistic & sacrifices
Consequences if fail
FINANCIAL CHECKUP
Balance budget
Pay high interest debt
Emergency fund (3-9 months)
Backup cash (credit line, cash advance)
GET MONEY TO START
Sacrifice spending
Savings program (auto transfer, payroll)
Save extra months yearly
Use gifts/inheritance
TIME VALUE OF MONEY
Small savings grow big over time
Compounding effect
Higher rate = bigger growth
Unit Trust
Definition
Managed investments
Pooling investors’ money into deposits, shares, bonds.
Run by professional fund managers.
Parties Involved in Unit Trust
Unit-holder
Management Company
Trustee
Types
Equity Funds
Islamic Funds
Fixed Income Funds
Property Trust Funds
Benefits Of Investing In Unit Trust Fund
Diversification of Risks
Liquidity
Hedge Against Inflation
Low Capital Requirement
Service of Professional Fund Managers
Charges
Front-end Fee
Switching Fee
Redemption Fee
Annual Management Fee
Investment in Gold
Overview
Safe-haven asset, popular in Malaysia.
Invest via bullion, dinars, or digital gold.
7 Good Reasons to Own Gold
Keeps value over time.
Protects against inflation.
Strong in deflation periods.
Safe during crises.
Gains when USD weakens.
Limited supply, high demand.
Diversifies portfolio, reduces risk.
FACTORS AFFECTING INVESTMENTS
SAFETY & RISK
Safe = low return
Risky = high potential return
TOLERANCE FOR RISK
Safe: older, low income, families, job insecure
Risky: young, high income, trained, job secure
RISK RETURN TRADE OFF
High risk = chance high profit
Low risk = smaller return
TYPES OF RISK
Inflation
Interest rate
Business failure
Market
Global/currency
INCOME
Safe: savings, CDs, bonds, treasury bills
High: corporate bonds, dividend stocks, real estate
GROWTH
Stocks, bonds,mutual funds, real estate
Speculative: gems, collectibles
LIQUIDITY
Easy sell = stocks
Hard sell = real estate
ASSET ALLOCATION & ALTERNATIVES
ASSET ALLOCATION
Spread investments > reduce risk
Time: longer = better returns
Age: young = riskier, older = safer
SUGGESTED (YOUNG)
Stocks 82%
Cash 11%
Bonds 7%
ALTERNATIVES
Stocks - ownership, dividends not guaranteed
Bonds - loan to gov/company, fixed income
Mutual funds - pooled money, managed, diversified
Real estate - buy/sell/rent, location important
Speculative - antiques, options, commodities, metals
PERSONAL PLAN
Set goals
Calculate needed money
Know available funds
List investment options
Evaluate risk/return
Shortlist
Choose > 2 investment
Monitor & review
REDUCING RISK
Research & evaluate
Use financial planner
Monitor value
Keep records
Check tax effects
SOURCES OF INFO
Internet (legal sites)
Newspaper, news programs
Business mags, gov reports
Corporate reports
Investor newsletters
TYPES OF INVESTMENTS
SAVINGS ACCOUNT
Safe, insured, small interest
Types: individual, joint, societies
:check: Easy, emergency, safe
:red_cross: Low return, fees, minimum balance
FIXED DEPOSIT (FD)
Lock money for fixed time
Higher return than savings
Penalty early withdrawal
Conventional > interest
Islamic > profit sharing