Decoding investment products
With a multitude of investment products to choose from, make sure you understand the product features including liquidity and transaction costs in addition to risks and returns.
Stocks, bonds and funds are common investment products. Investors should pay attention to their features and risks.
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Beyond fixed deposits
Consider those investments with low risk and return.
If you would like to invest against inflation, you may choose iBond and Silver Bond issued by the Hong Kong government.
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Understanding the risks
Stocks are not necessarily high risk. Stocks are different in terms of volatility.
Bonds are not necessarily low risk. Bonds with low credit ratings have higher price volatility and are relatively high risk.
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Finding high dividend stocks
The dividend policy tells you whether the company will distribute dividends and its dividend payout ratio.
Check the company's past dividend payout patterns, whether it has net earnings to pay dividends and its current dividend yield.
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Understanding bond features
Do not only use coupon rates to measure investment value of bonds. Bonds with high credit risk usually offer higher interest rates to enhance their appeal.
Bonds lack an active second-hand market, therefore it is relatively more difficult to sell a bond after you have purchased it; you may have to hold it until maturity.
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Investing in funds
You should be aware of a fund's investment portfolio, fees for investors and dividend payout policy when choosing a fund.
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Beyond risk and return
Keep a close eye on the following issues: Capacity for realised gain; transaction fees and taxes; if the product has a fixed investment period; and if the product is complicated in structure and operation, and involves leverage.
