Posted by: venom

In today’s advanced lifestyle, there are many types of investment instruments available. These instruments range from advanced derivative financial instruments like options and rights; to interesting instruments like antiques and collectibles. This provides a wide array of choices that may make decisions simply too difficult for the average investor.

For the average investor, you should avoid the high risk advanced instruments like derivatives as these instruments are very high risk and require expert knowledge to trade. These type of instruments are best left to corporate bodies like investment houses or private trusts.

Also, instruments that are very illiquid - like antiques, stamps and collectibles should also be left to the experts in the individual fields. The secondary market for these types of instruments are highly restricted and only people with the right connections can broker suck instruments.

Instead, go for the average instruments like property, unit trusts, stocks, bonds, etc. So how do you go about deciding which investment instrument is for you?

You will need to consider a couple of things:
1. How much do you have to invest?
2. What is the time horizon for the investment?
3. What is the purpose of the investment?
4. How big is your risk appetite?

If you have just started your career and only a small sum to invest, go for instruments like unit trusts and stocks. Since you are young and can take the risk, these instruments offer relatively high returns for acceptable risk. Obviously, instruments like property is beyond your reach at the moment. Set aside a small sum to invest in these instruments on a regular basis. Unit trusts spread the risk over more assets but would generally provide a lower return as compared to stocks since there is normally a management fee and the returns of the spread assets will average out.

If you have more money to invest (possibly because you’ve worked for more years and have a nice tidy sum saved up), go for instruments like propery in which capital appreciation can be significant. However, note that property is highly illiquid and you may not be able to sell the property in time when you’re in need. As such, also spread your investments over the other instruments like bonds and stocks are these are more liquid.

If you’re rich and have money that you can afford to lose, go for the high risk instruments like financial derivatives. Get a good advisor to manage this investment for you. Be prepared to win and to lose.

As mentioned earlier, the type of investment that is right for you will depend on your circumstances. Sit down and think about the questions provided above and decide on what’s best for your situation.

Good luck!