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NEW UPDATES Asean Affairs  5 August 2015  




All investments involve some degree of risk

BRUNEIANS now have a local channel with which they can invest in the stock market. The Brunei Times journalist Leo Kasim speaks to Baiduri Capital, which began operations in June, on the basics of stock trading and the benefits of investing.

Why should people invest?

There are many reasons why we would recommend people to invest, and there are also several reasons why people do invest. However, for most people it boils down to the following:

Capital growth

Potential capital gains from owning assets that can grow in value over time and shares have shown to have the highest returns in the long term. Investing in companies that focus on expansion offers the potential for capital growth as they are more inclined to reinvest earnings into business development, enter new markets or acquire other businesses in order to grow.

Passive income

Certain shares offer income in the form of dividends. There are companies that reliably pay a percentage of their earnings as dividend as they aim to reward their shareholders with consistent dividend payments.

What is the first thing that you need to know before you start investing in the stock market?

All investments involve some degree of risk and possible returns.

It’s important to be informed and to understand the risks involved and the possible returns before deciding to invest in the stock market.

The general consensus is that the higher the risk, the higher is the reward and potential for greater investment returns.

The key is to balance risk and the impact on the portfolio by diversifying with shares across different industry sectors.

When it comes to investing, should people stick to an industry that they’re familiar with?

Yes, especially for beginners who are just starting out in the stock market. As they are familiar with the industry, it would be easier to understand and grasp concepts and learn.

Once an investor is comfortable, confident and well versed with the “knows and hows” of investing in the stock market, then they can delve into other industries or asset classes.

What kind of goals should people set before they get into stock trading?

Everyone should understand what their short and long term goals are before getting into stock investment. This will better define their own risk tolerance as well as selection of shares they choose for their portfolio.

Time frames and investment horizons represent an important part of setting investment goals.

For example, creating more savings for your retirement would be a long-term goal.

Buying a home in five years would be considered a medium-term goal.

Short-term goals are typically those that would take about one year. For example amassing an emergency fund or earning some additional income.

A capital growth strategy might suit a medium to long term investment goal as short term volatility will not have a significant impact on the portfolio as companies of this nature normally offer higher potential of expansion or growth.

Investing in more mature industries with relatively consistent sources of revenue but moderate growth is suitable for income strategy with a short term investment goal due to its lower volatility.

For investors who are less risk tolerant, they can look into a more balanced approach of investing in both capital growth shares and income shares where they will be able to receive regular dividend payment while participating in the capital gains of the portfolio.



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