Where to invest?

If you are like me, you must be wondering where to invest for better returns. Savings account and time deposits with banks return meager interest revenue.

 

Investing in property require huge commitment and not for those who are at not at prime of career.

 

Investing in government bonds or corporate bonds may yield decent interest revenue but you may not want to put all money in bonds. For one they carry risk of default depending on the governments and corporations selected.

 

Investing in currency linked investment carries the risk of currency risk. You must still need to keep tab of economic environment prevailing at the countries which the currencies relate to. Some possible volatility: Is US currency weakening or strengthening? How long will Yen be kept low against US dollar?

 

Investing in oil, gold and soft commodities require investors to know the commodity market. It is a specialised market and not meant for the retail investors. It is highly risky and require deep pocket to play the market.

 

This leads me to discuss equity investment. Share prices move up with economic growth on account that companies will return to positive earnings due to economic growth. Though share prices started to run-up 6 to 9 months before seeing the positive growth of the economy, there is still opportunity to invest in a rising equity market. The Straits Time Index (STI) had gained 65 per cent last year at 2897 points on 31 December 2009 but it is still below the high mark recorded on 11 October 2007 at 3875 points.

 

Industry commentators had been saying shares have upside potential for the first half of this year but the future is uncertain for the second half. When corporations started to announce year-end financial results in the first quarter, there will be positive news and this will again reinforce the push for share prices. The upside is a possible another 10 per cent which translates to STI at 3,186.

 

Though analysts and investors may be bullish, it is getting harder to pick winners from the listed companies. Services industry is touted as the growth sector for 2010. Tourism is expected to turn around. Financial services sector is another. Construction sector is expected to continue to grow.

 

Will there be a double dip in the economy? There are some economists who are not ruling this out in the second half. The risks are potentially huge government debts that have to be reduced and this will cut fiscal stimulus from the economy. If unemployment is not reduced, consumer demands will not come back and this will halt economic growth.

 

What I am doing is to review my portfolio of share investments and pick additional counters to invest based on company study. I will be on the lookout for signs of economic problems surfacing. My time horizon for short-term share investment is now down to only first half of 2010. Taking profits even not huge will be carried out in the first half.

 

Written on 1/4/2010 4:09 PM

 

Copyright © 2010, the author known as LKT in Singapore.

 

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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