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3 Types of Investment Products to Keep on Your Radar

20 Dec 2021

3 Types of Investment Products in Singapore | Money Money Home
(c) Sadie Xiao

Say investment and people will immediately think of stocks.

But in reality, there are many different investment options you can get into, and stocks are just one of the many types of investment products you can use to grow your money.

Other examples include forex, futures, bonds, gold, and cryptocurrency. The list goes on.

Stock investment can be tricky if you don't have the stomach for it, and if you're not knowledgeable enough, "buy low, sell high" will definitely be easier said than done. 

That's why, over time, to avoid jumping out of their seats each time the share price moves, a lot of people have resorted to investing in other investment products instead.

See also: What Investors See in a Bear Market

That's not to say that these products are superior or inferior to stocks, it just means these products fit their investing style and preference better.

And that's okay.

There are also people who invest in other types of investment products to diversify their portfolios.

If you haven't heard of the saying already, here it is: NEVER put your eggs in one basket when it comes to investing.

It is best to divide your investment funds and put them in different places, be it in different stocks or different instruments, depending on what you like. The important thing is to diversify.

Not doing so or "betting too much on the same horse" is a costly move and can bring about your own downfall when the one "horse" doesn't perform as you've hoped.

So many types of investment products, so little funds. Which one should you choose?

The internet has had its "hype" moment with some investing instruments in the last few years, but those aside, there are also a few instruments that have been used for generations such as commodities and gold. While all of them are not without risks, some of them ARE proven to be easier to navigate than others.

So, here are some popular types of investment products you should (or should not) put on your "to invest" list right now.

1. Gold

Gold as a type of investment product | Money Money Home

Old is gold. Only in this case, the investing product is literally...GOLD.

Hailed as probably one of the most traditional and go-to investing instruments especially in Asia, gold is still one of the most popular hedging tools there is today. 

The logic behind it is simple. Money loses value over the years due to inflation, while gold prices tend to rise or fall depending on the economic situation.

See also: Your CPF OA can be used to invest in gold

So what do you do? You use that money to buy gold, keep it away for a while, and wait for gold prices to increase before selling it off. Over time, not only are you not exposed to the risk of your money devaluing, you may even make more back thanks to the increase in gold prices. 

And not only that. Apart from actually buying gold accessories and stowing them away like our Asian grandmothers, there are also other ways to invest in gold that's come to be in the last few decades, also known as "paper gold." For example, futures, options, ETFs, or even gold-mining companies' stocks. By opting for these, storage issues that come with buying gold accessories are greatly minimised.

However, that said, like "buy low, sell high," this is merely an ideal picture of what COULD happen when you invest in gold. Like other investments, earning from gold is highly circumstantial and relies heavily on timing. For example, for people who'd bought gold at one of its peak prices, it will be pretty difficult to wait for a higher price and profit from it.

Then there's the belief that gold would always beat inflation. That is also not true as gold prices tend to move up and down while inflation tend to either remain constant or increase.

If you're patient enough, gold CAN be profitable in the long term. Your funds, however, will be locked away in this metal in the meantime, and you may miss better investment opportunities.

2. Crypto Assets

Crypto assets as type of investment product | Money Money Home

If there is an exact opposite to gold as an investment product, this would be it. Think of crypto assets as the Gen Z and gold as the WW2 generation.

According to our experts, there are three types of crypto assets:
a) stored value assets, e.g., Bitcoin and Ethereum
b) productive assets, e.g., smart contract businesses
c) assets tokenised on blockchain, e.g., NFTs (Non-Fungible Tokens) for digital art

If you haven't been living under a rock, you would know that NFTs are the "in" thing at the moment and the internet is rife with news about paintings or artworks sold for millions in the last few months. Then there's Bitcoin that's been making headlines time and again.

But are they really a safe investment?

Honestly? We don't know yet.

Because of its novelty, it is still considered a high-risk instrument for now. Not much is known about the underside of it, and their actual value is as good as anyone's guess.

Crypto assets, however, are highly volatile due to high volumes of sentimental trading and it also poses additional technological risks on top of an asset's usual investment risk.

For those who have deep expertise on the subject, they may benefit from investing in this product because they would know the ins and outs of it. Otherwise, it is purely a gamble on luck for an average investor for now and you are better off investing in other types of investment products.

3. Special Purpose Acquisition Company (SPAC)

SPAC type of investment product | Money Money Home

If the year 2020 had an investment "highlight reel," SPAC would definitely be somewhere at the top.

Essentially an operation-less "shell company," SPAC can be started by any financial expert. All they need to do is round up some industry experts, fund managers, and financial institutions to create a management team. From there, this team will then gather investors and take this SPAC public, while they look for a business to buy over and merge with to make it an "actual" listed company.

Think of it as a shell that's waiting for a hermit crab to come live in it.

Even though it is not a new concept, SPACs rose to prominence in 2020 when the world was locked inside due to the COVID-19 pandemic. This is because of an IPO "hype" back then and people were finding avenues to grow their money from their sofas. 

However, unlike a normal listed company, SPAC poses a higher risk to investors. Also known as blank cheque companies (because investors are putting money in without knowing what company the SPAC will be absorbing at the end, they're almost literally writing them a blank cheque to let them do whatever they want with it), there's no telling how the entire thing will pan out in the end. Simply put, it is a break-it-or-make-it situation more than half the time.

Moreover, with businesses opting to be listed via SPAC, it also brings to question the legitimacy of its business and operations. Stock exchanges have strict requirements in place for companies that wish to go public, but by going public via a merger with SPAC, these companies can brazenly escape these checks and possibly pose danger to investors.

For those who would like to invest in SPAC but don't have a good understanding of it, you may be better off investing in stocks. 

Regardless of what it is, the most important thing to do before investing is for you to understand an investment product inside and out. Once you do, it will be much safer to plan your investment strategy.

Watch this week's episode of Money Money Home as Xianren shows off her long-term investments in the form of accessories and bags, while Daren invests in umm... bacon and toilet rolls.

Money Money Home is an edutainment series that takes reference from Malaysia’s TV programme of the same title.

Money Money Home | VI

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