Investment planning

A beginner’s guide to
investing
Make your
money work
harder
A beginner’s guide to investing
Make your money work harder

Long term saving has many benefits, ensuring that you and
your family are able to enjoy the things you have planned
for the future such as paying for your child to go to university,
funding a family wedding or simply topping up your
retirement fund.
Whatever you are saving for, it is important to ensure that your hard earned savings
are working for you. Investing wisely can be a way of achieving your long term
financial goals sooner.
Our beginner’s guide to investing aims to equip you with the knowledge to get you
started, including:

1 Why invest?

2 Types of investment

3 How to invest in funds

4 Plan your investments

5 Your investment portfolio

6 Investing with Friends Provident International

“An investment in knowledge

pays the best interest.”
Benjamin Franklin

2 Friends Provident International A beginner’s guide to investing

 1 Why invest?
Will your savings be enough to achieve your long-term financial goals?
When you save money you generally pay it in to a bank Furthermore if you factor in the rising cost of living;
account and in return receive interest. While bank accounts housing, food, taxes and services, known as inflation, this
provide a safer home for cash, the interest is typically low and will not only impact the amount you are able to put away
therefore when saving for long-term goals the end return on into regular savings in the short-term but also the cost of
your savings could be minimal. your long-term goals.

The impact of inflation on costs

Assuming an inflation rate of 6% per year

Weekly shopping 2023 2028 2033

.65 .55
$2 $3
1 ltr milk

Impact on the amount you

save on a regular basis $1 .98
Source; https://www.globalproductprices.com/USA/milk_prices

Property 2023 2028 2033

Impact on the cost
of property purchase $436k $584k $782k
Source; https://www.fool.com/the-ascent/research/average-house-price-state

Savings Investments
A proportion of income not spent on everyday Putting money into financial products
living expenses. Used for large purchases in the with a view to earning profits. Used for large
near future such as a car, a property or a purchases in the long-term future such as
holiday and for emergencies and contingencies. retirement or children’s education.
• Short-term • Long-term
• Lower risk • Potentially higher risk
• Lower return • Potentially higher return
• Easy access to funds • Access to certain funds may be restricted
(for example property)

When to start investing

You may be fortunate enough to have a lump sum of money ready to invest. However, if not, you could use your bank
account to build a pot of cash. Another option is to drip feed into an investment with regular payments.

Before investing you should:

✓ Ensure you have enough savings to cover emergencies and contingencies
✓ Make sure you have at least six months expenses covered should your Talk to your
circumstances change (for example you lose your job) financial adviser
✓ Insure yourself should you become unable to work (for example you suffer to discuss your
a serious illness)
investment options.
✓ Remember that the value of an investment can go down as well as up and
you could get back less than you invest.

3
 2 Types of investment
Once you have your expenses and contingencies covered and have decided to invest,
it is good to have an understanding of the different types of investment, known as asset
classes, of which there are four main types.

Asset classes explained

Cash Bonds (Fixed interest)

Cash in a bank account or other money market securities A loan or bond issued by a company or government over a
that earn interest over time. This is normally considered set period of time in return for a fixed interest rate as well
to be a safer option during periods of investment market as the return of the original capital. Different types of bond
volatility, or for short term needs. However, the real value have different levels of risk and return but they usually have
of the investment may be eroded over time by the effects a better return than cash in the long run. Generally they are
of inflation. considered lower risk than shares.

Short-term investors (up to three years) Short-term to medium-term investors (three to five years)

Property Equities (Shares)

Property generally appreciates in value over time. As well Equities (Shares) are issued by a company to raise money
as buying a home, you could also purchase a property for to develop the business. Investors buy shares, which can be
rental. The rental income goes directly into your pocket traded on stock markets. They are considered to be one of
and you have control over your investment. However, you the best investments to achieve long-term returns, however
also have the responsibility of ensuring that the rent is shares can be volatile in the short-term, meaning their value
paid. Also, when the property market is slow it may be is likely to fluctuate.
difficult to sell your investment and realise your gains.
Medium to long-term investors (five years plus) Medium to long-term investors (five years plus)

The risk reward trade off

Each asset class comes with a different level of reward and risk. As the table above explains, generally speaking, the higher the
return opportunity the greater the risk. This is shown in the image below.

Equities
High

(shares)

Property
ty
Reward

Bonds
(Fixed interest)
Cash
sh

4 Friends Provident International

Low

Low Risk High

4 Friends Provident International A beginner’s guide to investing

 3 How to invest in funds
A good way to start investing is through an expert fund manager.
There is a wide range of funds available from various fund management companies. Often known as
“mutual funds”, these investment funds ‘pool’ together the money of individual investors and in return investors
receive units, each representing an equal share of the fund. Professional fund managers use their knowledge
and experience to choose how to invest the fund’s money with the aim of increasing the fund’s value over time.
A major benefit of investment funds is that you reduce the risk of holding just a few individual shares or bonds.
Instead your returns are determined by a much wider range of investment opportunities.

How your money is invested in a fund

$140
is paid back You Invest
to you $100
So do another
140% of your 99 investors
investment

Growing the
investment pot to
$14,000 is divided $10,000
between investors

Fund manager
Industries perform invests $10,000 of funds
well and make a 40% profit into industries

The benefits of funds

✓ Knowledge of a professional ✓ Higher potential returns than other
investment fund manager options such as a bank account
✓ Option to take advantage of a wide
range of investment opportunities Possible risks
✓ Funds are tightly controlled and • The value of investments can go down as
monitored by legislation well as up, meaning you could get back less
than you put in
✓ Sharing the cost of the fund with
other investors to make investing • Stock markets can be unpredictable so there
is no guarantee that a fund will do well
more affordable

5
 4 Plan your investments
Once you are ready to invest it is recommended that you speak with your financial adviser
who can offer you guidance based on your individual circumstances. At this stage it’s a good
idea to ask yourself the following questions, so you can gauge which types of investment will
be suitable for you.

What are your financial goals?

1 For example, do your future financial goals include retirement and/or your
children’s university education? Make a list to help you visualise them. $

How much money do you need to achieve

2 your financial goals?

Do your research around the cost of your financial goals.
Calculate what
you need

How much can you afford to invest?

3 Ensure your plan is achievable. How much you need for your financial
goal and how much you can afford to invest might be different.
Calculate what
you can afford

When will you need to pay for your goals?

4 How far away are your financial goals? Is it 10 years away or 20?
Knowing your time frame will give you an idea of:
• The amount of inflation you need to factor in
• The cost of your goals in the future
Calculate the
effect of inflation

How much risk are you prepared to take?

5 Before investing it is important to understand your attitude to risk

and the potential for a good return should be balanced against the
fact that you may not get all or even any of your money back.

Your financial adviser will make recommendations for your investment portfolio based on your answers to the above.

6 Friends Provident International A beginner’s guide to investing

 5 Your investment portfolio
Building your portfolio at the outset is not the end solution as the investment mix which is right
for you today might not be right for you in the future. This will depend on market conditions and
your lifestyle changes.

Build your portfolio Cash Cash

Bonds
Industries and their respective asset classes
Equities
respond differently to market conditions and (shares)
changes. By including exposure to multiple asset Higher Property Lower
classes and industries your investment manager risk risk Bonds
can reduce the risk to your investment should an
industry suffer a shortfall. This is known as Equities
(shares)
diversification.
Property

You should also consider:

Market timing – It can be very difficult to predict market Benefits of regular saving – Market rises and falls are part of
direction and movements to determine the exact timing of when life, but by saving a fixed amount on a regular basis you have a
to invest. This is because markets rise and fall in unanticipated method to ‘smooth out’ market volatility and benefit over the
spurts, making it easy to mistime and potentially lose out when long-term.
market sentiment recovers.

Review your portfolio Equities (shares)

It is likely that the balance of investments in your portfolio will need to evolve slowly not only in line with Cash
market conditions but also with factors such as your personal circumstances and most notably your age.
Bonds
The level of risk you are prepared to take, along with your investment and income needs, are likely to
change throughout the different stages of your life, each requiring a different balance within your portfolio. Property

5% 5% 5% 10%
15%
20%
27.5%
70% 10% 65% 55% 40%
10% 35%
12.5%
15%
More Risk Less Risk

20s Late 30s to early 40s Mid 50s Late 60s and beyond
Consider being aggressive A growth and income approach Seek to reduce risk in your Allocating more to bonds
with your investment that still favours equities over portfolio as you approach makes sense, but maintaining
approach. You have time on bonds may help balance retirement. There is typically some stock market exposure
your side to weather stock retirement planning and other less time to recover market may be necessary to keep
market fluctuations. more immediate financial losses. pace with inflation in today’s
obligations such as a child’s low interest rate environment.
post-secondary education.

Manage your portfolio Switching online

Investors must make their own investment decisions
based on their own financial objectives and financial
Your investment decisions do not need to
resources. We recommend that you discuss the
be permanent and you can switch your funds
suitability of your investments with your financial
online at any time without charge.
adviser and regularly review them.

7
 6 Investing with Friends
Provident International
Friends Provident International provides access to funds from some of the
world’s leading fund management companies with the following benefits:
✓ Funds available in a number of currencies
✓ A broad range of funds covering all major asset classes
✓ An investment solution for every type of investor
✓ Manage your portfolio online by switching current funds and redirecting future
premiums – whenever it suits you, at no extra cost
✓ Monthly fund price and performance updates

How to get started

Go online to see which funds you are currently invested in. If you
01 are not already using the FPI Portal to manage your policy online,
simply go to https://portal.fpinternational.com/ to register.

02 Visit the Fund Centre on our website to find out more about the
range of funds available to you.

03 Speak with your financial adviser to learn more about which

investments are best suited to your circumstances.

This document is for information only. It does not constitute advice or an offer to provide any product
or service by Friends Provident International.
Please seek professional advice, taking into account your personal circumstances, before making
investment decisions. We cannot accept liability for loss of any kind incurred as a result of reliance on
the information or opinions provided in this document. We do not condone tax evasion and our
products and services may not be used for evading your tax liabilities.

Friends Provident International Limited: Registered and Head Office: Royal Court, Castletown, Isle of Man, British Isles, IM9 1RA. Isle of Man
incorporated company number 11494C. Authorised and regulated by the Isle of Man Financial Services Authority. Provider of life assurance and
investment products. Singapore branch: 182 Cecil Street, Level 17 Frasers Tower, Singapore 069547. Registered in Singapore No. T06FC6835J.
Licensed by the Monetary Authority of Singapore to conduct life insurance business in Singapore. Member of the Life Insurance Association of
Singapore. Member of the Singapore Financial Dispute Resolution Scheme. Hong Kong branch: 803, 8/F., One Kowloon, No.1 Wang Yuen Street,
Kowloon Bay, Hong Kong. Authorised by the Insurance Authority of Hong Kong to conduct long-term insurance business in Hong Kong. Dubai
branch: PO Box 215113, Emaar Square, Building 6, Floor 5, Dubai, United Arab Emirates. Registered in the United Arab Emirates (UAE) with the
Central Bank of the UAE as an insurance company. Registration date, 18 April 2007 (Registration No. 76). Registered with the Ministry of
Economy as a foreign company to conduct life assurance and funds accumulation operations (Registration No. 2013). Friends Provident
International is a registered trademark and trading name of Friends Provident International Limited.

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