Top Investment

The Star: January 7, 2009

OVER the years, real estate has proven time and again its stability, attractive returns and ability to hedge against inflation. Thus, it is not surprising that most of the rich invest substantially in properties.

It is an expert opinion that most people's Asset Allocation Model and Investment Portfolio should look something like this (give or take 5%):

Assuming you have RM100,000 set aside for investment purposes, at least RM60,000 should be invested in properties. Less than RM30,000 go directly into the stock market and the balance (less than RM5,000) into high risks, highly leveraged, volatile investments such as Options, Futures or Foreign Exchange (Forex).

Many people make the mistake of concentrating too much of their time and money into the upper levels of the pyramid, as their portfolio returns are highly volatile and unpredictable.

First, it's extremely important to build up a solid investment base using real estate before venturing into other investments to give your portfolio regular and predictable rental income and to enjoy capital appreciation.

If you have an hour per day to look after your various investments, you ought to be spending 60% of that time for properties, 30% for equities and less than 5% for high risk investments.

Some trainers mention that you only need less than 20 minutes a day.

Yes, only if you have invested at least two hours per day over the next three years mastering the subject - a hidden fact many are unaware of.

In Malaysia, two main direct investment vehicles are real estate and stocks. Properties are stable and long term in nature, whereas the stock market is volatile and short term.

Hence one needs to practice Tactical Asset Allocation between these two.

Another mistake is buying investment products giving single digit returns with high upfront charges.

You should only take the risks and invest when you see the opportunity to make more than double of what you can save with minimal risks.

For real estate, it is advisable to have a portfolio of various property types.

Whichever way the property cycle goes, you will be able to enjoy benefits either from Rentals or Appreciation.

Your foundation must be solid. For beginners, start investing for rental returns beginning with medium cost apartments.

The risks are minimal as long as your chosen location is strategic. ''Using creative financing techniques, many of our graduates have even bought properties with little or zero Down Payment and achieved a positive cash flow.

It's extremely easy to earn long term compounded returns from both Rental Yields and Capital Appreciation of 10-12% p.a.'' according to Milan Doshi, best-selling author and independent financial trainer.

Once you have built a firm base, move up and invest in landed houses for capital appreciation.

The risks here are higher as landed properties will give you negative cash flow if you put in the minimum down payment.

Your ultimate goal in property investments is to eventually move to the commercial sector once your budget grows to RM1 million.