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Investment Basics
Whereas Caam Saudi Fransi
seeks to attract more investors, it exerts the best possible efforts to deliver
the best services, strengthen the long-term relationship with its clients, and enhance
their role in the investment process and its role as a financial advisor.
Therefore, we include this presentation to provide you with a foundation to help
you make the right Investment decisions. It covers the basics of Investments, the
concept of risk management and introduces the principal asset classes: stocks, bonds
and cash equivalents.
However, this presentation is not intended to give you advice, but rather to introduce
you to basic Investment fundamentals such as:
- The basics of investing.
- The benefits of stocks, bonds and cash equivalents.
- Investing fundamentals such as diversification and the management of risk.
What is investing?
When you invest, you are sacrificing your effort, time and money now in the hope
of gaining something greater in the future. Your goal is to have your money work
harder for you.
Why should you invest?
The answer is simply in order for you to secure your financial future as well as
your family's. You will acknowledge the benefits of investing early and of investing
regularly.
Towards a Diversified Portfolio
- Do you shy away from investing because you are worried about losing money?
- What would be the solution?
- How can you make an informed investment solution?
This presentation will include some illustrations that help you:
- Understanding the tradeoff between risk and return of different types of Investments.
- Learn how you can manage risk by using the right asset allocation strategy.
- Identify your investor risk profile and determine your asset allocation strategy
for the financial goals you want to pursue.
Building Your Portfolio
We take you through the steps of building your portfolio. You will set your goals,
determine your asset allocation strategy, identify which Investment vehicles you
want in your portfolio and start investing. You will be able to construct and monitor
your own portfolio.
When to invest?
Investing early allows your Investments more time to grow, and means your earnings
and dividends have the opportunity to grow at a faster rate because of compounding.
Compounding is the growth that results from the re-investment of income, it has
a snowball effect because you earn income not only on the original Investments,
but also on the income accumulated in earlier years. Investing regularly puts you
on the road to financial well-being.
Investment choice.
When you invest, you have three main asset classes available to you, i.e. cash equivalents,
bonds and stocks.
Cash Equivalents
Cash equivalents usually provide ready access to your money when you need it, because
they can easily be converted to cash. A portion of your portfolio should always
be invested in them to provide liquidity as they are referred to as 'liquid assets',
that is they are easily accessible for sudden cash needs, and are intended for short-term
use.
Bonds
Bonds are issued by companies and governments as a way of borrowing money. They
are referred to as 'fixed income' Investments because your earnings are usually
predetermined by a fixed rate of interest. They can bring a certain amount of stability
to a portfolio.
Stocks
When you invest in stocks, in the form of shares, you are buying part of a company.
Stocks and shares provide capital appreciation, and over time, they have outperformed
all other types of Investments. There are two ways you can make money investing
in stocks:
- Growth, which occurs when you buy a stock and the price goes up.
- Income, which can be earned when you buy a stock that pays dividends.
Mutual Funds
A mutual fund pools the money of many investors and buys stocks, bonds, money market
instruments, or a combination of these securities. You delegate your day to day
Investment decisions to a team of professional fund managers. Its is an easy and
convenient way to diversify by spreading money across asset classes.
Towards a Diversified Portfolio
There are many factors that affect how
your Investments perform. One important element is risk. Every Investment decision
involves a certain amount of risk. That is why you should understand how risk affects
investing and the importance of diversification. Learn how you can manage risk by
using the right asset allocation strategy.
Risk
One of the most important issues you face as an investor is determining how comfortable
you are with risk. Your Investment risk tolerance means how much downturn you can
handle without bailing out. There is a tradeoff between risk and reward. The higher
the Investment risk, the higher the potential return and the better suited it is
for long-term time horizons.There are two types of risk, i.e.
- You do have some control over the amount of risk you are willing to accept in your
Investment portfolio.
- You have no control over the risk. These arise from a possibility of rising interest
costs, a downturn in the economy, a change in interest rates, political instability,
etc.
Diversification
The importance of diversification stems form the old saying "don't put all your
eggs in one basket". Indeed, different asset classes can respond differently to
the same market conditions. That is why it is best to spread your Investments.
Asset Allocation
The best way to diversify your Investments is through an asset volatility allocation
strategy. Asset allocation can reduce overall portfolio risks and enhance potential
returns. The asset allocation decision is the most important an investor can make.
It may be even more important than which securities you choose and when you decide
to buy and sell.
Building Your Portfolio
We defined 4 steps for building your portfolio,
which we will accompany you in the following paragraphs:
- Step 1: Your profile.
Start by defining your goals. Identify your objectives, risk tolerance, time horizon,
income needs, base currency and expectations.
- Step 2: Understand the spectrum of products and services.
Develop an understanding of the products and services available to you in order
to build the portfolio that best suits your needs. Choose between Investment funds,
asset management and brokerage services.
- Step 3: Build a diversified portfolio.
The portfolio will take into consideration such elements as the investor's classification,
the investor's objectives, time horizon and risk tolerance. Determine the asset
mix, and the asset allocation. And finally identify specific sectors, groups, themes
and types of Investment vehicles.
- Step 4: Monitor and review.
Establish a systematic way of monitoring your portfolio
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Mutual Funds
Caam Saudi Fransi offers you a wide range of open-ended Mutual Funds covering: - All major asset classes (cash, bonds and equities)
- All major markets (US, Europe, Japan, Saudi Arabia, Asia and emerging markets)
Redemption and subscription are daily at the next prevailing market valuation.
Advantages of Caam Saudi Fransi Mutual Funds:
With our mutual funds, you can enjoy our professional services coupled with many
other advantages: - Professional Management:
Lets you delegate your day-to-day Investment decisions to a team of professional fund managers - Diversification:
Protects you from being exposed to just one asset - Lower Transaction Costs:
Large pools of funds result in economies of scale - Liquidity:
You can redeem your Investments daily and have access to cash rapidly - Global Reach:
You have access to Investment opportunities around the world - Flexibility:
You can structure the portfolio that best suits your needs and can switch at any time within the pyramid of funds
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