Periscope
Plan for a rich future
Buying and selling of warrants and properties are also among their top choices.
¡§Earning easy money is not a good choice for everybody,¡¨ said James Mok Hon-fai, the federation supervisor.
But he said investing in the financial markets was a part of financial planning like savings as long as young people did enough research and analyses on the risks involved before making a decision.
Planning and investment
To prepare for the future, financial experts say, young people should start their financial planning to balance how they spend and invest as early as possible.
¡§The earlier you begin saving, the earlier you start earning the interest,¡¨ said Jimmy Woo Jack-man, executive director of the Mandatory Provident Fund Schemes Authority. ¡§It is simple mathematics.¡¨
People face different kinds of risks in different stages of life. A longer investment plan can bear more risks, Mr Woo said.
The implementation of the MPF system in December 2000 has prompted the young work force to an early start of retirement planning and personal wealth management.
Mr Woo said the MPF schemes could secure a reasonable living standard after retirement.
Yet, many consider the MPF just part of a bigger retirement plan as the mandatory contribution and its investment returns may not be enough to provide a comfortable retirement life.
For those young people who want to start their financial planning, Carrie Lee of Convoy Financial Services suggested them to do so by first drawing up a chart of their cash flow to show the amount of their essential expenditure and make a surplus budget.
¡§They need to reserve an emergency cash of three to six months¡¦ salaries. If there is still some money left, they can consider some medium- and long-term investments,¡¨ she said.
Kenny Tang Sing-hing, research director of Tung Tai Securities Co. Ltd., said young people could put 50 per cent of their money for long-term investment, 30 per cent for medium term and 20 per cent for high-risk, high-yield products.
¡§But young people should have clear targets, like buying a flat or planning for retirement. Then they choose the best method and seek professional financial opinions to achieve their goals,¡¨ he said.
Common investment tools include:
| Foreign Deposits | fixed deposits increase the capital by putting the money into a fixed deposit account |
Foreign Currencies |
obtain profits from the fluctuations of interest and exchange rates through the selling and buying of foreign currencies |
Stocks |
listed company shares |
Bonds |
debt instruments issued by governments, government agencies and corporations; holders receive regular interest income |
Warrants |
a pool of money collected from a group of investors from a trust, and invested by professional fund managers |
Funds |
give the holder the right to buy or sell a specified asset at a pre-determined price during the life of the warrant |
Options and futures |
¡¥derivative¡¦ investments which enable experienced and sophisticated investors to fine-tune their investment strategy in line with their assessment of future market |
Property |
generate returns from rents or the selling and buying of properties, for long-term investment or speculation |
(Source: Investment Guide of The Prudential Assurance Co. Ltd.)
Examples of starting to save early
Mr A and Mr B both save and invest HK$500 every month. But Mr A starts saving and investing 10 years earlier than Mr B. Assuming an annual investment return of five per cent, then the investment returns will be:
|
Mr A |
Mr B |
Age 21 ¡V 30 |
Save $500 per month and invest |
Save nothing |
Age 31 - 64 |
Save $500 per month and invest |
Save $500 per month and invest |
Total savings at the age of 65 |
$264,000 |
$204,000 |
Total savings and returns at age 65 (Assuming an annual return of investment to be 5%) |
$958,063 |
$534,558 |
By the time Mr A is 65, his total capital saved is only $60,000 more than Mr B¡¦s, but Mr A¡¦s total returns are 80 per cent more than what Mr B has achieved.
The benefits of investing returns with compound interest are considerably more than that extra 10 years of saving.
(Source: Mondatory Provident Fund Schemes Authority)
