02 September 2011

Investment Strategy - General & Specific

There are two ways of investment:

- General
- Specific

'General' focus on Macro-Economic. For example, if you are good in economy, then you will focus on the supply and demand on the certain products, such as Commodities, Currencies as well as the Country Risk. From there, you could earn more by investing in Futures (e.g. Currencies, Commodities etc) or Unit Trusts (e.g. Active or Passive Managed Funds) or ETFs or even REITs (Real Estate Investment Trusts). The difference between Futures and Unit Trusts/REITs/ETFs is that Futures normally applies to bigger leverage, which means that you could invest in small amount for huge investment amount (In another word, you are putting a 10% deposit to purchase 100% asset, hoping that the asset price could appreciate in short or long run). For ETFs / REITs, it is in Stock Exchange and you are able to invest in with little commission involved. For Unit Trusts, in my personal opinion, I would prefer to invest in Active Managed Fund because I could invest the Passive Managed Fund via ETFs. REITs is another investment product that allow you to enjoy high yield while bearing a lower volatility as compared to Equities / ETFs / Futures.

Some people likes to invest in 'General' as they have sensitivity on current movement on the General investment products. They like to apply 'Top-Down' Approach.

For 'Specific', it applies more on Equities, Private Equity, Hedge Fund, Real Estate (Alternative Investment) etc. To be good in investing in specific product, you may need to have in depth knowledge on the product you invest into. For example, if you invest in Equities, then you should know how to analyze the company's financial report and its ecosystem (e.g Suppliers, Customers, Competitors, Substitute, New Comers) and of course you have to know the intrinsic value of the company or the product that you invest into. Normally you may need to have a longer period of investment, because you have to buy the 'UnderValued' stock and wait for it to appreciate to its market price. We have to apply 'Bottom-Up' approach on this. It takes longer time as compared to 'General' approach because it is not so easy to fully understand the whole company - You may need to have about 1 month - 3 months to study it as compared to the General Approach.

Of course, if you would like to ask me which approach is better, I would like to say is that, it all depends on your characteristic. If you are 'general' type, means that you only like to focus on the economy, then my advice to you is to focus more on general investment product. If you like to study hard for certain investment product, my advice to you is to focus more on specific investment product. Until now, I still do not really conclude which method is better, it all depends on the investors that apply to it.

Good luck in your investing. :)

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