Article from The Star

Good article about investment from The Star

How to maximise returns

Having learnt the benefits of investing early, the next step is to further enhance one’s wealth. In this last of a three-part series, CIMB Private Banking defines wealth enhancement and how asset allocation can have a positive impact on investment returns.

To be wealthy, one needs to create wealth, but to stay wealthy, one has to enhance, optimise and preserve his assets and investments. The question is how to enhance one’s wealth when the investment choices and offerings are becoming more complex?

Wealth enhancement is a methodology of planning a strategy and executing a plan to achieve certain financial objectives through the following process:
~Determining the investor’s goals and objectives,
~understanding the investor’s risk profile,
~analysing the investor’s current financial state,
~planning a financial strategy,
~detailing a recommendation and action plan, and executing the plan.

The key areas to focus on are the last three.

For an investor, wealth enhancement is about maximising returns based on a certain level of tolerance for risk to returns.The concept of risk to returns is also known as volatility in returns and is best described as the odds of expected returns not materialising, deviating from what an investor is expecting to earn from an investment.Investors will always choose an investment that is able to generate the highest returns with the lowest level of risks possible. This is known as the Efficient Frontier. According to this frontier, Investment X is more desirable than Investment Y because the former has the potential to earn higher returns based on the same level of risks than the latter.