Topic 9: Engaging Investment

Planning With IPFPWM (Part 3)

By:
Suhaili Almaamun, PhD
Senior Lecturer, Faculty of Economics and Management, UKM
Member, Research Centre for Islamic Economics and Finance (EKONIS), UKM

Outline

Starting investment programme

Investment choice (Keown)
Investment choice (AKPK & SC)
Issues on investment for Muslims

Starting Your
Investment
Programme

Pay yourself first

Make investing automatic
Take advantage of your employer
Invest your windfalls
Make 2 months a year investment months
live a life of poverty

Where can you invest?

Lending investments

Investment
Choices
(Keown)

Placing your money into savings

accounts and bonds which are
issued by corporations and the
government
Bonds -- debt instruments that
provide a return in the form of a
coupon interest rate payment and
par value at the stated maturity
date
Most have a fixed rate of return,
although some rates vary or float

Ownership investments
Placing your money into preferred
and common stocks. You become
part owner in the corporation and
receive a portion of the profits as
dividends (Dividends on preferred
stock are generally fixed)
Buying real estate to generate a
return through rent or capital
appreciation.

Investment
Choices
(AKPK and
SC)

Cash and fixed income

Shares
Unit trust fund
Property
Bond/sukuk
Real Estate Investment Trust - REIT
(Dana Amanah Pelaburan Hartanah)

because they usually deliver more stable

returns with lower volatility than shares.
conservative or defensive assets

2 types

Cash & Fixed

income

cash

Fixed income
investments

bonds

Benefits:
Money
market
funds

Bank
accounts

Certificates
of deposits
(CDs)

a group of investments
that provide a fixed-rate
return for a set period of
time.

Protect your
principal and
earn interest
income

Initial investment
is guaranteed by
the issuer with
the added benefit
of interest
income options.

Flexibility to
meet your needs

Offers a variety of
maturity and income
options.

Access to your
money when you
want it

Bonds can be sold

at market value any
time should you
need access to your
funds

How do you earn from equity

investment?

Dividend

Capital
appreciation

Equity = ownership

Equity
investments

Equity/Shares
/Stocks

Risks?
No dividend,
capital
depreciation
When the
company is not
doing well

Micro or
macroecono
mics factor

Company is
closing down

Less demand for

the shares and
unable to sell them

Economic
slump
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ready-made
investments that allow
the pooling of funds
from different investors
with similar investment
objectives.

Unit
Investment
Trust Funds

managed by
professional fund
managers

invested in various financial

instruments such as money
market securities, bonds
and equities, which are
normally available to bigger
investors only.

Trust Funds

Types of investors:
New investors

Willing to use
professional
fund managers

Having small
initial amount of
investment and
willing to add
investment
constantly

Looking ways to
diversify
investment to
minimize the risk

1. Diversified portfolio and flexibility

Unit
Investment
Trust Funds:
Advantages

Your resources are pooled with other investors,

allowing you to make investments impossible as
an individual investor. All the investors share
proportionately in the gains and losses of the
fund.

There are many unit trusts to choose from. and

easily diversify your investments.
Spreading your investment reduces the overall
risk of the investment and maximizes returns.
You can invest for as long or as briefly as you like.
This means investing without formally
committing to a contractual period.

Unit
Investment
Trust Funds:
Advantages

2. Affordability
Units of a unit trust fund are generally sold
at relatively affordable prices.
For a minimum initial investment, a unit
holder can avail himself of the expertise of
professional fund managers which may not
be possible if he were to seek professional
services on his own.

Unit
Investment
Trust Funds:
Advantages

3. Ease of liquidation
A unit trust manager is obliged to
repurchase units from a unit holder
whenever requested to do so by a unit
holder.

Unit
Investment
Trust Funds:
Advantages

4. A wider range of investments

By pooling your funds, you gain access to
investment opportunities which are normally
unavailable to individual investors.

Unit
Investment
Trust Funds:
Advantages

5. Professional management
A unit holders investments are managed
by fully qualified and trained professionals
who conduct economic research and use
their expertise to manage the unit trust
fund which otherwise may not be available
to the ordinary investor.
By virtue of its research facilities,
experience and investment skills, the
manager is in a better position to make a
more informed investment decisions.

A real estate property that has

been purchased with the
intention of earning a return on
the investment (purchase),
either through rent (income),
the future resale of the
property (capital gain) or both.

An investment property can be a long-term

endeavor, such as an apartment building, or
an intended short-term investment in the
case of flipping (where a property is bought,
remodeled or renovated, and sold at a
profit).

Property

Property

Location the
most important
factor

Types of investors:
Investors who
perceive
emergency fund is
not necessary

Long term
investment is
his/her objective

Who are able to pay back

the mortgage if the
property is not rented out
or the interest of the
mortgage goes up.

The bonds represent debt that

the bond issuer owes to the
bond investors.

Bonds pay regular interest, and bond

investors get the principal back on maturity

Corporate bonds
are usually riskier
than government
bonds

Types of investors:

Bond

for retirees who depend

on the interest income
for their living expenses
and who cannot afford
to lose any of their
savings.

Bond prices rise when

rates fall and fall when
rates rise.

Bond

The disadvantages
Bond market volatility
could affect the prices
of individual bonds,
regardless of the
issuers' underlying
fundamentals.

Credit risk - issuers

could default on their
interest and principal
repayment obligations
if they run into cashflow problems.

Sukuk

Sukuk are asset-based securities not debt instruments

sukuk represent ownership in a tangible asset, usufruct of an asset,
service, project, business, or joint venture.
Each sukuk has a face value (based on the value of the underlying asset),
and the investor may pay that amount or (as with a conventional bond)
buy it at a premium or discount.
Investors who purchase sukuk are rewarded with a share of the profits
derived from the asset.
with sukuk, the initial investment isnt guaranteed; the sukuk holder may
or may not get back the entire principal (face value) amount. Thats
because, unlike conventional bond holders, sukuk holders share the risk of
the underlying asset. If the project or business on which sukuk are issued
doesnt perform as well as expected, the sukuk investor must bear a share
of the loss.
Retail sukuk?

a financial product that invests capital raised from investors in real estate such
as offices and commercial facilities and pays out rent income generated from
such properties and capital gains from changes in portfolio as distributions to
investors.

REIT (Real
Estate
Investment
Trust )

REIT

Shariah
compliant
securities

ASNB investment
Issues of
investments
for Muslims in
Malaysia

Gold investment
FOREX
HALAL?

OR

HARAM?
19

Email:
sba7611@gmail.com
suhaili@ukm.edu.my

Thank you

Phone:
0176795007

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