What kinds of fund do we need? Group 7 Ko Wing Sum 033104 Wong Chin Ying 033118 Cheng Ching Man 033122 Leung Ho Fun 033126 Ma Chung Man 033218

Undergraduate Ms Cheng Single 20 years old girl Year 1 student in a university Save money for 1st year repayment after graduation Travel with family

Development of Fund started in 1970s -1980s only foreigners involved 80s to 90s rapidly developed 1987 the stock crisis

Development of Fund Two main types Authorized Fund and Unauthorized Fund Different between them

Development of Fund Difference Funds offered to the public in Hong Kong Have a well-defined investment strategy NOT mean it guarantees a promising return from the fund Company's marketing strategy

Development of Fund 1,942 numbers of Authorized Funds Including both Mutual and Unit Trust Funds Mutual Fund stock limited corporation selling securities stockholders shared in proportion

Development of Fund Unit Trust Fund  unincorporated mutual fund structure  allows funds to hold and pass through profits to the individual owners

Development of Fund Bond Fund Equity Fund Index Fund Guaranteed Fund Hedge Fund Fund of Funds

Development of Fund Different types of funds involved different levels of risk Consider situation and degree of risk-bearing before investing

Suggestion Save $60,000 for 3 years Save near $1,300 Fixed period fund

Middle Age Mr. Tong 40 Years Old Stable job (Month Salary: HK$30,000) Cash: HK$100,000 Property: one HK$750,000 estate One 10 year-old son

Prepare saving objective : Education fee for son’s university fee (10 years later) Retirement expenses (20 years later)

Suggestion: Education fee for son’s university fee (10 years later) Lower risk investment: Bond fund Retirement expenses (20 years later) High risk investment: Equity fund

Bond Funds Provide stable income with minimal risk. Invest in: income-producing instruments, may include corporate, government or municipal bonds. Low-risk investment, E.g. investing in U.S. Government Long-Term Bonds. Stable return change in interest rates, exchange rate and bonds’ credit rating, fund price will fluctuate

Equity Funds Invest primarily in stocks, usually common stocks. Purpose: seek for capital gain. Various choices of Equity Funds. E.g. Global Stock Market / one specific country. In Hong Kong: hybrid funds integrates both Bond and Equity Funds:

Performance of a Bond Fund (HSBC Asia Bond Fund) Performance of a Equity Fund (HSBC GIF Chinese Equity Fund)

Retirement Mr. Lam 60 years old just retired about 4 million cashes no experience of investment maintain his retire life standard

Retirement stock market is too high risk Guaranteed Fund monthly dividends annual income of 200 thousands

Guaranteed Fund Type of collective investment scheme Guarantee to pay you back a predetermined amount On a specific data Growth of the Underlying Instruments or index (1 ＋ Participation rate Payment at maturity Initial capital invested ) x x =

Suggestions (retirement) Guaranteed Fund concern the flexibility at least 4 years redeem shares >>pay extra service charge

the annual interest rate 1 million 2% 1 million only 20 thousand interest @ year.

Suggestions (retirement) TAI FOOK “Share profit fund” high flexibility draw 10% from the account @year No extra fees required

the interest =around 200 thousand dollars. 5 years later invest 400 million current rate 5% the interest =around 200 thousand dollars. 5 years later 0.8 million with his 4 million capitals.

REIT What is REIT? A collective investment scheme Aims: deliver a source of recurrent income to investors Means: investing income-generating real estate--- e.g. shopping malls, offices, hotels, etc.

REIT Advantages: -Higher liquidity comparing with property investment -Allow to participate in large-scale and quality properties -risk diversification

REIT Disadvantages: Underlying properties  unit price of REIT Operating loss  no dividends

Suggestions (retirement) high credit rating corporate bond 4.4% - 4.8% interest rate 5-7 years quite appreciable return USD bond funds

Suggestions (retirement) bond funds stock funds REIT (around 10%) resist the inflation share the risk

Suggestions (retirement) remain about 3% cash flow (accidental purpose) re-adjust the investment portfolio regularly

Things to Consider Retirement age After retirement: monthly expenses and period of time only for reference not any investment advice of recommendations. Investment involves risk

The End Thanks for Listen to Us!

MC 1 Which one is not the difference between authorized Funds and unauthorized Funds? Has the advertisement to promote the fund The structures of funds may not be governed by any Hong Kong rules or regulations Funds have a well-defined investment strategy guarantees a promising return from the fund

MC 2 Which one is wrong to describe the Mutual fund? A. Similar in nature to Unit Trust fund B. An unincorporated mutual fund structure C. The stockholders in the corporation D. The profit in the corporation will be shared in proportion to the amount of investor’s investment.

MC 3 “A collective investment scheme that aims to deliver a source of recurrent income to investors through focused investment in a portfolio of income-generating real estate…” This refers to..? A. Bond Fund B. Equity Fund C. Real Estate Fund D. Index Fund