Money has a tendency to lose its value over time because the price of goods and services has an upward tendency. This is called inflation. Here are some factors that could eat away your money:

Inflation. Simply, inflation occurs when the price of goods and services rises. And when prices rise, people will ask for a rise in salary. That's why the money you earn today will be worth less 10 years from now.

Interest rate fluctuations. A drop in interest rates means a smaller return on your deposits, and if the interest rate is lower than the rate of inflation, your savings lose value. But for some investments, such as equities and bonds, the value of your investment may rise because of the drop in interest rates.

International economic trends. What happens in other economies can affect the value of your money. Political circumstances, GDP growth, and stock-market indices in other countries can all have an impact on the buying power of your money.

With so many factors involved, it is crucial that you have a financial plan to protect your future and to put your money where it generates reasonable returns to meet your needs.

The sooner you start, the better. The example below shows the difference in accumulative savings between Mr Early and Mr Late, who start saving at different times.

Mr Early saves for 10 years and then stops. Mr Late starts 10 years later and saves for 20 years. But Mr Early still gets 87% more than Mr Late (based upon 10% annual growth, not taking into account annual inflation).

Start planning now to foresee how much savings you will accumulate within a specific time frame. This will help you master the future better. And, you should always have a nest egg in case of an emergency or unanticipated circumstances.

You can choose from three main financial tools with varying degrees of risk:

• Deposits
• Investments

Traditionally, deposit products are the safest. They provide high liquidity - you can quickly and easily retrieve your money - but offer lower rates of interest. Investment tools offer potentially higher returns but with a greater risk.

One thing to remember about investments is that the level of return is generally proportional to the level of risk. Thus an investment offering potentially high returns will usually have a high-risk element.

• Securities/Stocks
• Bonds
• Foreign currencies
• Unit trusts

Securities are the generic name for shares and other investment tools quoted on the stock market. Individuals may invest in securities, and check the progress of their investment every day in the newspapers or on the Internet.

It is possible to enjoy a higher rate of return from investing in securities than from savings accounts. Stock market securities in thriving economic climates will generally show an increase over time, and sometimes within a very short period. However, all stock markets are volatile and buying securities should not be seen as a short-term method of making money.

Buying securities also costs money. Stockbrokers make various charges for their services, such as commission.

Other than investing in securities by yourself, you can assign asset management professionals or companies to invest on your behalf.

Bonds are issued by governments and companies in order to raise money, and are a relatively safe investment. Bonds are usually seen as a long-term investment and can have terms of up to 30 years, although five to 10 years is the normal investment period. Many fund managers use bonds as a stable element in unit trust products.

There are two ways to gain a return on your capital from foreign currency, either through interest-rate differences or exchange-rate fluctuations.

Many financial institutions offer margin trading on foreign currencies. This means that you deposit a small percentage of your investment amount, but receive the whole amount of the interest. Of course, this is highly speculative and if the currency devalues by more than your interest return, your return will be negative if the foreign currency is converted back into the local currency.

Unit trusts (or mutual funds) are an attractive medium- to long-term investment tool. They give investors the opportunity to diversify even a small investment in securities, bonds, currencies and commodities in markets around the world. This is achieved by combining the resources of many investors into one large fund which can be spread over a number of different investments and over a wide geographical area. This range of investments is called a portfolio.

Unit trusts have a number of benefits:

• Risk diversification
  Even if you only have a small amount to invest, Unit Trust provides the opportunity to invest in a broad range of stocks, allowing you to spread your risk over a variety of products and markets.
• Access to global investment opportunities
  Buying individually the equivalent number of stocks as in an equity unit trust would involve a high transaction cost, but by investing in Unit Trust you can invest in stocks in a number of different markets in a more cost-effective way.
• Professional Management
  Unit Trusts are managed by experienced professionals, so you can invest your money without the problems that affect many individual investors, such as limited investment experience, lack of time and access to the latest market information.
• Low maintenance
  Unit Trust provides the opportunity to invest in equities without the administrative burden of arranging stock settlement, registrations and new share issues.
• Flexibility
  As Unit Trust may be bought and sold daily, you can switch from one investment style to another easily if your preferences change. It is also convenient to track the value of your investments as many funds' prices are quoted in newspapers daily.

Many people in the past have lost money through unwise investments or lack of relevant information and assistance. If you're thinking of making an investment, here are some questions you should answer or actions to take:

• Are you dealing through a reputable financial institution?
• Is the company registered with the appropriate government bodies?
• You should seek independent advice from an independent professional adviser before making an investment.
• Compare the services offered and the fees charged with other companies.

Here are some simple guidelines to follow for making wise investments:

• Set your objectives.
• Do your homework before investing. It is risky to rely on pure luck when making an investment.
• Ask yourself whether you want to invest or speculate.
• For investment, make sure you have a cut-off point in mind to protect your bottom line.
• In the case of speculation, don't make investment decisions out of panic when the market becomes volatile.
• Invest as much as you can afford, but no more.
• Consider the effects inflation can have on the real return of your investment.
• Always use a reputable investment firm or financial institution.
• Diversify. Invest internationally and spread your investments across different types of assets to manage exposure to any particular type of risk.
• Make sure you understand exactly what risks are involved with every investment you make.
• If in doubt, seek professional advice.
• Keep an eye on your investments. Take opportunities and shift products if it is beneficial to do so.

Know your current financial situation. Before you begin to think about investing your money, you should know how much you can spare each month. Naturally, the more you can put aside now, the better it will be for your future. It's up to you to achieve a balance between your current lifestyle and your expectations. Take a look at the below example to find out how much you can invest Calculate your income and expenses taking into account the following:

• Mortgage repayments
• Loans and overdrafts
• Living expenses
• Emergency funds
• Car expenses
• Entertainment
• Holidays
• School fees
• Family commitments

Generally speaking, whatever spare cash you have after allowing for all your expenses is what you can afford to invest. You can commit a certain amount each month and look upon it as a monthly expense. As your salary increases, you should also increase the amount you invest proportionately. By doing this, you'll be keeping up with inflation and your money will be working harder for you.

Example

Once you know how much you can afford to invest, you can set your objectives - why you are investing and how you are planning to use your investments. Your objectives could incorporate any combination of the following:

• Retirement
• Protection for your family
• Education for your children
• Special needs or emergencies
• Specific occasions (e.g. a wedding, buying a house, emigrating)
• Wealth accrual

Now make a list of your objectives, in order of priority, because you may not be able to afford to achieve every single goal. Divide your objectives also into long-, medium- and short-term goals. This will help you choose the type of investment you want to make. For example, if you plan to send your children to study abroad in three years' time and you need to save for their tuition fees and living expenses, you'll need a fairly low-risk investment. Think about when you will need the return as it also helps to determine the time horizon of your investment.

Keeping your objectives in mind, determine how much risk you're prepared to take. Do you want to adopt a conservative, moderate or aggressive investment strategy? Ask yourself the following questions before you make your decision:

• Are you prepared to make long-term investments, which will allow you to take greater risks for higher returns?
• If you're going for short-term, high-risk investments, can you afford to lose some of the money you invest?
• If you're married with children, what level of risk can you take and still be certain of their future?
• If you want your money to be safe, will you be content with a moderate rate of return?
• How much have you put aside to meet unforeseen events?

The important thing to remember is that, in general, you can afford to choose higher-risk investment tools for longer-term investments because, even if they go down in the short term, they are likely to show an overall upward trend over a long period. But for short-term investments, you will find low-risk products a more reliable and safer option. You can also make use of our Risk Profiling Questionnaire to help you find out more about your attitude towards investment risk.

The more you know about what you're investing in, the better it is. Unit trust prices are quoted on the Internet, and you can keep track of spot prices through your bank.

Many investment companies also hold seminars, especially when they're launching a new fund. Banks also host similar events for the benefit of their customers. Attending them can be informative and useful.

Constant review helps to keep your investments up-to-date. In order to maximise the money you invest, it is necessary to review your investment portfolio on a regular basis. Your financial situation and your investment goals could change, and markets are constantly shifting.

New opportunities and investment tools also emerge from time to time, and it is possible that some investments you are holding are not performing to your expectations. If that is the case, you may consider revising your portfolio.

You can start investing in unit trusts with funds of as little as BND1,000 and you can also opt for a minimum monthly contribution amounting to BND100.

Unit trusts are very flexible and you can buy and sell unit trusts on any (dealing) day. Your proceeds can take as little as seven working days to access.

Yes, if you are investing for the first time on the unit trust fund. After which, we can offer you a monthly investment plan where no initial lump sum is required and the monthly contribution is only BND100.

You can:

• participate in the equity market even with limited capital
• reduce investment risk by using Dollar Cost Averaging
• enjoy potentially higher return than general deposits as a medium-to long-term investment
• meet your targeted investment needs

Dollar Cost Averaging refers to the buying of securities at scheduled intervals, irrespective of the dollar amount, whether the price is rising or falling. When the price is low, more units can be bought and vice versa. At such, the average cost will be less than the average of the price paid. The risk arising from short-term market fluctuations will be reduced as a result.

Unit trusts have an element of risk but less than direct investment on the stock market. Risk is comparatively lower because it may be spread over a number of years, a variety of commodities, currencies or countries - you are spreading the risk.

Unit trusts are managed differently from fund to fund as fund managers may invest more in certain types of assets (e.g. equities) and less in others, or may employ a different investment strategy.

The general rule of thumb is: the riskier the investment, the greater the return. Hence, a unit trust that invests in safer assets, generally, will not produce a return as high as one that invests in volatile assets.

Professional fund managers do this for you, so you don't have to monitor them on a daily basis. They have access to information and research statistics from economists and analysts around the world, and keep you updated of major changes.

Unit trust fees are actually much lower than if you were to set up an individual fund or investment. This is due to economies of scale. As a large number of investors are involved in a fund the fee cost is therefore shared and thus reduced.

People subscribe to unit trusts for a variety of investment reasons. Some people do use them to mature in the long-term as an additional income source on retirement.