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Investments FAQ
What affects the value of money?
When should I start planning for the future?
I'm a new investor. What are the basic rules to investing wisely?
What should I do before I start investing?
I know how much I have to invest, now what?
How do I determine my attitude toward investment risk?
What types of financial tools can I invest my money in?
What investment products are available at HSBC?
What is Capital Protected Investment (CPI) Product?
What is Deposit Plus?
What is Overseas Investment Plan/Product (OIP)?
What affects the value of money?
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.
When should I start planning for the future?
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).
| Mr. Early | Mr. Late | |||
| Year | Savings | Accumulation | Savings | Accumulation |
1
|
1,000
|
1,100
|
0
|
0
|
2
|
1,000
|
2,310
|
0
|
0
|
3
|
1,000
|
3,641
|
0
|
0
|
4
|
1,000
|
5,105
|
0
|
0
|
5
|
1,000
|
6,716
|
0
|
0
|
6
|
1,000
|
8,487
|
0
|
0
|
7
|
1,000
|
10,436
|
0
|
0
|
8
|
1,000
|
12,579
|
0
|
0
|
9
|
1,000
|
14,937
|
0
|
0
|
10
|
1,000
|
17,531
|
0
|
0
|
11
|
0
|
19,284
|
1,000
|
1,100
|
12
|
0
|
21,213
|
1,000
|
2,310
|
13
|
0
|
23,334
|
1,000
|
3,641
|
14
|
0
|
25,667
|
1,000
|
5,105
|
15
|
0
|
28,234
|
1,000
|
6,716
|
16
|
0
|
31,058
|
1,000
|
8,487
|
17
|
0
|
34,163
|
1,000
|
10,436
|
18
|
0
|
37,580
|
1,000
|
12,579
|
19
|
0
|
41,338
|
1,000
|
14,937
|
20
|
0
|
45,471
|
1,000
|
17,531
|
21
|
0
|
50,018
|
1,000
|
19,284
|
22
|
0
|
55,020
|
1,000
|
23,523
|
23
|
0
|
60,522
|
1,000
|
26,975
|
24
|
0
|
66,575
|
1,000
|
30,772
|
25
|
0
|
73,232
|
1,000
|
34,950
|
26
|
0
|
80,555
|
1,000
|
39,545
|
27
|
0
|
88,611
|
1,000
|
44,599
|
28
|
0
|
97,472
|
1,000
|
50,159
|
29
|
0
|
107,219
|
1,000
|
56,275
|
30
|
0
|
117,941
|
1,000
|
63,002
|
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.
I'm a new investor. What are the basic rules to investing wisely?
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. |
| • | Make sure you have a cut-off point in mind to protect your bottom line. |
| • | Invest as much as you can afford, but no more. |
| • | Don't leave money lying around in non-interest bearing accounts except as stand-by cash. |
| • | Always use a reputable investment firm or financial institution. |
| • | Make diversified investments. |
| • | 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. |
What should I do before I start investing?
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.
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
I know how much I have to invest, now what?
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.
You can calculate how much you need to reach your objectives, taking into account projected interest rates and inflation.
How do I determine my attitude toward investment risk?
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? |
| • | If you opt for safe investments, will the returns be enough to cover inflation? |
What types of financial tools can I invest my money in?
You can choose from the main financial tools with varying degrees of risk:
| • | Savings |
| • | Investments |
Traditionally, savings accounts are the safest place to put your money. 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.
What investment products are available at HSBC?
One thing to remember about investments is that the level of return is generally proportionate to the level of risk. Thus an investment offering potentially high returns will usually have a high risk element.
HSBC currently provides selected investment products including Capital Protected Investment (CPI) Product, Deposit Plus, and Overseas Investment Plan/Product etc., to different customer needs.
In 2008, HSBC launched a brand newly open-ended OIP. Under this platform, we offer a series of offshore funds for you to choose. Based on your choice, HSBC will invest in related offshore funds according to regulation of OIP.
What is Capital Protected Investment (CPI) Product?
We bring you a series of ‘Capital Protected Investments (CPI) Product offering you the potential for higher return with 100% capital protection at maturity.
Comprehensive product type -- To match your return expectation, risk appetite and investment view, you can choose various investment tenures, investment currencies (RMB and foreign currencies) and underlying assets. These underlying assets include:
| • | Foreign currency exchange rates |
| • | Interest rates, e.g. London Interbank Offer Rate (LIBOR) |
| • | Equity basket |
| • | Indices etc. |
100% capital protection upon maturity -- No matter how the market moves, you need not worry about your capital, as this product is 100% capital protected upon maturity.
Higher potential return -- If the market moves as you expected, you may be able to earn a higher return than time deposit.
Suitable customers -- Customer’s specific attitude toward investment risk is ‘Cautious’ or above.
Risk Disclosure—Capital protected investment product entails investment risks. Investor will only retain return on the product as per the express stipulation of applicable terms and conditions. Investors should fully understand the investment risk and act prudently in making the investment decision. This product should not be treated as a normal term deposit or a substitute there of. Investors should be prepared to take the risk of earning a comparatively low return or even no return on the money invested.
What is Deposit Plus?
Deposit Plus is a combination of a time deposit and a currency option. By taking advantage of exchange rate movements, it allows you to earn a higher return than a normal foreign currency time deposit and potentially earn a higher interest rate than a normal time deposit.
It is a unique form of time deposit linked with a foreign currency, which allows you to earn time deposit interest and an option premium at the same time.
When your Deposit Plus matures, you will be paid the principal, time deposit interest and the option premium in either your deposit currency or linked currency (converted from the deposit currency at the Conversion Rate), depending on the exchange rate on the Fixing Date.
Choice from 8 selected currencies -- You can select your currency pair according to your view on the currency market or your foreign currency needs. You can choose two currencies – a deposit currency and a linked currency. The two currencies can be USD, HKD, AUD, CAD, EUR, GBP, JPY or SGD for Foreign Currency Exchange Account or USD, HKD, EUR or JPY for Foreign Currency Notes Account.
Flexible investment period -- You can choose your own investment period ranging from 1 week to 1 month.
Suitable Customers:
| • | If you have spare funds in foreign currency and hope to earn a potentially higher return than deposit; |
| • | If you have the need for the linked currency in the short term; |
| • | If you expect linked currency will appreciate or foreign currency fluctuation is narrow in your investment period; |
| • | If you need to diversify your foreign currency investment portfolio; |
| • | Customer’s specific attitude toward investment risk is ‘Cautious’ or above. |
Click here to view details of how Deposit Plus works
Risk Disclosure--Deposit Plus is high risk investment product. Your principal may be lost as a result of the fluctuation of marketing conditions. You should fully understand the investment risk and act prudently in making the investment decision. The net return in relation to Deposit Plus will depend upon market conditions prevailing at the deposit fixing time on the deposit fixing date. You must be prepared to incur loss as a result of depreciation in the value of the currency paid. Such loss may offset the interest and option premium earned on the deposit and may even result in losses in the principal amount of the deposit. If you have any concerns about this product, you should consult your professional financial advisers.
What is Overseas Investment Plan/Product (OIP)?
Overseas Investment Plan/Product (OIP) brings you the opportunity to participate in global investment market, achieve global asset allocation and benefit from global investment market without stepping abroad.
Various choices of investment products -- Investment can be linked with different underlying assets:
| • | Foreign currency exchange rates |
| • | Equity indices |
| • | Bond/equity funds etc. |
You have various choices in investment tenures.
Risk diversification -- The asset allocated in a single market is easily impacted by the local risk factors like interest rate, exchange rate, etc, so the risk is concentrated. Overseas investment through Overseas Investment Plan can help diversify the risk of single market.
Transparent Operating Mechanism -- The operating mechanism is transparent that you can know the flow of funds clearly, enabling you to select the suitable products more easily.
Independent custody -- Your funds will be kept by an independent custodian bank, providing added security to your investment.
Risk Disclosure—Overseas Investment Plan entails investment risk. Investors will only obtain the return on this product as per the express stipulation of the applicable terms and conditions. Investors should fully understand the investment risk and act prudently in making the investment decision. The returns hereunder are subject to the credit risk of the issuer, the custodian bank and the Bank.
Please note: The information is provided for your reference only, and does not construe any form of legal, financial or other professional advice. HSBC is not responsible for the accuracy, updatedness and completeness of the information. This document does not constitute an offer, solicitation, advice or agreement, and is not legally binding over any party. HSBC makes no representation or warranty (express or implied) of any nature nor is any responsibility of any kind accepted with respect to the completeness or accuracy of any information, representation or warranty (expressed or implied) in, or omission from, this document. No liability is accepted whatsoever for any direct, indirect or consequential loss arising from the use of this document.
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