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Life is a journey. Make it great. Managing and growing your wealth VISION KNOWLEDGE PATH CHOICE The financial resources for the lifestyle you want Growing your wealth for the lifestyle you want does not happen by chance. It results from careful planning and wise investment. A sound financial plan is your first step to achieving your goals such as buying your first property, giving your kids a sound education, or retiring when you want to. While you build the resources to fulfill your life’s goals, you also want to ensure that your money continues to work hard for you even in varying economic situations. 3 4 VISION KNOWLEDGE PATH VISION CHOICE How to build your wealth over time Many people know how to build wealth simply by accumulating savings. But if you are unable to add value to your savings, the overall value of your assets will gradually be eroded by inflation, undermining all your efforts. It takes careful and considered planning to build wealth and overcome the effects of inflation. Among seven Asian regions surveyed, Chinese people have the third strongest tendency to save. 48% of Chinese interviewees said that they would increase their rate of savings in the next six months. While savings and accumulating wealth are important, the key to adding value lies in consistent and sustainable wealth management. KNOWLEDGE China ranks the 3 in the Asian region in saving for the future Plans to save in next 6 months HK% India% China% Singapore% By investing fixed amounts regularly, you can take advantage of “dollar cost averaging”. This means that if you are buying funds, when the price rises, you buy fewer units and when the price drops, you buy more. So over time, regardless of whether the price of the fund you are buying rises or falls, the average price you pay for each unit is likely to be lower than the market price. This may help increase the long-term return on your investment. Malaysia% Taiwan% 41 33 30 57 Decrease saving 1 6 47 44 33 26 Stop saving 48 61 67 Maintain current level 2 4 3 5 4 7 52 6 9 14 12 6 Albert Einstein said, “The most powerful force in the universe is compound interest.” Indeed, an effective savings plan needs a longer period of time for the power of compound interest to work to your advantage. Save HK$5,000 per month for 10 years and let it grow (Assuming 5% p.a.return) Time 6000,000 30 years 6000,000 40 years 6000,000 0 500,000 Capital 179,646 Capital Gain 684,085 1,514,900 2,883,261 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 Total Savings 4,000,000(RMB) For example, let’s say you save RMB 5,000 a month for 10 years – the total amount you accumulate is RMB 600,000. If you earn 5% interest each year on your savings, after 10 years you will have accumulated RMB 779,645 - almost RMB 180,000 more! By the 40th year, that sum will reach RMB 3,483,261. 5 30,000 25,000 20,000 15,000 5,000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: AASTOCKS 6 That’s the power of compound interest, the force you want to harness to build your wealth for the long term. The longer you invest your capital, the better your results will be. Defnition: 35,000 † Most people understand that investing their capital can lead to potentially greater wealth. However, if you simply invest your money in equities and expect to double your earnings in a short time, the risk is much higher. It is also not easy to maintain the momentum of growing for the long-term. 20 years HSI 10,000 49 Grow your wealth with compound interest 6000,000 100 50 25 Source: HSBC Asian Insurance Monitor 2011 10 years 200 150 Increase savings Dollar-cost averaging* Dollar-cost averaging may help manage market risk 250 Korea% CHOICE Invest regularly to benefit from fluctuations USD rd PATH 年份 Average bid price of a tracking fund HSI† buy more units when the price is lower and fewer units when the price is higher and may benefit from a lower average cost in the long run * the technique does not guarantee a profit or protect you from suffering a loss in a declining market. The graph above shows that for the 10 years from 2001 to 2010, the Hang Seng Index recorded an overall increase. However, there were sharp fluctuations, especially between 2003 and 2009, which had made many investors worried. If you had used dollar-cost averaging during that period to invest regular amounts in a tracking fund each month, you could have enjoyed potential capital gain with less volatility. Good asset allocation helps grow your wealth steadily “Asset allocation” means diversifying and balancing the risk of your investments among different assets. A winning basketball team has a mix of three-point shooters, offensive players and defensive players. The same goes for a winning portfolio. Just as dollar-cost averaging may help smooth out the fluctuations in market prices, careful asset allocation diversifies your investments across different kinds of assets to ”smooth out” the rises and falls in different assets and create a more balanced portfolio for all market conditions. Review your portfolio regularly Nothing in life stands still – especially not in today’s dynamic global economy. So no matter what investment strategy you use, it is important to review your portfolio regularly and adjust your mix of investments as needed. As you progress through the different life stages, your responsibilities and priorities will change. Your appetite for risk may also change as you grow older. That is why it′s good to have a capable advisor you can turn to to help you adjust your asset allocation. Your Relationship Managers will be glad to support you and help you review your portfolio periodically, so you can make the right changes at the right time for the right reasons. 6 VISION KNOWLEDGE PATH VISION CHOICE How to help reach your wealth goals The path to growing your wealth effectively is to follow three principles: start early, be consistent and use the right tool for your needs at each stage of your life. 1 PATH CHOICE How to select the products you need to achieve your goals Figuring out your needs in wealth growth will help you select the right products. Start early The earlier you start investing, the sooner you can get the power of compound interest working for you to build value, earn even greater returns and make your money work harder for you. $ Target Wealth 2 1 Regular saving 2 KNOWLEDGE Irregular savings behavior Your needs in wealth growth may include Secured wealth accumulation You will need your savings to have guaranteed returns. Partially Withdrawal You will need the flexibility to withdraw cash at important life stages. Enhance potential returns You will need your money to work harder for you to counter the low-interest-rate environment. Flexibility You will need flexible payment and return ways to meet your needs at different times. Start Late Time Be consistent Many people stop their investment planning particularly during market downturns. By doing this, they often miss out on opportunities to invest at lower prices. If you stick to your plan and keep moving ahead consistently, you can spread your risks and grow your wealth for the long-term through dollar-cost averaging and careful asset allocation. Use the right tool at the right time With good asset allocation and regular reviews of your portfolio with your Relationship Manager, you can adjust your portfolio to meet your needs at different stages of your life and in different market conditions. This helps you keep your momentum going to achieve your long-term financial goals. 1 Dividends are not guaranteed. 2 Investment involves risks. The income (if any) from investment choices may go down as well as up. Insurance policy owner shall take all the investment risk. 7 Note: Please note that your savings returns may go down as well as up. The diagram and information shown are hypothetical and for illustration only. Please contact your Relationship Manager for professional advice. Note: This document is not provided for sales purpose. The information shown in this document is hypothetical and for illustration only. It is not intended to constitute a recommendation or advice to any customers and is not intended as a substitute for professional advice. You should not act on any information in this document without seeking specific professional advice. Please contact your Relationship Manager for addressing your wealth management needs. 8 Disclaimer: This document has been distributed by HSBC Bank (China) Company Limited (the “Bank”). It is not intended for anyone other than the recipient and should not be distributed by the recipient to any other persons. It shall not be copied, reproduced, transmitted or further distributed. Whilst every care has been taken in preparing this document, neither the Bank nor any other HSBC Group member(s) makes any guarantee, representation or warranty or accepts any responsibility or liability as to its accuracy or completeness. Except as specifically indicated, the expressions of opinion are those of the Bank and/or the relevant HSBC Group member(s) only and are subject to change without notice. The information contained in this document has not been reviewed in the light of your personal financial circumstances. Neither the Bank nor any other HSBC Group member(s) is providing any financial or investment advice. The information is not and should not be construed as an offer to sell or a solicitation for an offer to buy any financial products, and should not be considered as investment advice. Some of the information in this document is derived from third party sources as specified at the relevant places where such information is set out. The Bank believes such information to be reliable but it has not independently verified. 33