Personal Financial Planning (PFP) and Investments

[1] ROI - the profit earned on an investment; + or -.
- Risks: firm-specific risk (can be diversified) and market risk (cannot be diversified).

[2] Risk/Return relationship.
- Higher the risk > the higher the return.
- However, the higher risks of investments do not necessarily bring higher returns.

[3] Risk/Return trade-offs:
- Bank deposit (lowest), Bond/Debentures (higher), Stocks (highest).

[4] Risk diversification is very important to every investor. Different investment products that are not correlated in their portfolio.

[5] PFP aims to help individuals:
- achieve financial goals in life, avoid financial mistakes, maintain living standards.

[6] Life cycle is an important concept in PFP. Individuals usually have different financial needs, priorities and objectives at different life stages that typically young single, just married, married with young children, married with older children, pre-retirement and retirement.

[7] MPF scheme
Employee Rights:
- Join the employer's MPF scheme. Make voluntary contributions to the sheme. Withdraw the accrued benefits at age 65.
- Employee Responsibilities: Contribute 5% monthly relevant income to the scheme. Bear the investment risk. Choose MPF funds according to their risk tolerance level.