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Investment Concepts

A Few Fundamental Concepts

Here are some fundamental concepts that can serve as helpful guidelines for investors.


The investor can diversify to ensure that his money is distributed among several different investments or instruments in order to spread out his risk. The more diversified a portfolio is, the less vulnerable one will be to the poor performance of a single investment.

Risk And Return

Risk can be defined as the uncertainty of the outcome of one's investment. When a customer invests, the price value of his investment may rise or fall. These price fluctuations introduce the risk that the investor may get into.

Typically, the higher the potential return on an investment, the more it tends to rise and fall in value and the less predictable is the return.

It is important for an investor to match his risk appetite with his chosen investment. That is, an investor whose risk appetite is low will not have an investment that is subject to great price swings.

Long-Term Investing vs Short-Term Investing

The period for short-term investing generally covers less than one year; medium term investing is greater than one year but less than three years; while that of long term investing goes three years and beyond.

Time allows markets to work in the investor's favor. In general, holding an investment over a long period of time reduces the level of uncertainty.

Types of Investments

Debt Instruments

When the government or a corporation needs to raise cash, it may borrow from investors. A corporation can borrow privately from lending institutions using promissory notes. A corporation can also borrow publicly by issuing commercial papers which are registered with the SEC.

On the other hand, the government can borrow from the public through instruments such as treasury bills, notes and bonds.

Since debt instruments are normally longer-term investments, interest payments tend to be higher than term deposits.


A common stock is a unit of ownership in a corporation for which the holder can vote on corporate matters and receive dividends from the company's earnings. Therefore, when the investor purchases a stock, he becomes a part-owner of the whole company.

Although investing in stocks involves higher risks versus investing in debt or money market instruments, you can take advantage of the higher earning potential that can be gained from stocks through capital appreciation and dividends. Furthermore, stock investments have in general outperformed bond and money market instruments over time.


An investment fund pools money from unrelated investors with similar investment objectives. The fund is managed by a portfolio manager who invests the money in a portfolio of securities and / or other instruments according to the specified investment objectives.

A fund offers several distinct benefits to investors:

  • As a single investor, it may be difficult to achieve diversification. Funds enable you to purchase various types of securities and other instruments to build a diversified portfolio.
  • The fund is managed by experienced professionals who have access to information on the economy and market movements.
  • Through the fund, you can invest in a diversified portfolio, enjoying the same earnings potential from the securities that would have been accessible exclusively to institutional investors.
  • Funds make it possible for investors to buy instruments at a lower cost. When the fund buys different instruments, the cost of buying these instruments is divided among all investors versus the sole investor bearing the total cost.

Build Your Own Investment Portfolio

No two investors are alike; people have different goals when they invest. When a customer invests, he should determine his objectives for investing.

Generally, the investor may invest for the following reasons:

  • Regular Income / Earning Stream
  • Wealth Accumulation
  • Capital Preservation
  • For Retirement
  • Child's Education
  • Business Formation

After determining his investment objectives, the investor must then ascertain the risk he is willing to take to try to fulfill these objectives.

Factors that an investor should consider before making an Investment:

Time Horizon Time horizon refers to the period over which the investor is willing to keep his money invested.
Investible Funds This refers to the money the investor can set aside for investing. Prior to investing, most financial experts suggest setting aside cash reserves equal to at least six months of expenses.
Investment Options Once the investor has determined his investment objectives, his risk-return preference, his time horizon for investing and the funds he has available, then selecting investment alternatives that would suit his profile will be easier to determine.

Frequently Asked Questions:

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A debt instrument is a tool that can be utilized by an individual, government, or business entity to raise capital. For example, a corporation can borrow money from lending institutions by using promissory notes. Similarly, the government can also borrow money from the public through investment products such as treasury bills and more. Citibank offers a wide range of debt instruments that you can check out if you want to raise your capital by investing in debt instruments. Some of the common ones are bonds, money market instruments, fixed maturity plans, monthly income plans, and more. Debt instruments are also usually long-term instruments. As a result, the interest associated tends to be higher than term deposits.

Check some of the options below to get assistance on how to invest in stocks:

  • Via Online Brokers

    There are two types of online brokers - full-service brokers and discount brokers. Full-service brokers give you a wide range of brokerage services and even financial advice. Such brokers often deal with high-net-worth clients. Discount brokers, on the other hand, offer you the tools to select and carry out your transactions. You do not require a minimum deposit amount in your account to get the services of a discount broker.

  • Via Robo-Advisors

    They are digital platforms that offer investment services that are automated and driven by algorithms. This is ideal if you want algorithms to make your investment decisions.

  • Via Your Employer

    You can check out the work-based retirement plans that are available and try to invest a small percent of your salary into one each month.

Check the ways below to learn how to invest in funds:

  • Know your goals and risk tolerance

    Before you start investing, the first thing that you should do is to know your goals for investing. For example, you must ask yourself whether you want to invest to ensure a comfortable retirement life or you want to invest in a short-term plan to pay your college fees. Once you identify your goal, you will be able to select a fund that meets your needs. You must also consider your ability to tolerate risks. Mutual funds are subjected to market fluctuations, and so the risks and returns are directly proportional to each other. If you are not ready to accept the risks, then you can invest in conservative investment products.

  • Type of Fund

    If you want to invest to meet a long-term goal, then you can invest in a long-term fund. Similarly, if you want a current income from your portfolio then you can invest in income funds such as bonds.

  • Fees

    Investors must pay a certain amount of fees to mutual fund companies. As a result, you must understand the charges associated with the investment before buying.

    Apart from the above, you must also decide whether you want a passively or actively managed mutual fund, the size of the fund, and so on.


Investments are not deposits or obligations of, or guaranteed or insured by, Citibank®, N.A., Citicorp or any of their affiliates or by any local government or insurance agency and are subject to investment risks, including the possible loss of the principal amount invested. Past performance is not indicative of future performance, prices can go up or down. Investors investing in instruments denominated in non-local currency should be aware of the risk of exchange rate fluctuations that may cause a loss in principal. Investments are available only to investors who are neither citizens, residents, nor green card holders of the United States.

For any concerns, you may contact us at (632) 8995-9999 or send us a message here or e-mail us here. CFSI is regulated by the Securities and Exchange Commission with telephone number 8584-1119 and Insurance Commission with telephone number 8523-8461.