• What is an Investment? 
  • Thinking of investing? 
  • Are you ready to invest?
  • Are you investing wisely?
  • What to avoid when investing?
  • Seeking financial or investment advice?
  • Save and spend wisely
  • What are the different types of investments?
  • Cash Investments
  • Takaful / Insurance
  • Employee Provident Fund
  • Equity Investments
  • Collective Investment Schemes
  • Debentures and Fixed Income Investments

What is an Investment?

Investment is putting in your time, effort and assets or money to get returns or rewards. For example, you invest in time at the gym to get fit or you invest effort in studying to get good grades. Likewise, you invest money in financial products to get a profitable return. But REMEMBER! It is not without its RISKS! If you do not plan and do it wisely and carefully, you may suffer losses and not get what you want out of it. Take the time to plan and do your homework properly before you invest.

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Are you ready to invest?

If you are not sure whether you are ready to invest, here are some questions you can use to ask yourself:

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You may consult a licensed financial planner or investment adviser if you feel you need help answering any of the above questions.

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Are you investing wisely?

Here are some tips on how you can ensure that you are investing wisely:

  • Spend less than what you earn: The wider the gap between your earning and spending, the more financially successful you get. The only thing between you and your wealth is your willingness to spend wisely.
  • Know where your money goes: Keep track of your spending and investment performance. Keeping records will help you if you need to make changes to your investment portfolio.
  • Avoid impulse buying: You need to analyse and evaluate facts and figures. Do not let emotions drive your investment decisions.
  • Identify your level of risk tolerance: Know your risk tolerance limit. Don't just consider the prospect of gaining more money, but also losing it all as well.
  • Verify your information: To invest wisely, ensure that the facts are from reliable sources. Unreliable facts can drag you towards making expensive mistakes.

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What to avoid when investing?

You want to reap benefits from your investment/s in hopes that it can bring a better future for you or your family, and you also do not want to fall for things that may lead to you losing your investments entirely. Below are things to avoid when investing:

  • Avoid investing in products that you do not understand and do not know what the risks are.
  • Avoid investing in a company that offers "special deals" and promises big returns if you act quickly.
  • Avoid putting all your money in one type of investment.
  • Avoid assuming that your investments are always performing well. Be sure you are updated regularly on the performance of your investments.
  • Avoid investing if you are unsure and have doubts about the investment.
  • Avoid borrowing to invest when you still have trouble paying your current debts.

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Seeking financial or investment advice?

In setting up a financial plan or investment plan, you may wish to seek professional advice. Consider these tips:

  • Speak to a qualified adviser rather than solely relying on advice from family members, friends or colleagues, unless they are qualified to do so.
  • A qualified and licensed adviser should consider your objectives, financial situation and needs. The adviser should then recommend strategies or discuss financial products that suits your profile and risk appetite.
  • Take the time to discuss plans with your adviser and ask as many questions as possible. Good advice from an experienced and well-informed adviser can help you save money and become more financially-secure.
  • Remember that providing advice as an investment adviser or a financial planner is a regulated activity. So be sure that your adviser is properly licensed before engaging with one.

Ensure that the investment adviser and the financial planner holds a Capital Markets Services Licence or a Capital Markets Services Representative's Licence. You may refer to the List of AMBD Licensees.

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Save and Spend Wisely

Tips and tricks to spending and saving your money wisely:

  • Do not spend more than what you earn.
  • Always pay your credit card and bills on time to avoid late penalties. If possible, pay the full amount and be debt-free.
  • Build your assets through investments or insurance.
  • Only spend on necessary items.
  • Set up a limit for splurges.
  • List out and prioritise your expenses.
  • Save for 'rainy days'.
  • Use coupons or reward points. Privilege and member cards may entitle you to discount benefits.
  • Learn to budget –and stick to it.
  • Learn the characteristics of financial scams to avoid it.

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What are the different types of investments?

Wondering what should you invest in, and what is available in the market?

There are different types of investments available in the financial market. You may invest in one particular product or have a mixture of different investments. The types of investment you want should depend on your risk tolerance. Remember to ensure that the product is licensed and registered before you invest. Here are examples of the types of investment available:

  • Cash investments

A cash investment simply means savings, or depositing your money into a bank's savings account. Having a saving account will allow you to 'grow' your money when you save consistently. 

  • Insurance/ Takaful

    Insurance and Takaful products are the types of investments that give you coverage in times of emergencies or unexpected events. It is recommended for you to buy insurance or Takaful to protect yourself from unexpected financial difficulties.
     
  • Employee Provident Fund (i.e. TAP/ SCP)

The Employee Provident Fund is an investment for people who are employed. It is mandatory for the employer to contribute a percentage to the fund for the wellbeing of the employee when he or she retires. You could also consider voluntarily increasing your contribution to the fund which will increase the money you will receive. Please visit the TAP website for more information.

Other common investments include equity investments, collective investment schemes, debentures and fixed income investments.

  • Equity Investments

An equity investment means buying and holding shares of companies that are offered to the public, to gain income from dividends and capital gains when the value of stock rises. 

  • Collective Investment Schemes (CIS)

    A CIS is made up of a pool of funds collected from many investors for the purpose of investing in a combination or portfolio of securities, such as stocks, bonds and money market instruments. This gives investors the opportunity to invest in various securities, which may give better returns depending on market conditions.
     
  • Debentures and Fixed Income Investments

Debentures and fixed income investments are both debt instruments. This simply means investors gives out a loan to a company or the government, for the purpose of raising capital to expand or carry out developmental projects. In return, investors get repayment with some profit (or interest for conventional debentures and fixed income) after a project is complete. Common examples are bonds, Treasury bills and sukuk.

Be mindful that these types of investments may carry more risk, so be sure you understand the product before you invest and monitor its performance in the market regularly.

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Cash investments

Cash investments are any investments that have high liquidity with a clearly stated interest rate attached to it. They generally offer a low rate of return compared to other types of investments. However, they are also associated with very low levels of risk. You can be sure to get your principal back at the end of the period. Examples of cash investments in conventional banks are Savings Accounts, Fixed Deposits, and Certificates of Deposit.

Cash investments are also available in Islamic banks. Instead of receiving interest, the return will be in the form of profit (e.g through a Wakalah contract) and hibah (e.g. through a Wadiah Yad Dhamanah contract). Examples of cash investments in Islamic banks are Savings Accounts, Term Deposits with the Syariah concepts of Wakalah or Wadiah Yad Dhamanah.

Cash investments are also a good idea if you have not yet decided where or what you want to invest in. You can keep your money in cash investments while making your decision. You may not get as much return for this type of investment but you can be sure that your money is safe.

Wakalah (Agency): A contract of agency is where the depositor gives permission to the bank to act on his or her behalf, for example to invest into Syariah-compliant investments.

Wadiah Yad Dhamanah (Guaranteed Safe Custody): This is a safekeeping contract which is based on guarantee, where the bank is entitled to use the deposit for trading or any purposes which are Syariah-compliant, with an obligation to return the capital to the depositor.

Islamic finance: Islamic finance broadly refers to financial transactions, operations and services that are based on the principles of Syariah. It is free from interest, uncertainty, gambling, and unlawful goods and services. Muslims and non-Muslims can enjoy the benefits of Islamic finance.

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Takaful / Insurance

In life, there are always risks that things may go wrong. And if it happens, you may need money to meet any incurring costs. Takaful and insurance can provide assistance in meeting your unexpected losses, either by compensation (e.g. reimbursing your medical bills), or reinstatement (e.g. restoring your burnt house). Takaful and insurance can also assist you when you travel abroad and lose your luggage, or fall seriously ill. Therefore, with Takaful/ Insurance you can avoid chaos in your finances and would be able to avoid the risk of having to face those costs yourself.

Takaful and insurance are basically contracts that come in two types:

  1. General Takaful or insurance – Covers properties such as your motor vehicles, house, business, employees and money. Policies include Motor Takaful or insurance, Fire Takaful or insurance, and others.
  2. Family Takaful or life insurance – Helps you to plan your finances for retirement, savings and investment, and protection of your loved ones. Policies include Whole Life insurance, Individual Family Takaful, and others.

Takaful provides financial protection based on Syariah principles by sharing risks between participants while insurance works on the principle of transferring your risks to the insurance company.

Takaful operators in Brunei Darussalam mainly use Mudharabah and Wakalah models for both general and family Takaful.

Wakalah: The Takaful operator acts as an agent (Wakil) of the participant to manage the Takaful fund.

Mudharabah: A contract of profit sharing between Takaful operator and participant.

Aside from seeking protection, you may start to think about investing. There is also an insurance product or plan that combine insurance protection with investment element. This product is widely known as investment-linked insurance policies (ILPs). ILPs requires you to pay premiums either regularly or in one lump sum which are used partially to provide Takaful or insurance coverage, while the remaining part are typically invested into Collective Investment Schemes (CIS) of your choice.

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Employee Provident Fund (TAP / SCP)

An employee provident fund is a retirement benefit for salaried employees, in which both employee and employer each contributes an amount every month according to a pre-set rate.

In Brunei Darussalam, this fund is under the administration of the Employees Trust Fund, also known as Tabung Amanah Pekerja (TAP). It is a savings platform to help employees save a portion of their monthly salary towards their retirement fund. TAP administers two mandatory schemes; the TAP scheme and the Supplemental Contributory Pension (SCP) scheme under the Tabung Amanah Pekerja Board Order, 2016.

All employees in the public and the private sectors who are citizens and permanent residents of Brunei Darussalam under the age of 55 are required to contribute to the TAP scheme. An employee shall contribute 5% of his/ her monthly salary to the scheme and an additional 5% shall be contributed by the employer.

The SCP scheme, on the other hand, is a supplementary scheme established under the Supplemental Contributory Pension Trust Order, 2009. The scheme is mandatory for citizens and permanent residents of the country aged between 18 to 60 years old working in the public and the private sectors. In this scheme, 3.5% of the salary shall be contributed by the employee and an additional 3.5% shall be contributed by his employer. The minimum monthly contribution amount for the SCP scheme is B$35.00, whereas the maximum amount is B$98.00.

Individuals who are self-employed are also encouraged to participate in the SCP scheme. They only need to make a minimum contribution amount of B$17.50 to their SCP account, ensuring the minimum contribution of B$35.00 per month is met.

Voluntary contribution

TAP and SCP members are encouraged to make voluntary contributions to their savings to increase their retirement fund. There is no maximum amount for voluntary contributions. Contributions can be made more than once per month.

* Please visit the TAP website for more information.

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Equity Investments

What are shares? Companies need money to start or grow their business. One way of raising money is by issuing shares and selling them to investors through an initial public offering (IPO). Once issued they may be traded on the stock market.

What happens when you invest in shares? An investor would typically go to a licensed dealer to buy shares of a company on a stock exchange. This makes the investor a part owner of the company or a shareholder.

How can you make money / benefit from investing in shares? When a company makes a profit, it may keep the profits as retained earnings or pay it out to shareholders as dividends. Shareholders can also make money when the value or the price of the shares rise.

What are the risks? If the value or price of the share falls, there is no guarantee that investors will get their money back. If a company fails, shareholders may lose most or all of their investment. However, they are not responsible for the company's debts.

How can you know if a share is Syariah-compliant? To determine whether a share is Syariah-compliant or not, the licensed dealer or stock exchange will carry out a Syariah screening process on the company. They will indicate whether a company is Syariah-compliant or not.

Syariah-compliant shares refers to shares of a company whose business activities are carried out in accordance to Islamic principles. E.g. no sales of pork, alcohol or firearms.

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Collective Investment Schemes (CIS)

What is a CIS? CIS is also commonly known as a mutual fund or unit trust. A CIS is a professionally managed investment scheme, run by a licensed fund management company that rings together a collective group of investors and invests their money in stocks, bonds and other assets/ securities.

What are the benefits?

  • Affordability
  • Diversification
  • Liquidity
  • Professional management

What are the types of CIS? There are many types of CIS, depending on what assets or securities the CIS invests into.

There are also active CIS (proactively managed by a manager) or passive CIS (follows the performance of an index). Some CIS are also listed and traded on a stock exchange.

  • Equity fund                        
  • Balanced Fund                 
  • Fixed Income Fund                         
  • Money Market Fund

How to choose a CIS to invest in? Consider the following:

  • Risk: Research the risks associated with the CIS, e.g. capabilities of the fund manager.
  • Time Horizon: Decide the time frame of your investment. This will affect the returns of the investment. 
  • Product Disclosure: Research information on the funds, e.g. fee charges usually found in the prospectus.
  • Performance: Research the market to identify the funds that perform well and their past performance.

Features of a Syariah-Compliant CIS:

  • Only invests into Syariah-compliant assets or securities.
  • Would typically have a Syariah adviser to ensure the investments are in accordance with Syariah principles.
  • Available for all investors including non-Muslims.

Where can I buy a CIS? CIS are distributed through financial institutions holding Capital Markets Services Licences. You can get a list of the licensed financial institutions in Brunei Darussalam on the List of AMBD Licensees.

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Debentures and Fixed Income Investments

What are bonds? A bond is basically a loan. When you buy a bond, you are lending money to the issuer of the bond. Bond holders typically receive regular interest payments, also known as coupons. This is normally a fixed amount which is set when the bond is first issued. At maturity or the end of the loan period, the amount that you originally lent will be returned.

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What are the different types of bonds?

  • Government bonds

These are issued by the government of a country, usually to raise money to finance its budget, develop infrastructure or to create a benchmark for corporates to price their bonds.

  • Corporate bonds

These are issued by companies, typically to raise funds for business expansion or projects. They offer higher interest rates as they are often viewed to be riskier than government bonds.

Why does the issuer matter? An investor must consider the credit rating of the bond. Credit rating refers to the bond issuer's ability to pay the coupons and repay its debts.

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  • ​High credit quality bonds with little chance of default (issuer not paying back the loan).
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  • ​Medium credit quality or investment grade.
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  • ​Low credit quality, also known as junk bonds and more likely to default.

Bond prices and interest rates have an inverse relationship. When interest rates fall, bond prices rise. When interest rates rise, bond prices fall.

Sukuk is an Islamic Investment Certificate that is an Islamic (Syariah-compliant) alternative to bonds. Sukuk grants the investor a share of an asset, along with the commensurate cash flows and risk. As such, Sukuk adheres to Syariah principles, which prohibit the charging or payment of interest.

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