Navigating the world of investment strategies

Investors adopt different investment strategies, just as the heroes in Wuxia (Chinese warrior) novels employ different combat styles. Each strategy has its own unique strengths; the question is, how can the strategy be executed effectively?

Yield Chaser

Goal: To obtain interest returns as a main source of income. Regardless of market conditions, yield-chasing investors pursue a stable and regular stream of investment returns as their ultimate investment goal. In the prevailing low-interest-rate environment, interest-bearing assets become these investors' favourite choices.


  1. High-dividend stock: Conventional wisdom tells us that utilities and telecommunication stocks tend to offer stable dividends, while Real Estate Investment Trusts (REITs) are safe bets for rental income. However, the risks involved in high-dividend stocks cannot be overlooked. As with all kinds of stock investments, high-dividend stocks are subject to the risk of price fluctuations, too.< /p>

  2. High-dividend stock fund/high-yield bond fund: High-dividend stock funds primarily invest in interest-bearing assets, such as stocks with high-dividend payouts. This kind of fund usually distributes interest quarterly or even monthly, making them more suitable for investors seeking regular cash flow. Another type of mutual fund with attractive interest income is the high-yield bond fund. This kind of fund mainly invests in high-yield or emerging market bonds. Similar to high-dividend stocks, high-yield and emerging market bonds are subject to the risks of price fluctuations, and their default rates are higher than investment grade bonds in general. Investors should understand the risks before investing.

Growth Seeker

Goal: Capital appreciation as the major objective. Growth seekers emphasise asset price appreciations, that is, to grow the capital portion of their investments.


  1. Growth stocks: Companies in emerging industries or industries in upward cycles have higher potential for growth and these stocks are wildly popular among growth-seeking investors.

  2. Growth fund: This kind of fund commonly invests in stock markets with high economic growth (such as Asia) or industries with high growth potential. Growth funds aim to obtain a relatively higher investment return for investors.

  3. Derivatives such as Callable Bull/Bear Contracts (CBBC) and options: Derivatives allow investors with limited capital to amplify returns by using leverage. However, investors may have to face larger investment risks, too.

The Conservative Party

Goal: To obtain stable returns.

Conservative investors are not after overnight big windfalls, but low-risk, sustainable and stable returns.


  1. Fixed deposits: Investors can recapture the principal and earn interest when the fixed deposit matures. Fixed deposits also pay higher rates of interest than current accounts.

  2. Certificate of Deposit: Certificates of deposit issued by banks usually offer an interest return higher than fixed deposits, thus it is a popular product among conservative investors.

  3. Sovereign bonds: Sovereign bonds issued by developed economies such as the US, Japan and Hong Kong (for example, iBond) generally entail lower default rates. They are popular investment options in every conservative investor's toolkit.

Different Investment strategies, different strengths

Which strategy performs better? There is no straight answer to this question as their performances greatly depend on the prevailing market situation. The most important takeaway for investors is that they should understand their own needs, wealth management capabilities and risk tolerance in order to select the suitable investment strategy.

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Important Risk Warning

  • Some of the investment products are structured products which may involve derivatives. The investment decision is yours but you should not invest unless the intermediary who sells it to you has explained to you that the product is suitable for you having regard to your financial situation, investment experience and investment objectives.
  • The price of securities/structured products may move up or down. Losses may be incurred as well as profits made as a result of buying and selling securities/structured products.
  • In the worst case scenario, the value of the Unit Trusts (UT) may be worth substantially less than the original amount you have invested (and in an extreme case could be worth nothing).
  • Margin FX trading is a leveraged foreign exchange investment product which involves a high degree of risk and is only suitable for customers who are of adventurous or speculative risk attitude.
  • Investors should not make investment decision based on this material alone.
  • Investment involves risk and past performance is not indicative of future performance. Please refer to the offering documents for further details, including fees and charges and risk factors.
  • Issuer's Risk – you rely on the issuer's creditworthiness. Bonds/Certificates of Deposit (CDs)/structured products are subject to both the actual and perceived measures of creditworthiness of the issuer. There is no assurance of protection against a default by the issuer in respect of the repayment obligations. In the worst case scenario (eg insolvency of the issuer), you might not be able to recover the principal and interest/coupon, if applicable, and the potential maximum loss could be 100% of invested amount and no interest/coupon received.
  • Currency conversion risk – the value of your foreign currency and RMB deposit will be subject to the risk of exchange rate fluctuation. If you choose to convert your foreign currency and RMB deposit to other currencies at an exchange rate that is less favourable than the exchange rate in which you made your original conversion to that foreign currency and RMB, you may suffer loss in principal.
  • RMB denominated products are subject to liquidity risk as there may be no regular trading and active secondary market for RMB Income Instruments. The bid and offer spread of the price of RMB Income Instruments may be large, so investors may incur significant trading and realisation costs and may suffer losses accordingly.

Additional risks are disclosed in the "Risk Disclosure" section. Please refer to "Risk Disclosure" section for details.

Bonds/CDs/Deposit Plus (DPS)/Capital Protected Investment Deposit (CPI)/Equity linked investments (ELI) and UT are not equivalent to time deposits. DPS/CPI/ELI/CDs are not protected deposits, and they are NOT protected by the Deposit Protection Scheme in Hong Kong. DPS/ELI are not principal protected.

Risk Disclosure

Bonds and Certificate of Deposits (CDs) Risk Disclosure

  • Bonds and CDs are mainly for medium to long term investment, not for short term speculation. You should be prepared to invest your funds in bonds/CDs for the full investment tenor; you could lose part or all of your investment if you choose to sell bonds/CDs prior to maturity.
  • It is the issuer to pay interest and repay principal of bonds/CDs. If the issuer defaults, the holder of bonds/CDs may not be able to receive back the interest and principal. The holder of bonds/CDs bears the credit risk of the issuer and has no recourse to HSBC unless HSBC is the issuer itself.
  • Indicative price of bonds/CDs are available and bond/CDs price do fluctuate when market changes. Factors affecting market price of bonds/CDs include, and are not limited to, fluctuations in Interest Rates, Credit Spreads, and Liquidity Premiums. The fluctuation in yield generally has a greater effect on prices of longer tenor bonds/CDs. There is an inherent risk that losses may be incurred rather than profit made as a result of buying and selling bonds/CDs.
  • If you wish to sell Bonds/CDs, the Bank may repurchase it based on the prevailing market price under normal market circumstances, but the selling price may differ from the original buying price due to changes in market conditions.
  • There may be exchange rate risks if you choose to convert payments made on bonds/CDs to your home currency.
  • The secondary market for bonds/CDs may not provide significant liquidity or may trade at prices based on the prevailing market conditions and may not be in line with the expectations of holders of bonds/CDs.
  • If bonds/CDs are early redeemed, you may not be able to enjoy the same rates of return when you re-invest the funds in other investments.

Renminbi related products Risk Disclosure

  • There may be exchange rate risks if you choose to convert payments made on securities/bonds/CDs to your home currency.
  • RMB products may suffer significant losses in liquidating the underlying investments if such investments do not have an active secondary market and their prices have large bid/offer spreads.
  • In general, RMB equity products are exposed to the usual kind of default risks that might be associated with equity products denominated in other currencies.
  • CPI (if denominated in RMB) will be denominated and settled in RMB deliverable in Hong Kong, which is different from that of RMB deliverable in Mainland China.

China A Shares Risk Disclosure

  • Investment in China A Shares through Shanghai-Hong Kong Stock Connect involves risks. You should carefully consider whether any investment products or services mentioned herein are appropriate for you in view of your investment experience, objectives, financial resources and relevant circumstances. The price of securities may move up or down. Losses may be incurred and profits may be made as a result of buying and selling securities.

Foreign Exchange Risk Disclosure

  • Currency conversion risk – the value of your foreign currency and RMB deposit will be subject to the risk of exchange rate fluctuation. If you choose to convert your foreign currency and RMB deposit to other currencies at an exchange rate that is less favourable than the exchange rate in which you made your original conversion to foreign currency and RMB deposit, you may suffer loss in principal.

Margin FX Risk Disclosure

  • Risk of trading in leveraged foreign exchange contracts – The risk of loss in leveraged foreign exchange trading can be substantial. You may sustain losses in excess of your initial margin funds. Placing contingent orders, such as "stop-loss" or "stop-limit" orders, will not necessarily limit losses to the intended amounts. Market conditions may make it impossible to execute such orders. You may be called upon at short notice to deposit additional margin funds. If the required funds are not provided within the prescribed time, your position may be liquidated. You will remain liable for any resulting deficit in your account. You should therefore carefully consider whether such trading is suitable in light of your own financial position and investment objectives.

DPS and CPI Risk Disclosure

  • Deposit Plus (DPS) and Structured Investment Deposit are not available for persons who are US citizen / with US nationality, are US resident or US tax payer, or have a US address (eg primary mailing, residence or business address in the US).
  • Credit risk of the Bank – DPS and Capital Protected Investment Deposit (CPI) are not secured by any collateral. When you invest in these products, you will be relying on the Bank's creditworthiness. If the Bank becomes insolvent or defaults on its obligations under these products, you can only claim as an unsecured creditor of the Bank. In the worst case, you could suffer a total loss of your deposit amount.
  • Maximum potential loss – DPS is not principal protected. You must be prepared to incur loss as a result of depreciation in the value of the currency paid (if the deposit is converted to the linked currency at maturity). Such loss may offset the interest earned on the deposit and may even result in losses in the principal amount of the deposit.
  • Market risk – The return of CPI will depend upon the exchange rates of currency pair against trigger rate at the fixing time on the fixing date. Movements in exchange rates can be unpredictable, sudden and drastic, and affected by complex political and economic factors. You must be prepared to take the risk of earning the lower payout/no return (if exchange rate performs against expectation) on the money invested.
  • Risk of early termination by the Bank – The Bank shall have the discretion to uplift a Deposit or any part thereof prior to the Maturity Date (subject to the deduction of such break costs or the addition of such proportion of the return or redemption amount, which may result in a figure less than the original principal amount of the Deposit) if it determines, in its sole discretion, that this is necessary or appropriate to protect any right of the Bank to combine accounts or set-off, or any security interest, or to protect the customer's interests.
  • Risks relating to RMB – You should note that the value of RMB against other foreign currencies fluctuates and will be affected by, amongst other things, the PRC government's control (for example, the PRC government regulates conversion between RMB and foreign currencies), which may adversely affect your return under this product. In case you receive RMB as Linked Currency at maturity and you choose to convert your maturity proceed to other currencies, you may suffer loss in principal. This product will be denominated (if Deposit Currency being RMB) and settled (when receive RMB at maturity) in RMB deliverable in Hong Kong, which is different from that of RMB deliverable in Mainland China.

Equity Linked Investments Risk Disclosure

The following risks shoud be read together with the other risks contained in the "Risk Warnings section in the relevant offering documents of the ELIs

  • You should note that this material does NOT form part of the offering documents of our ELIs. You should read all the offering documents of our ELIs (including the programme memorandum, the financial disclosure document, the relevant product booklet and the indicative term sheet and any addendum to any of such documents) before deciding whether to invest in our ELIs. If you have doubt on the content of this material, you should seek independent professional advice.
  • Our ELIs are not listed on any stock exchange. There may not be any active or liquid secondary market.
  • Our ELIs are not principal protected: you could lose all of your investment.
  • Our ELIs constitute general, unsecured and unsubordinated contractual obligations of HSBC as issuer and of no other person (including the ultimate holding company of our group, HSBC Holdings plc). When you buy our ELIs, you will relying on HSBC's creditworthiness. If HSBC becomes insolvent or defaults on its obligations under the ELIs, in the worst case scenario, you could lose all of your investment.
  • Investing in ELIs is not the same as investing in their reference assets. The potential return in relation to an ELI will depend upon the performance of the reference asset on the relevant valuation date. Changes in the market price of the reference asset may not lead to a corresponding change in the market value of, or you potential payout under, the ELIs.
  • You may, at settlement, receive physical delivery of reference asset(s).
  • Our ELIs may be terminated early by us according to the terms as set out in offering documents our ELIs.
  • Our ELIs are not secured on any of our assets or any collateral.
  • Our ELIs are structured investment products which are embedded with derivatives.
  • Our ELIs are not covered by the Investor Compensation Fund.
  • Investment returns (if any) not denominated in home currency are exposed to exchange rate fluctuations. Rates of exchange may cause the value of investments to go up or down.

Unit Trusts Risk Disclosure

  • The information contained in this material relating to the Funds and Unit Trusts Offer does not constitute an offer for the purchase or sale of any investment products.
  • You should carefully consider whether any investment products or services mentioned herein are appropriate for you in view of your investment experience, objectives, financial resources and circumstances.
  • The information contained in this material and the content relating to the Funds and Unit Trusts Offer have not been reviewed by the Securities and Futures Commission of Hong Kong or any regulatory authority in Hong Kong.
  • Funds which are invested in certain markets and companies (e.g. emerging, commodity markets and smaller companies etc) may also involve a higher degree of risk and are usually more sensitive to price movements.
  • Credit Risk/Interest Rate Risk – a fund that invests in fixed income securities may fall in value if interest rates change, and is subject to the credit risk that issuers may not make payments on such securities. Price of the fund may have a high volatility due to investment in financial derivative instruments and may involve a greater degree of risk than in the case with conventional securities.
  • Counterparty Risk – a fund will be exposed to credit risk on the counterparties with which it trades in relation to financial derivative instrument contracts that are not traded on a recognised exchange. Such instruments are not afforded the same protections as may apply to participants trading financial derivative instruments on organised exchanges, such as the performance guarantee of an exchange clearing house. A fund will be subject to the possibility of insolvency, bankruptcy or default of a counter party.

Risks associated with the MRF arrangement

  • Quota restrictions: The Mainland-Hong Kong Mutual Recognition of Funds (MRF) scheme is subject to an overall quota restriction. Subscription of units in the Fund may be suspended at any time if such quota is used up.
  • Failure to meet eligibility requirements: If the Fund ceases to meet any of the eligibility requirements under the MRF, it may not be allowed to accept new subscriptions. In the worst scenario, the SFC may even withdraw its authorisation for the Fund to be publicly offered in Hong Kong for breach of eligibility requirements. There is no assurance that the Fund can satisfy these requirements on a continuous basis.
  • Mainland China tax risk: Currently, certain tax concessions and exemptions are available to the Fund and/or its investors under the MRF regime. There is no assurance that such concessions and exemptions or Mainland tax laws and regulations will not change. Any change to the existing concessions and exemptions as well as the relevant laws and regulations may adversely affect the Fund and/or its investors and they may suffer substantial losses as a result.
  • Different market practices: Market practices in the Mainland China and Hong Kong may be different. In addition, operational arrangements of the Fund and other public funds offered in Hong Kong may be different in certain ways. For example, subscriptions or redemptionredemptions of units may only be processed on a day when both Mainland and Hong kong markets are open, or it may have different cut-off times or dealing day arrangements versus other SFC-authorised funds. Investors should understand these differences and their implications.
  • Concentration risk / Mainland China market risk: The Fund invests primarily in securities related to the Mainland China market and may be subject to additional concentration risk. Investing in the Mainland China market may give rise to different risks including political, policy, tax, economic, foreign exchange, legal, regulatory and liquidity risks.
  • RMB currency and conversion risks: RMB is currently not freely convertible and is subject to exchange controls and restrictions. Non-RMB based investors are exposed to foreign exchange risk and there is no guarantee that the value of RMB against the investors' base currencies (for example HKD) will not depreciate. Any depreciation of RMB could adversely affect the value of investor's investment in the Fund. Investors may not receive RMB upon redemption of investments and/or dividend payment or such payment may be delayed due to the exchange controls and restrictions applicable to RMB.

Mainland China Equity risk

  • Market risk: The Fund's investment in equity securities is subject to general market risks, whose value may fluctuate due to various factors, such as changes in investment sentiment, political and economic conditions and issuer-specific factors.
  • Volatility risk: High market volatility and potential settlement difficulties in the Mainland China equity markets may also result in significant fluctuations in the prices of the securities traded on such markets and thereby may adversely affect the value of the Fund.
  • Policy risk: Securities exchanges in Mainland China typically have the right to suspend or limit trading in any security traded on the relevant exchange. The government or the regulators may also implement policies that may affect the financial markets. All these may have a negative impact on the Fund.
  • High stock valuation risk: The stocks listed on the Mainland China stock exchanges may have a higher price-earnings ratio; and such high valuation may not be sustainable and stock prices may fall drastically.
  • Liquidity risk: Securities markets in Mainland China may be less liquid than other developed markets. The Fund may suffer substantial losses if it is not able to dispose of investments at a time it desires.

Risk associated with small-capitalisation/mid-capitalisation companies

  • The stock of small-capitalisaction/mid-capitalisation companies may have lower liquidity and their prices are more volatile to adverse economic developments than those of larger capitalisation companies in general.

Risk associated with ChiNext market

  • Differences in regulations: The rules and regulations regarding securities in the ChiNext market are less stringent in terms of profitability and share capital than those in the main board market.
  • Emerging nature of ChiNext companies: Given the emerging nature of companies listed on the ChiNext market, there is a risk that the securities traded on ChiNext market may be susceptible to higher market volatility compared to securities traded on the main board market.
  • Higher fluctuation on stock prices: Listed companies in the ChiNext market are usually in their preliminary stage of development having a smaller scale and shorter operating history and their stability and resistance to market risks may be lower. Hence, they are subject to higher fluctuation in stock prices as the performance of these companies changes. They are subject to higher risks and higher turnover ratios than companies listed on the main board.
  • Delisting risk: The companies listed on the ChiNext market are generally less resistant to market risks and may experience more fluctuations in their performance. It may be more common and faster for listed companies in the ChiNext market than companies listed on main board and SME board to delist. This may have an adverse impact on the Fund if the companies that it invests in are delisted.
  • Valuation risk: Conventional valuation methods may not be entirely applicable to companies listed in the ChiNext market. There are fewer circulating shares in the ChiNext market as such stock prices may be more susceptible to manipulation and may experience higher fluctuation upon market speculation. Stocks traded on the ChiNext market may be overvalued and such high valuation may not be sustainable.

Mainland debt securities risks

  • Volatility and liquidity risks: The Mainland debt securities markets may be subject to higher volatility and lower liquidity compared to more developed markets. The prices of securities traded in such markets may be subject to fluctuations.
  • Counterparty risk: The Fund is exposed to the credit/default risk of issuers of the debt securities that the Fund may invest in.
  • Interest rate risk: Investment in the Fund is subject to interest rate risk. In general, the prices of debt securities rise when interest rates fall, whilst their prices fall when interest rates rise. The Fund is exposed to additional policy risk of potential adjustment by the government to the interbank deposit rate.
  • Downgrading risk: The credit rating of a debt instrument or its issuer may be downgraded subsequent to investment by the Fund. In the event of such downgrading, the value of the Fund may be adversely affected. The Manager may or may not be able to dispose of the debt instruments that are being downgraded.
  • Credit rating agency risk: The credit appraisal system in the Mainland and the rating methodologies employed in the Mainland may be different from those employed in other markets. Credit ratings given by Mainland rating agencies may therefore not be directly comparable with those given by other international rating agencies.
  • Risk associated with urban investment bonds: The Fund may invest in urban investment bonds. Urban investment bonds are issued by local government financing vehicles ("LGFVs"), such bonds are typically not guaranteed by local governments or the central government of the Mainland. In the even that the LGFVs default on payment of principal or interest of the urban investment bonds, the Fund could suffer substantial loss and the net asset value of the Fund could be adversely affected.
  • Risk associated with asset-backed securities: The Fund may invest in asset-backed securities (including asset-backed commercial papers). Asset-backed securities may be highly illiquid and prone to substantial price volatility. These instruments may be subject to greater credit, liquidity and interest rate risk compared to other debt securities. They are often exposed to extension and prepayment risks and risks that the payment oligations relating to the underlying assets are not met, which may adversely impact the returns of the securities.
  • Risk associated with debt securities which are rated BB+ or below by a Mainland credit rating agency or unrated: The Fund may invest in debt securities rated BB+ or below by a Mainland credit rating agency or unrated. Such securities are generally subject to lower liquidity, higher volatility and greater risk of loss of principal and interest than high-rated debt securities.

Risks associated with repurchase and reverse repurchase transactions

  • The Manager may enter into repurchase and reverse repurchase transactions for the account of the Fund on the Mainland stock exchanges or in the interbank market.
  • The collateral pledged under the reverse repurchase transactions in the interbank market may not be marked-to-market. In addition, the Fund may suffer substantial loss when engaging in reverse repurchase transactions as there may be delay and difficulties in recovering cash placed out or realizing the collateral, or proceeds from the sale of the collateral may be less than the cash placed with the counterparty due to inadequate valuation of the collateral and market movements upon default of the counterparty.
  • For repurchase transactions, the Fund may suffer substantial loss as there may be delay and difficulties in recoving collateral pledged with the counterparty or the cash originally received may be less than the collateral pledged due to inadequate valuation of the collateral and market movement upon default of the counterparty.
  • Distribution out of capital risk: Investors should note that the payment of distributions out of capital represents a return or a withdrawal of part of the amount they originally invested or capital gain attributable to that amount. Any distributions involving payment of dividends out of capital of the share class will result in an immediate decrease in the NAV per unit of the relevant units.

The Hongkong and Shanghai Banking Corporation Limited is the issuer and product arranger of our ELIs.

The information contained in this material have not been reviewed by the Securities and Futures Commission of Hong Kong or any regulatory authority in Hong Kong.

Investment involves risk. The price of the investment products may move up or down. Losses may be incurred as well as profits made as a result of buying and selling investment products.

You should carefully consider whether any investment products or services mentioned herein are appropriate for you in view of your investment experience, objectives, financial resources and circumstances.

Making available to you any advertisements, marketing or promotional materials, market information or other information relating to a product or service shall not, by itself, constitute solicitation of the sale or recommendation of any product or service. If you wish to receive solicitation or recommendation from us, please contact us and, where relevant, go through our suitability assessment before transacting.