Mon | Dec 5, 2016

Investment concerns at middle age

Published:Sunday | October 5, 2014 | 12:00 AM

Oran Hall, Personal Financial Advisor

QUESTION: I trust you are well. I read your column most Sundays and find them very interesting and informative. I have been wanting to write to you to get personal advice for some time now but have not found the time before today.
I am a middle-aged person and I have managed to save some funds and am now looking for investment options. I have been doing some things but I fear I don't know enough to maximise what I have. I am not sure whether to buy stocks or invest in government paper, etc. Recently, I converted a lot of my savings to US dollars but don't know if I have invested them smartly either. I would appreciate your help and advice.

- L. Wade

FINANCIAL ADVISER: From what you have said, it does not seem that you have engaged the services of an investment professional to advise you. If that is the case, the first action you need to take is to seek good professional help.

You clearly have done some things right: you have saved, then moved from savings to investment and have included some foreign currency in your portfolio. You are now contemplating whether to buy stocks or government securities.

You should realise that you need a diversified portfolio. The basic instruments readily available in our market are stocks, unit trusts, mutual funds and fixed income securities - long-term and short-term. There are also opportunities to invest in securities denominated in Jamaican dollars and in foreign currencies. But investment dealers do have other less well-known options available.

So your question should not be whether to buy stocks or government securities; there should be a place for both in a balanced portfolio.

The truth is, the make-up of your portfolio ultimately will be determined by what you want to achieve, your capacity and willingness to take risk, your knowledge of the markets and your ability to attend to your investments.

It seems that you do have some knowledge of some of the instruments available but it is advisable to develop and widen your knowledge and understanding of the market so that you can make more appropriate decisions. In fact, even if you should opt to leave much of the control of your portfolio in the hands of others, it makes sense to have a reasonable knowledge of the market. The better equipped you are to ask good questions, the better your chances of having a portfolio that is suitable for you.

It is challenging to comment on your portfolio in the absence of knowledge about it. Knowing your age would also be helpful in having some idea about the strategies that could be taken. I doubt that there is any investment instrument that is unsuitable for persons of a particular age.

PROFESSIONAL GUIDANCE

What is of the highest importance is what portion of your resources is invested in particular instruments. For example, stocks provide a good hedge against inflation but that portion of your portfolio should be reduced as you get nearer to retirement.

Professional guidance is important for many reasons. For example, because not all securities of the same type are of the same quality, it is helpful to know what is good and what is not. Timing is also important and this can be achieved - not necessarily with perfection - with professional guidance.

You mentioned converting to foreign currency. How good that move was depends on when it was done. It is also possible that the conversion could have been done more effectively by using a medium other than the one you chose.

The advice I give, though generally acknowledged as helpful, is limited in the sense that it is based on the often limited information presented by my readers. To give more specific advice would require more detailed information and a more rigorous examination and analysis of each case.

I would not even suggest that your case is bad or beyond repair. In fact, I do not believe it is. My advice is that you sit with a qualified and competent investment adviser and discuss what you want and when, so that a programme can be worked out to get you to where you want to be - and be patient.

May abundant success be yours.

Oran A. Hall, a member of the Caribbean Financial Planning Association and principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel. Email finviser.jm@gmail.com.