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Financial Adviser | Interested in investing in mutual funds

Published:Sunday | December 6, 2015 | 12:00 AMOran Hall

QUESTION: I am interested in investing in a mutual fund in Jamaica. What would you say is the best one at the moment that will give me good returns? Is there any way I could get a side-by-side comparison of the currently available ones?

- Jannell

 

FINANCIAL ADVISER: It is natural to see the best-performing investment fund as the one that gives the highest returns. It does not necessarily mean, however, that the fund yielding the highest returns is the most suitable fund for an investor because the risk associated with it could be much more than the investor is willing to take.

The CI Funds and the Scotiabank Mutual Funds are readily available to Jamaican residents who can choose from at least 45 funds registered to be sold in the Jamaican market. The former may be sourced from several licensed securities dealers and the latter from Scotia Investments.

I do not know what your risk profile is, but I believe that there is sufficient variety to accommodate your risk profile and your profile, overall.

When we look at the Scotia funds, we see three growth funds: one Canadian, one US, and the other global. There is a US Dollar bond fund and there is a money market fund.

The CI Funds offer many more options. The 40 funds marketed here fit into five categories: income, Canadian equities, US equities, speciality equities, and global funds. You should not hesitate to buy more than one fund if that is what is required to meet your objectives.

The funds vary widely, so it is not likely that you will be able to compare them fairly. It is hardly fair to compare two funds that are structured differently to meet objectives that are dissimilar.

It is interesting that you should be interested in knowing which fund is giving the best returns now. You need to go beyond that. If you take a look at the funds over different time spans, you will observe that the fund recording the highest yield changes from time to time. Some will show a steady rate of return; others will be more volatile. Look, therefore, at the performance of the funds over time.

I should also encourage you to see mutual-fund investments as long term even when the market is passing through rocky times. Investing for short-term gain, particularly if done frequently, can erode your gains.

To get information on the funds to enable you to make a decision, I suggest that you check the relevant websites. For the CI Funds, check www.ci.com. It has data on net asset value (NAV) ranging from one day to one year to three years and from the inception of the fund. The NAV is often what the fund is sold for.

You will also find information on the investment objectives of the funds, their asset allocation and the major investors.

The CI Funds website has data on over 170 funds, so it would be prudent to make contact with Jamaican investment dealers who sell them to advise which ones are available here, or you may buy them directly from overseas sources.

The website - www.scotiainvestmentsjm.com - has information on the Scotiabank Mutual Funds, but its investment advisers are able to provide assistance if that is necessary. Similarly, investment advisers from companies that sell the CI Funds are available to assist you.

It seems to me that you may have to spend some time, using the information available from the above web sites, comparing the performance of the various mutual funds. I suggest that you first determine what you want to achieve from making the investment. Thereafter, identify which funds suit your purpose, and then compare them using current data and historical data if possible. When you have done so, make your selection.

 

Oran A. Hall, principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel.

finviser.jm@gmail.com