Oran Hall | Financial Adviser | Maximising savings on a government salary
QUESTION: I am 26 years old, soon to be 27. I need some advice on how to invest my money. I'm really interested in letting my money work for me but I don't know where and when to start. I have been working in a
government job for about five years now and I have been saving but I want to earn more. So I am asking for your help.
FINANCIAL ADVISER: I recently read this statement: "Every dollar needs a job". When your money works for you, it generates income in several forms, sometimes passively, to ultimately secure your financial independence over the long-term. Starting early is a critical element in this process.
You have been taking care of a very important element of the process in that you have been saving. Perhaps you have been budgeting too. The fact that you have been saving means that you are in a position to invest.
As you position yourself to do so, avoid debt as much as you are able to and save consistently. At your age, it is likely you will want to acquire personal assets. If that is a part of your plan, do so on a structured basis by planning when you want to acquire them and saving consistently to that end.
Your concern is that you are not earning enough on your savings. Well, with interest rates being as low as they are, I am not surprised you want better. Investing is indeed a better option but it comes with more risk. You must remember this and be committed to whatever financial and investing programme you decide on for the long term.
Your returns will not likely appear to be attractive in the short term but should get much better over time as invested resources increase, as returns get higher on a bigger base and as you add more on a consistent basis. There is no better time to start than now.
VISIT DEALERS, COMPARE
Consult a licensed securities dealer. They are listed in the telephone directory but you may also find get that information from the website of the Jamaica Securities Dealers Association - www.jamaicasecurities
Those that conduct business on the Jamaica Stock Exchange can be found on the exchange's website - www.jamstockex.com.
Arrange to make a personal visit to one of them. Better yet, two, so you can make comparisons. Before that, if you know persons who have been investing, ask them to tell you about their experiences with their dealers or financial advisers.
When you make your visit, be clear about what you want to achieve, how much you can afford to invest and how often you want to invest.
You can make such a visit more profitable for yourself by becoming familiar with investment issues. To do so, read the financial sections of the newspapers, listen to financial and investment programmes on the radio and watch them on the television. You do not have to confine yourself to local programmes.
I expect a serious adviser to help you formulate an investment programme that is suitable for you. It should include an asset mix that takes your objectives into full consideration. Your objectives are the goals you want to realise and the particular approaches you will need to realise them such as liquidity, regular income, capital appreciation/growth and security of principal.
Get to know the instruments that are associated with each objective. For example, ordinary stock is used primarily for capital appreciation, bonds for regular income and security of principal and short term interest-bearing instruments such as repurchase agreements and unit trusts for liquidity.
If you want to invest in stocks, learn to read and interpret financial statements and invest in a securities course. I am aware of four institutions that offer such courses locally. And there are foreign courses too.
Start slowly and be patient. Do not expect miracles. Avoid greed. Invest for the long-term but if you take the course of setting targets for how much you want to make, take action when that point is reached.
If you prefer to invest in a portfolio that is already structured, and you want to play a passive role, the unit trust is for you. You can select one or more that you can identify with in terms of their objectives. Advisers employed to these unit trusts should be able to give you the appropriate guidance, but you should also do your research on them before committing your business to them.
Youth is a good place to start and that is where you are. Enjoy the journey.
- Oran A. Hall, principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel.