Mon | Mar 25, 2019

Oran Hall | Investing at middle age

Published:Sunday | February 3, 2019 | 12:27 AM



QUESTION: I have $300,000 to put into the market. What do you think is good for a 53 year-old man? -Peter

FINANCIAL ADVISER: The stock market is what I believe you are referring to. The best course available to you is to discuss your plans with and seek guidance from a member of the investment community who deals in stocks.

The strong performance of the local stock market has caused several of my readers to turn to me for advice on how to invest in the stock market. This is the question I am asked most often by far. Some readers go beyond that and ask to be told which stocks to buy, but this is beyond the scope of this column.

In your case, you are close to the end of the mid-career, or establishment, phase of the life cycle. In this phase, it is generally expected that major debts would have been paid off or significantly reduced and that major expenses, including those associated with the education of children, would have been out of the way. But that is not everybody’s reality.

This is generally seen as the time when more funds are available to be invested, and it comes just before the pre-retirement phase when caution is imperative as retirement beckons. It makes sense that you would want to invest in the stock market because the returns on interest-bearing securities are low and it is important to earn a return on your funds that is sufficient to protect you purchasing power.

I do not know what your investment portfolio looks like or if you have one. An investment professional advising you would almost certainly want to know about it and would be keen to know if buying stocks is really a course you would really be comfortable with.

Many prospective investors seem to believe that stock prices move in only one direction: up. Some also believe they move at one speed: fast. But the reality is that this is not what happens in the real world. They do move up – and pretty quickly too sometime. But they sometimes stall for a long time and sometimes fall – sharply.

Do not depend solely on the investment adviser. Get familiar with stocks yourself. Think of the sectors of the economy that you like. Then look at companies in those sectors that appeal to you. This approach will help you to develop and maintain interest in the companies and the market.

Even if you are not able to do any meaningful analysis of the companies, just think how much that can help you to have an informed discussion with an investment adviser.

Can I suggest that you avoid thinking of short term gains? I am not privy to your reasons for wanting to invest in the market, but it is best to take that approach. In fact, it would make sense to see this step as one element of your preparation for retirement.

If you are planning to maintain a portfolio over a long time, there are three possible approaches. First, you may choose to manage your own portfolio, buying and selling when the need to do so arise, bearing in mind that investing long term does not mean holding a security for a life time. With this approach, you should be prepared to spend time to do research and monitor your portfolio.

Engaging a portfolio management company to manage your portfolio is another approach. You would have to pay a management fee, but you would not have to worry about spending time to make decisions and do research.

Here is another option: the unit trust. You could choose one that is invested primarily in equities if you have funds invested in more conservative instruments because it is important to have a diversified portfolio. You could also choose a balanced fund that has equities and other types of instruments. Such a fund would still have a relatively high proportion of equities but less than an equity fund.

Whatever you decide to do, make a very conscious effort to learn about investments – the market and how it operates, the instruments and how to identify your own needs. You do not have to be an expert but the more you know and understand, the more equipped you will be to take care of your investments.


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