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Personal Financial Adviser | Looking for an investment mentor

Published:Friday | December 2, 2016 | 12:00 AMOran Hall

QUESTION: I have been looking for a mentor in Jamaica to educate or guide me in investing, but all the financial advisers and people I spoke to in regards to investing were seeking to promote their respective company's products. That would not be bad, but only if I knew that was in fact the best thing that I could invest in across the board.

- Stefan


FINANCIAL ADVISER: Yours is not a singular situation. There are many people who want to invest but feel a great sense of inadequacy because of their perceived lack of knowledge and experience. But you must start somewhere if you want to invest, or do anything else, for that matter.

The onus is on you to do what is necessary to invest your resources. I do not doubt that you may need guidance initially, but you should be ready to go step by step until you are where you want to be.

There may be some cases in which investment dealers may have their own products to sell, but that is not so in the majority of cases. Stockbrokers, for example, sell the same stocks and bonds. They may have their own preferences, but that is where it generally stops.

They are generally agents acting for their clients, but there are times when they assume the role of principal when they may sell securities which they own. It is hardly likely, though, that you would know that they are offering securities from their own inventory, and unless the rules have changed, they are required to reveal that when they are trading stocks on the stock exchange.

If you are investing in unit trusts, it is very natural that each person will offer their respective company's products to you. They do not have an option. Beyond that, bank products are not generally investment products, but savings products, and financial institutions will recommend or sell the products of other institutions in their family.

The important thing to do is to seek advice from more than one investment dealer when you are deciding to invest.

But before doing so, you should be clear in our own mind about why you want to invest and what timeline you have in mind. You should also be clear about the level of risk you are able to take.


Questions to self


There are tests that can help you to determine your risk profile. How useful they are depends on how the questions are structured, for it is quite possible to build biases into them by the way in which the questions are asked.

But you can have an idea about your risk tolerance by reflecting on how you react in situations where you perceive that you may incur a loss. Do you want to sell immediately or hold on believing the situation will improve and yield positive results for you in the long run? Are you attracted to instruments that you believe to be safe or those that could cause you to lose money at some point although your primary goal is to make a good return?

Your level of knowledge is useful in how you approach investments. If you educate yourself about the various instruments, you put yourself in a good position to know which to invest in. To get the required knowledge, you should be ready to spend time reading about them.

Make use of the media, which has programmes that cost you nothing but your time. Never allow yourself to be at the mercy of anybody because of your lack of knowledge.

Know your objectives. Do you want income for something in particular over a particular period of time? Short-term interest-generating securities such as treasury bills may be of value to you if you need that type of income in the short term, but bonds are a better option if you want interest over a long time.

If you want to own an investment asset that increases in value over time because you want higher returns, you would quite likely consider ordinary stocks. But there are many stocks, and some are more risky than others. An investment adviser can assist you to make a decision, but you should be able to ask intelligent questions to elicit responses that can assist you to make wise decisions.

There are other options such as unit trusts, which make it possible to invest in an instrument that is diversified and satisfies many objectives - safety of principal, capital appreciation and liquidity, for example.

By the way, an instrument that is good for capital appreciation is generally not good for safety of principal and vice versa.

There is at least one instrument for every objective, so know your objectives and be able to articulate them as the first step to get help and guidance. Let the adviser know what they are and ask for the instruments available to help you realise them.

There is no investment instrument that is the best 'across the board'. The most suitable one for you is that which can help you meet your objectives.

Investment advisers can be quite useful, but I would not suggest you leave every-thing to them. Mentors?

I doubt you will

find many so educate yourself, and do not allow yourself to be influenced by the decisions of others. Your objectives, risk profile and circumstances could be quite different from theirs.

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