“If you had invested US$10,000 in the Sterling Asset Management mutual fund in 2003, you would have over US$77,000 today.” Dwayne Neil, Assistant Vice President Personal Financial Planning
As the saying goes, with age comes wisdom but with wisdom comes responsibility. Owing to prevailing financial global conditions, many wonder whether saving is now the responsible option due to historic interest rate lows.
This was the main topic of the recent webinar “Interest Rates Are So Low, Does It Make Sense To Invest?” hosted by one of the Caribbean’s most-respected family-run investment firms, Sterling Asset Management (broadcast October 12th, 2021, Kingston, Jamaica) with panelists Board Chairman and CEO of Caribbean Assurance Brokers, Raymond Walker, and Sterling executive Dwayne Neil, Assistant Vice President Personal Financial Planning.
“Interest rates are low. They have been low for some time now and we project that they will continue to be low for some time to come,” Dwayne pointed out.
However, “There are still options for people looking to invest. People can look at things like structured notes, and mutual funds that can give you great returns,” he added.
“But it’s important that you match your risk appetite with the investment products you’re going into. Get the details of these products – not just look at the interest rates – but look at the fixed rate of interest and capital appreciation.”
When the topic turned to saving for retirement, Neil pointed out that a Jamaican-dollar pension plan, created to help prepare you for retirement will not be enough to support you once you retire. Local regulations impose restrictions on the type, and concentration of assets a pension fund manager can invest in. These restrictions can result in lower returns than if you were to invest in a non-pension product without these restrictions. Additionally, there is the impact of devaluation- up to 80% of [any given Jamaican] retiree’s pension savings are invested in Jamaican Dollars, which would have been exposed to devaluation at a rate of 12.4% per annum from 1982 to 2019.
He further commented, “Even with a pension plan, look at other investments to diversify and maximize your earnings. A good long-term option when planning for retirement can be a US Dollar mutual fund or unit trust type product. These are pooled funds that are professionally managed and can allow for very attractive returns. These funds can also be added to at any time and can be a good complement to your pension plan. For example, Sterling’s US Dollar mutual fund has returned an average of almost 12% per year since its inception in 2003. If you had invested US$10,000 in the fund in 2003 you would have over US$77,000 today.”
Entrepreneurs and business owners – the backbone of most service economies – should also heed the call to diversify, rather than rely solely on their enterprises to meet their income needs.
“Yes, your business may earn you more,” Neil agreed, “but in uncertain times like we are now experiencing, pumping all your earnings back into the same business is actually a high-risk venture.
“If the business should be negatively affected by external factors (such as prolonged lockdowns and curtailments), then the businessperson could face greater losses than the business can bear. Having a diversified portfolio spreads the risk across different assets.”
“To persons still expressing the view that cost represented a high barrier to entry to investing, Neil advised. “Start saving toward the minimum amount needed to invest. Buying stocks can be done using a small amount of capital and you can buy continuously to grow your portfolio. Unit trusts and mutual funds can also be a good way to start as the minimums tend to be smaller than other investment options. Plan to keep adding to your investment to enjoy the benefits of growth and compounding interest.”
Potential investors can even look to pool funds with a family member or friend so both can reap the benefits of investing. “If a young person opened an account with a parent who has assets, then they can make investments which they would not have qualified for on their own,” Neil concluded.
ABOUT STERLING ASSET MANAGEMENT
Sterling Asset Management is the Caribbean’s family-led 21st century built investment firm. Sterling Asset Management partners with large brokerages to connect you with the major global capital markets. Providing you with attractive returns for medium to long-term investments. Services: Investment Planning, Global US$ Bonds, Short Term Investments.