How to start in­vest­ing

Jamaica Gleaner - - BUSINESS - Oran Hall – She­nee

QUES­TION: I am 25 years of age and am now see­ing the im­por­tance of in­vest­ing and would like to start do­ing so, but I have no idea as to where to start or what to do, as I have very lit­tle knowl­edge or un­der­stand­ing about this area. I write to you with the hope of get­ting some ad­vice or sugges­tions as to where I could start, as you are pro­fi­cient in the field.

FI­NAN­CIAL AD­VISER: In pre­vi­ous re­sponses to ques­tions sim­i­lar to yours, I have gen­er­ally ad­vised that prospec­tive in­vestors seek to know them­selves — their per­sonal and fi­nan­cial sit­u­a­tion, their risk tol­er­ance, their goals and their ob­jec­tives.

I have also gen­er­ally rec­om­mended that they learn about the fi­nan­cial mar­kets by read­ing rel­e­vant literature and by fol­low­ing rel­e­vant me­dia pro­grammes. All of these are still rel­e­vant.

You may take the ap­proach of in­vest­ing your money your­self, or you may have pro­fes­sional man­agers do so for you. In this case, you may en­gage one of the port­fo­lio-man­age­ment com­pa­nies for a fee. Some stock­broking com­pa­nies also have de­part­ments that do port­fo­lio man­age­ment.

Com­pa­nies that of­fer this ser­vice gen­er­ally do so on a dis­cre­tionary ba­sis. That is, they make all de­ci­sions re­lat­ing to the man­age­ment of the port­fo­lio.

MIN­I­MUM SUM

At the out­set, they make a de­ter­mi­na­tion of the risk tol­er­ance, ob­jec­tives and goals of the client. They then es­tab­lish an as­set mix and cre­ate a port­fo­lio for their client.

Port­fo­lio man­agers usu­ally re­quire that their clients start with a set min­i­mum sum, which varies by port­fo­lio man­ager. Clients are free to add new funds pe­ri­od­i­cally, and the port­fo­lio man­agers keep them up to date on how the port­fo­lio is do­ing by send­ing them pe­ri­odic re­ports.

In­vest­ing your own funds is far more de­mand­ing. It re­quires time and ex­per­tise to do re­search and to make ap­pro­pri­ate de­ci­sions. You may, how­ever, ben­e­fit from the re­search of the stock­bro­kers and may seek ad­vice from in­vest­ment ad­vis­ers, but you are the ul­ti­mate de­ci­sion­maker.

The stock­bro­kers are very im­por­tant in the in­vest­ment busi­ness. They act as agents for their clients who buy and sell se­cu­ri­ties, such as stocks, bonds and mu­tual funds. They are able to make rec­om­men­da­tions based on their as­sess­ment of your risk pro­file, your goals and ob­jec­tives. You should not, how­ever, ex­pect them to rou­tinely tell you if and when to sell your se­cu­ri­ties as so many in­vestors ex­pect them to.

I usu­ally rec­om­mend that new in­vestors start with unit trusts be­cause there is a wide va­ri­ety of them ca­ter­ing to the needs of var­i­ous types of in­vestors. But with so many in the mar­ket, mak­ing the right se­lec­tion can be daunt­ing, but you can get help from the ad­vis­ers.

To in­vest in unit trusts, go di­rectly to them or call them. The Yel­low Pages can as­sist you to lo­cate the stock­bro­kers, unit trusts, and port­fo­lio-man­age­ment com­pa­nies.

Ed­u­ca­tion is an im­por­tant re­quire­ment for mak­ing good

in­vest­ment de­ci­sions. It is dif­fi­cult to make ap­pro­pri­ate de­ci­sions with­out a ba­sic un­der­stand­ing of the in­vest­ment prod­ucts, how the mar­ket works, and how to select suit­able in­vest­ment in­stru­ments.

If you can af­ford it, I rec­om­mend that you en­rol in one of the in­vest­ment cour­ses avail­able lo­cally. They are not all at the same level. Frankly, you do not need to do one of the more ad­vanced cour­ses.

I sug­gest that you check with the Ja­maica Stock Ex­change. Their e-Learn­ing Cam­pus of­fers sev­eral cour­ses, in­clud­ing one which is ideal for be­gin­ners like you. The Univer­sity Col­lege of the Caribbean and the Univer­sity of Tech­nol­ogy Ja­maica/JIM also of­fer cour­ses that are use­ful for per­sons in­ter­ested in work­ing in the fi­nan­cial sec­tor and for per­sons who want to equip them­selves to man­age their in­vest­ments.

These cour­ses, to dif­fer­ent de­grees, ex­pose stu­dents to how the econ­omy and the fi­nan­cial sec­tor work, how to in­ter­pret and an­a­lyse fi­nan­cial state­ments,

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