How to start investing

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,