M O N T H LY U P D A T E S A N D A N A LY S I S F R O M T H E V M W E A L T H T E A M
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Information can mean Money in Your Pocket
Knowledge is Power » Myths Surrounding Investing » Market Update & Economic Overview - March 2021
Myths Surrounding Investing
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Wealth Knows
Health VS Wealth
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Market Update and Economic Overview
Dwight Jackson MEET THE TEAM
Assistant Vice President-Capital Market VM Wealth Management Dwight Jackson joined the VM Wealth Management Limited team in February 2021 as Assistant Vice President, Capital Markets and will be developing and implementing strategies aimed at growing VMWM’s and VMIL’s market share locally and regionally. Dwight has more than 10 years of combined experience in the financial industry spanning investment banking, commercial banking, central banking, risk management, model building and research. Dwight attained a Master of Science degree in Economics with concentration in Financial Economics and Game Theory from the University of the West Indies, Mona, and a Bachelor of Science degree with honours from the University of the West Indies. He is also certified in Corporate Finance from Euromoney Learning, London. When he is not making big moves in the world of finance, Dwight enjoys watching, playing and talking about football. He is also an avid runner and cyclist.
Don’t be Fooled:
Myths Surrounding
INVESTIN hen it comes to investing, knowledge is power, and information can mean money in your pocket. So, we’ve compiled six popular points for discussion based on conversations with clients and prospective investors. Also, with the first of April being a day when misinformation abounds, this month seems like a fitting time to dispel some of the myths around investing. Let’s set the record straight.
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Myth #1: You Need a Lot of Money to Invest The traditional image of an investor as always being a high-powered, high-net-worth person no longer applies. While there are instruments that have high minimums, there are other ways to get your investment feet wet with $10,000 or less. For instance, you can open a Jamaica Central Securities Depository (JCSD) account, in order to trade on the Jamaica Stock Exchange (JSE), with as little as $10,000. Funds are added as needed once you’re ready to trade. Myth #2: Past Performance Guarantees Future Returns How a fund or a stock performed over the past 10 years does not tell you how it will do over the next decade. One thing that’s sure about investing is that there is no ‘sure thing’. Investment experts use various factors, including financial reports to determine the best options going forward. Just looking at historical returns won’t provide enough information to generate substantial projections. Myth #3: You should invest more conservatively as you near retirement This makes sense when you consider the fact that your prime earning years will be behind you by the time you’re ready to retire. It’s natural to think you’ll need to hang on to what you’ve accumulated to that point. As a general rule, this is prudent, but the investment approach will depend on the individual investor’s circumstances and risk tolerance. Persons who started their investment portfolio later or who have accumulated a lower level of wealth may find themselves in a situation of needing to invest more aggressively closer to retirement than someone who had started earlier and/or accumulated a higher level of wealth as they approach retirement.
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Myth #4: Blue chip stocks are the best stocks to own Blue chip stocks are relatively predictable because of the large companies behind them. However, blue chip stocks are not the only possible investments and restricting your portfolio to these safer investments may hinder you from achieving higher or more attractive returns than may be achieved from allocating a portion of your portfolio to a wider range of securities. In the early stages, the company is growing faster and the stock prices can increase relatively quickly. At a later stage, the company might be growing reliably, but more slowly, so that investment might not provide the kind of returns you’re looking for.
Myth #5: You must avoid volatility and risk All investments come with an element of risk. The good thing is that investors are rewarded for taking risks with potentially higher returns. Trying to avoid risk, for example selling your stocks every time you think the price will go down, will likely hurt your returns over the long term. A better way to manage portfolio risk is by investing in a range of assets to spread the risk across different assets with low correlations. This means that while some assets might decline when hit with a shock, others may rise or be unaffected, thereby smoothing the returns over time. Myth #6: You can time market peaks and troughs This time-honoured buy low-sell high strategy works well for investors planning to buy a stock and hold it long term. However, trying to determine a stock’s lowest point or highest point is difficult as we can’t accurately predict how the market will move. A better strategy would be to project the point at which you believe the stock becomes over or undervalued and adopt a disciplined approach to buy/sell at those points so you don’t get caught off-guard by unpredictable market events. There are many more misconceptions floating around about investing. They can be misleading at best and, at worst, can cause losses. The best way to approach investing is to go to the experts. Your wealth advisor can provide the clarity you need and recommend sources of information so you can stay abreast yourself. The important thing is to know where to get the right information and the guidance you need to make the best choices for you.
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Health is Wealth
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ealth and wealth are two aspects of our life that are inexorably linked. Wealth is nothing if you don’t have good health to enjoy it. On the other hand, wealth means having the resources that make it easier to maintain good health. If financial prosperity is one of your goals in life, then you should prioritise your physical prosperity too, approaching both with discipline and a commitment to action. Savings is the foundation of your financial life. It’s where most of us start accumulating money and, even as we grow financially, it remains a reliable source of funds we rely on in emergencies. Like our diet, savings sustain us and require discipline and consistency to produce healthy results. Automating our savings and making good nutrition a habit will ensure longevity.
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Like exercise, investing is how we stay ahead of the game. By investing a portion of our income, we can ensure our finances are more likely to stay ahead of inflation and grow at a pace that will help us achieve our goals. Exercise gets us in good physical shape, and provides some protection from the ageing process, as well as negative emotional and psychological states that can come from a sedentary lifestyle. An added benefit of building discipline in any area of our lives is that it often has a beneficial ripple effect in other areas. Caring for our mental health is all about the long game, like a retirement plan. Time and energy spent on our peace of mind, like pursuing hobbies, cultivating mindfulness or talking with a life coach, will reap benefits now as well as over the long term. Something as simple as going to bed early and getting a good night’s sleep every night makes us sharper and more productive during the day and has been shown to reduce the likelihood of debilitative ailments like Alzheimer’s disease later on. Similarly, retirement plans work best when we get started early and remain consistent. Thanks to the power of compound interest, we’ll be able to enjoy the benefits down the line.
We should go to both a doctor and a wealth advisor for regular checkups. They each have the expertise needed to guide us on the best ways to stay in shape. They can also spot any issues early and provide solutions. Both stay on top of the latest happenings in their fields and can give us information that might be beneficial or make valuable recommendations. It’s a good idea to have them both on speed dial. Health is wealth, and wealth, according to a 2012 poll from the Canadian Medical Association, is health. So, keep them both high on your priority list, develop the habits that will sustain your body and keep your pockets happy and stay in touch with the experts. If you stay healthy and wealthy, you get the best of both worlds and one great life.
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Click here to see our Stock Picks as at April 27, 2021
Wealth Knows
Bull Market A bull market is the condition of a financial market in which prices are rising or are expected to rise. The term “bull market” is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, real estate, currencies, and commodities.
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Market Update and Economic Overiew April 2021
Fixed Income President Joe Biden unveiled his US$2.25 trillion infrastructure plan on March 31. This initiative seeks to modernize bridges, highways and roads across the US. There will also be US$100 million allocated towards upgrading and building schools. US$400 billion will be allocated to building homes or community-based care centres for elderly and disabled persons. This reform is expected to be funded by an increase in the corporate tax rate to 28% from the 21% set by former President Trump in his 2017 tax bill. The change to the corporate tax his 2017 tax bill. The change to the corporate tax rate is expected to increase government revenues by 0.5% of GDP per year. Read the full report
Money Market February’s Treasury Bill auctions saw yields on all tenors spike unexpectedly. J$ liquidity was tight with a large player actively selling bonds into the market, having the effect of mopping up liquidity. However, in March, there was some level of liquidity and rates dipped in the March auctions by 29.36bps and 43.97bps on the 91-day and 182-day tenors respectively. Read the full report
Equities After spiking in February to a peak price of $2.13 on February 25, an 826% gain for the month, Ciboney’s price retreated just as sharply to a bottom of $0.22 on March 12 before recovering to settle just over $0.50 at the end of March. Ciboney management, on February 26, issued a press release to indicate that they “are not in possession of any material information that would have contributed to the trading levels and are also not aware of a reverse takeover of the company.” Read the full report
Foreign Exchange The Tax Administration of Jamaica (TAJ), under recommendation from several private sector groups, extended the tax filing deadline form March 15th to March 31st.This move resulted in a sell-off of US Dollars in the market to secure JMD funding ahead of the deadline. The local dollar closed the month at $148.00 in the Broker marker,posting a $3.20 month-over-month gain. The BOJ’s Weighted Average Selling Rate (WASR) closed March at $146.2150, a $5.73 or 3.92% appreciation versus lastmonth’s close of $151.9405. Read the full report
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Diversifying Your Portfolio =PEACE OF MIND