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5 Lessons from Investing in a
PANDEMIC
» 5 Ways to Start Generational Wealth » Market Update & Economic Overview - August 2021
5 Lessons from Investing in a Pandemic
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5 Ways to Build Generational Wealth
Market Update and Economic Overview
Danya Brown-Leslie Assistant Manager, Sales MEET THE TEAM
Danya has more than 17 years of Banking experience and has a track record of providing exceptional sales and customer service. She joined the team as Assistant Manager Sales in July 2020 and is keen on helping individuals and businesses achieve their investment goals.
5 Lessons from
INVESTING IN A
PANDEMIC re-pandemic, the Jamaican economy was poised to make an extraordinary turnaround with most, if not all, macroeconomic indicators showing signs of improvement since the debt-exchange of 2013. Interest rates were low, inflation remained within the targeted 4%-6% band, NIR was increasing, the FX market had gained some stability and was no longer moving in one direction (sliding), the local stock exchange had surged almost 300% in five years and was voted the world’s best in 2018, Debt to GDP had dipped below 100%, while there were more than 16 consecutive quarters of continuous GDP growth. Banks were eager to lend, and companies seemed willing to invest in productive capacity again.
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All these factors would leave investors brimming with confidence as the outlook for the markets were wellpositioned for periods of strong return. Or so we thought. True to my beliefs, I entered 2020 with an optimistic mindset, geared towards eking out as many gains as possible from my portfolio. In less than three months, the global economy took a turn for the worst as markets started to succumb to the ravages of the COVID-19 pandemic. Fast forward to 2021, having experienced the ebbs and flows of the investing world during the pandemic, investors have learned different investment practices, which epitomize the saying “Hindsight is 2020” or in Jamaican parlance, “If me did know.” Here are five things we have learnt from investing in a pandemic. 1. In a pandemic, market crises are inevitable and sometimes the best strategy is to do nothing. The Covid-19 crisis affirmed Henry’s Golden Rule about investing, ‘buy and hold’ and, by averaging down, investors stand to benefit when markets rebound, albeit with the timeline being uncertain. As long as the company is fundamentally sound, then seeing it through rough times in the short-term with your eye on the long-term may be a good investment play. Also, some portfolios may be too large to liquidate and preserve gains, so waiting may be your only option until markets recover. Warren Buffet echoed that “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” 2. Try to remain calm, conduct sound analysis and don’t make decisions while panicking. When it comes to investing during a crisis, sound market analyses could be the telling factor when it comes to gains and losses. The news and media houses may portray an abstract view on what’s taking place and it is incumbent on each investor to conduct or garner as much investment knowledge as possible before making further investment decisions. 3. It’s never too late to start investing, no matter how small the investment portion. While it is tempting to try to wait for an optimal investment time when the market has steadied and an upward trajectory is on the horizon, investors may miss out on many opportunities that may be profitable.
COVID-19 has sparked a rapid development and evolution in just about every aspect of people’s lives across the globe, which has opened new investing opportunities. Knowing that you have everything covered for a few months can hopefully help ease your mind in a time of distress and uncertainty. Most experts recommend saving enough to cover roughly 3-6 months of expenses in the event of an unexpected situation like a job loss, reduced working hours or medical emergencies in the absence of savings. 5. Recovery is inevitable. For many countries, the economic impact of the COVID-19 crisis has been precipitous, with some recovering more quickly than others, largely due to the procurement of several vaccines, along with social distancing protocols. From an investment standpoint, the bulk of the easy money has already been made, since the equity markets have factored in much of the reopening trade. This means investors should be selective as economies recover and fundamentals catch up with valuations. While it feels like forever and uncertainty lingers, there are signs of a turnaround. It’s hard to overstate how dramatic this market movement was, or how much panic was in the air. A lot was at play as investors scurried about trying to salvage monies lost due to the pandemic. COVID-19 has sparked a rapid development and evolution in just about every aspect of people’s lives across the globe, which has opened new investing opportunities. By paying attention to these investing themes for the post-pandemic world, investors can help position their portfolios for whatever lies ahead.
4. The impact of COVID-19 has surprised everyone, and it’s definitely a very challenging time financially. This has highlighted the importance of having an emergency fund or monies saved for a rainy day.
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5 Ways to Start Building
GENERATIONAL
WEALTH
A
s a child, when I heard the term generational wealth, I immediately thought of the Rockefellers and the Vanderbilts, I thought it was something exclusive to people with exotic last names and unattainable for the average working-class family. But as I grew older, I realised that with knowledge, guidance and proper planning, building generational wealth is possible regardless of a person’s socioeconomic standing.
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Generational wealth refers to wealth, be it property, investments, money, businesses, social status or goodwill, passed on through generations of a family. It is important to focus on building wealth during your lifetime as it provides you with security that you have enough money to cover day-to-day expenses and unexpected emergencies, it enables you to afford luxuries, it offers you the freedom to pursue passions and gives you peace of mind that when you transcend the physical realm, these benefits transfer to your children and grandchildren. Below are some practical ways to start building your generational wealth. CREATE AN EMERGENCY FUND – Start by making small but regular deposits to an easily accessible savings account until there is enough money to cover at least six months’ worth of expenses (utilities, mortgage, life insurance payments, etc.) for unforeseen events such as illness, home or vehicle repairs and job loss. By doing this, should an unexpected expense arise, these funds can be used instead of those earmarked for special purposes such as the down payment on a house and it prevents you from using credit cards or micro-financed loans, which usually carry high interest rates. START LEARNING ABOUT INVESTING AND PERSONAL FINANCE – This will be an ongoing process as the field of finance is broad and dynamic, but it will help you understand the types of investments that are available, and which ones may be right for you. Many courses, books and websites that provide information on the principles of investing and how to apply them are available online for free. Also, research licensed investment advisors and brokerages to help decide where to set up your investment account. CREATE AN INVESTMENT PORTFOLIO – Armed with your new knowledge on investing and guided by your
financial advisor you can start building your portfolio. Start by assessing your risk appetite, your investment horizon and your ultimate goals, then decide on the best mix of real estate, stocks, bonds, derivatives or money market securities, that matches your risk tolerance and will help you achieve your goals within your desired timeframe. Make regular deposits to your portfolio and follow its performance closely to see if it’s on track to achieving your desired goals. Note differences in your personal circumstances and your portfolio’s performance and make adjustments as necessary. INVEST IN YOURSELF – Spending time and money on your education, health, social and technical skills can give you an edge in today’s highly competitive and individualistic western society. Read more to broaden your knowledge base, take new courses to learn new skills and improve qualifications, get a mentor to guide your career and who’s positive qualities you can emulate. This will help you build character and climb the social and professional ladder which will in turn add to your wealth. TEACH YOUR CHILDREN ABOUT WEALTH – Start by giving them an allowance or compensating them for chores and allowing them to save for special purchases and gradually increase their lessons. As they grow older, teach them about banks and other financial institutions and how they work. Also teach them soft skills such as networking, patience and self-discipline and respect to help build their character and social network from an early age. Studies have shown that generational wealth rarely outlasts the third generation. By teaching your children about finances they get a better appreciation for money, how it’s earned, its usefulness and its limitations thus reducing the likelihood they will squander their inheritance.
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Click here to see our Stock Picks as at September 20, 2021
WEALTH TALKS: THE NEW BUSINESS NORMAL This webinar was held on Thursday, August 19, 2021. Click the link below to view the recording and remember to subscribe to our YouTube channel. Click here to see the full recording
Wealth Knows
Market Value Market Value is the price a buyer is willing to pay, and a seller is willing to accept at any given moment for a particular security. Since market values are constantly changing, the current market value may be more or less than the price of your original investment. 8
Market Update and Economic Overiew August 2021
Fixed Income The Federal Reserve kept interest rates unchanged at 0% - 0.25% and maintained the current asset buy-back programme. Amid the heightened growth concerns, the yield on the US 10-year Treasury gained 8 basis points, closing the month of August at 1.30% after a 1.22% opening. Read the full report
Money Market The Bank of Jamaica (BOJ) announced in August that it will keep its policy interest rate constant at 0.50% per annum. The BOJ disclosed its decision to consider tighter monetary policies in its next meeting in September. This signals a possible increase in the policy interest rate, along with limiting the increase of the Jamaican dollar liquidity expansion to contain inflation. Read the full report
Equities The local stock market was active during the month of August, with 63 stocks trading, of which 24 advanced, 32 declined and 7 traded firm. Mayberry Jamaican Equities Limited (MJE) was the volume leader with over 130 million units traded, followed by Supreme Ventures Limited (SVL) and Wigton Windfarm Limited (WIG). Read the full report
Foreign Exchange In August, the JMD, according to the Bank of Jamaica’s (BOJ) Weighted Average Selling Rate (WASR) gained $3.90 (2.59%) against its U.S. counterpart to close the month at $150.69. Read the full report
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