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Get More Involved In Your Investments
Sunday 8, April 2018

Get More Involved in your Investments

Ian Watson_1

How involved are you in the decision making process of your investment? There are those whom I will call active, that involve themselves in just about every aspect of the decision making process, while on the other hand, the passive investor is one who tends to leave just about everything to their investment advisor/manager. My experience with the passive investor is that they know very little about the instruments they are invested in and invariably they only make enquiries when they need funds or the investment has gone bad. Not everyone is a savvy investor but at a minimum one should research as best as is possible what one is  getting into and the likely implications that are likely to face you down the road. Simply put, investing is not as difficult as it appears and with the advent of the internet there is a proliferation of basic information that you can obtain for free. My recommendation to the passive investors is to get actively involved and in this regard there are certain basic facts that one should know. These are the key questions:

  1. What am I investing in? Many passive investors do not have a clue about their investments. The implications of this is that reliance is placed solely on the investment advisor for determining suitability and in a number of instances this is not a good fit with the needs and financial position of the investor. 
  2. What are the risks involved? Every investment has an element of risk involved and an investor has to be comfortable knowing the probability of the investment going bad and the likelihood of a capital loss. Knowing the credit rating of the issuer of your investment instrument is one of the best ways to ascertain this. Global bonds, for example, offer you this opportunity since credit rating agencies such as Standard and Poor’s, Moody’s and Fitch provide credit ratings which will highlight the level of credit risk you will be undertaking.
  3. What about liquidity? Many investors are unaware of this important consideration and only encounter this problem when they are in urgent need of cash to meet emergencies. Whatever the investment you are making, ensure that there is a ready market for it in the event you need to make an early exit. For those investors in bonds, especially global bonds, ensure that the quantities you hold meet the minimum tradeable amount that brokers will facilitate, so you will not have to rely on other potential sellers to pool with so as to meet the minimum tradable amount.
  4. Who makes the final investment decision? Many investors leave this entirely to their investment manager/ advisor but whilst the latter may have the technical skills to assess the investment, the final decision must be that of the investor. It ought to be that the investor is comfortable with the issues raised in items 1 to 3 above.  In addition, being a part of the process will help one in achieving that level of comfort once the decision is made. If, having been through that, you still have elements of doubt, then get the opinion of another financial advisor or a good friend or family member who may have a better understanding of investments.

In closing, it is very important for an investor to be au fait with the investment that they are making and being an integral part of that decision process gives one increased peace of mind. Being involved assists the investor with keeping an eye on the performance on a periodic basis and being familiar with most aspects of possible concern.  This knowledge leads one to make timely decisions rather than waiting until it’s too late.

Ian Watson is Vice President, Sales & Marketing at Sterling Asset Management Ltd. Sterling provides financial and advisory services to the corporate, individual and institutional investor. Feedback:  If you wish to have Sterling address your investment questions in upcoming articles, please e-mail us at: info@sterlingasset.net.jm or visit our website at www.sterling.com.jm

 

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