Investing is the act of putting money into various instruments with an expectation of earning a profit. Investments carry some degree of risk as well as the potential for greater rewards.
Saving refers to putting funds in a traditional bank account where over time, it can decrease in value due to inflation. It does not carry any risk but also does not create the potential to earn any profit.
Mutual funds are the embodciment of the saying, strength in numbers.
Imagine you have US$100 to invest. This low amount will not garner much in terms of interest if you invest it in the market. Now imagine ten thousand people have US$100 to invest. If everyone pools their money into one fund, they will command a higher rate of return and start earning more individually. Also, now that there is more money to invest, bigger investment opportunities will open their doors to you.
Mutual Funds provide growth, diversification and access to investment management expertise for smaller investors.
Over the next few weeks, we plan to discuss the 3 biggest mistakes that local investors are making right now. Investors could be earning 15% to 20% MORE per annum by avoiding these common errors. Today, we will discuss the first mistake and discuss the subsequent mistakes in separate articles. Mistake number 1: Real estate always offers great returns. While this may be true for real estate developers, it is rarely true for the individual investor seeking to buy and rent real estate. Let’s look at some examples.
JPS recently announced that it would call (i.e. “repurchase”) its 11% 2021 bond at a price of 101.83 from bondholders on March 5, 2019. This means that in addition to the interest earned for the period, bondholders will receive their principal of US$101.83 for every US$100 of face value invested. The bond is widely held by local investors. What will you do with your proceeds? Today we look at the history of the bond and some alternative options in the financial markets.
Your savings in the bank are losing money every day. Keeping your savings in cash is one of the fastest ways to burn a hole in your net worth. This applies to many repos as well. By ignoring the rate of inflation or accepting sub par returns on your investment, you are reducing the future value of your investments. It’s also important to note that interest rates on lower risk USD investments are now higher than interest rates on JMD investments.
A “fallen angel” in finance is a rated entity which once carried a high credit rating (investment grade) and displayed exceptional performance, but has since experienced sustained declines in ratings culminating in the loss of its investment grade status. Barbados’ financial woes over recent years have placed its debt in that demeaning category and future prospects for the debt also appear to be grim.
When you hear the term “junk bonds” you might be inclined to think that they are worthless; but don't let the term fool you or scare you away from these securities. Despite their name, junk bonds can be valuable investments for informed investors and may actually have a place in your portfolio because of their often higher yields. However, be warned- their potential high returns come with the potential for high risk.
Spotlight on Exchange traded funds
What Are Bonds?
A bond is an IOU in which you, the investor, agree to loan money to a company or government or other known entity - called the Issuer - in exchange for a specified rate of interest over a fixed period of time. Its opposite is a stock, which represents ownership in an entity and is worth only what someone else is willing to pay for it.