A very important, but often overlooked aspect of investing and wealth creation is protecting and preserving your investments. Generally, we focus on the risks associated with individual assets or asset classes, as we should, but having made those investments it is equally important to take all precautions to protect our investments. In recent times, technology has become a vital part of how we communicate, gather information and monitor our investments.
In the world of bond investing, risk mitigation is critical, hence bond covenants serve as important safeguards of investor interests. These contractual agreements outline the terms and conditions of bond issuances, providing a framework to protect bondholders from potential risks and uncertainties. Among the myriad of bond covenants, change of control restrictions, ratings restrictions, and sale of assets restrictions stand out as key provisions aimed at fortifying the position of bondholders.
Last week our team watched the Bob Marley One Love movie, as a part of a staff movie night that was dubbed “One Team, One Love”. While watching, I got an appreciation of Bob Marley's music and message of love, unity, and justice and how it continues to resonate with people worldwide. As I watched, I also realized how much his life and legacy also offer profound lessons in estate planning. Despite passing away at a relatively young age, Bob Marley's estate planning, or lack thereof in some respects, has been the subject of much discussion and legal battles.
While it's important to note that individual investment strategies vary widely and should not be generalized based on gender, there have been some observed trends and differences in the way men and women approach investing. These differences are often influenced by a combination of social, psychological, and economic factors.
Albert Einstein allegedly called compound interest the 8th wonder of the world. In the realm of personal finance, few concepts wield as much transformative potential as compound interest. Compound interest can help turn modest investments into substantial wealth over time. At its core, compound interest is the concept of earning interest not only on the initial investment but also on the accumulated interest from previous periods. This compounding effect can lead to exponential growth.
Throughout my article series entitled, "Securing Your Legacy," we've explored the importance of estate planning in wealth creation, having the right financial partner and choosing the right financial assets. As we continue the journey, this week we explore advanced strategies to protect and distribute your assets, specifically the importance of having a will. This article is written in collaboration with Stacey Knight, attorney at law*.
Throughout 2023 fixed income investors who were brave and had excess liquidity were able to take advantage of opportunities that arose in the bond market. Investors were able to add instruments that were investment grade at steep discounts. While some investors clutched their pearls, the brave stayed the course even as their portfolio value perhaps declined. The environment is slowly shifting as the Federal Reserve narrative has shifted from rate hikes to potential rate cuts.
Constructing a well-rounded investment portfolio necessitates thoughtful asset allocation decisions. In a Jamaican context, two prominent asset classes that warrant investor attention are global bonds and real estate. Exploring their characteristics and considering historical data can provide insights to assist investors in making informed choices when considering global bonds and real estate investments within their portfolios.
Global Bonds: Stability and Income Generation
The U.S. Federal Reserve (Fed) held its signal rate unchanged at its policy meeting on January 31st, as expected, but signalled it will be cutting interest rates later this year after hiking aggressively over the past two years to cool decades high inflation. As the Fed gradually normalizes its policy rate, some investors fear that the bond market may lose its appeal, with yields plummeting to levels reminiscent of the pre-pandemic era. However, a closer examination reveals that the landscape is more nuanced than a simple return to historically low yields.
