BOURSE SECURITIES LIMITED
3rd February, 2020
Common Investor Myths
This week we at Bourse address several common investor myths, which can sometimes discourage persons from improving their financial position. With a wide range of investment information and products available locally, it has never been more convenient to reap the rewards of investing. Ultimately, becoming a successful investor may be much easier than you think, regardless of how much investing knowledge or experience you may have.
Myth: I need a lot of money to start investing.
You don’t need to have a lot of money to invest. There are many investment products available which offer low minimums for those of us just beginning the investment journey.
In the case of mutual funds – which give you the benefit of investing in a pool of different stocks, bonds etc. – you can open an account at some providers with an initial investment of just TT$100.
Thinking of buying local stocks? Some providers have no minimums to open a local brokerage account. You can also buy stocks for as little as TT$2.70 per share (in the case of JMMB Group Limited). Trading international stocks may require at least US$500, based on the investment provider you select.
Myth: I need to have investment experience/knowledge
Individuals often feel a little intimidated when it comes to investing, thinking that they need a lot of knowledge or experience to be a successful investor. The fact is, there are many different investment products which cater to investors of differing knowledge or experience levels. Products such as Mutual Funds and Exchange Traded Funds (ETFs), for example, don’t require any particular knowledge at all. Mutual funds are professionally managed by investment experts, whose full-time job is following financial markets and maximizing the return on your investment. In the case of ETFs, these investments often track the performance of some widely followed investment benchmark. For example, the SPDR S&P 500 ETF Trust (SPY) tracks the performance of the US Equity market, as measured by the popular S&P 500 stock index.
For persons taking a more hands-on approach to investing, technology has made it easier than ever before to learn about investing and make informed decisions based on readily available information. In many instances, local and international providers publish ratings on stocks, indicating those which you may want to buy or sell.
Myth: Investing means buying stocks
For some, investing is usually associated with the stock market. This, however, is not the case. There is a wide range of investment options available which help to achieve different types of investment objectives. In addition to stocks, investors can consider options such as Exchange Traded Funds (ETFs), Mutual Funds, Bonds, Repurchase Agreements and other solutions.
Importantly, a wide menu of investment options caters to investors of varied risk preferences and investment horizons. Do you prefer certainty of returns and want to keep your initial investment safe? Income-focused mutual funds and repurchase agreements can help. Are you seeking potential significant growth of your investment? Stocks or Equity Mutual Funds may be what you’re looking for. Consulting with an experienced investment provider is always a great way to learn what types of investments may be best-suited to your needs.
Myth: Managing my investments is time-consuming
Managing your investments can be as easy and as hassle-free as you want it to be. If you want to actively manage your own portfolio, time (as well as some information and knowledge) is a must. However, options such as Mutual Funds and Exchange Traded Funds drastically reduce the time required to manage your investments. In many cases, the most time-consuming decision relates to selecting an investment provider(s). Thereafter, you can monitor your returns and make changes (if needed) as to who manages your money, if needed.
Investment providers also offer retirement mutual funds, which focus on delivering long-term returns. With this solution, getting started is as simple as selecting your preferred investment provider and setting up a standing order to invest periodically. An added benefit of retirement mutual funds is that they qualify for annual tax deductions, meaning you pay less taxes today.
For investors (i) who have larger investment amounts and (ii) wish to create customized investment portfolios, hiring an investment provider to build/manage your portfolio is another alternative.
Myth: It is difficult to get started
Creating an account with an institution that is able to facilitate investment services is just as easy as setting up a bank account. Basic requirements include valid forms of identification, proof of address and proof of income. In many cases, Relationship Officers are usually available to guide you and make the process as easy as possible.
Selecting an Investment Provider
Choosing a provider to help you achieve your investment goals is an important decision. When selecting your preferred investment provider, consider asking some of the following questions:
- Can the provider offer a full range of investment solutions? (Stocks, Bonds, ETFs, Mutual Funds, Repurchase Agreements etc.)
- Does the provider have a good track record of returns? For example, what have been the historical returns on their mutual funds or managed portfolio?
- Is the investment provider independently assessed by experts? For example, do they have a credit rating?
- Does the investment provider have significant experience in the area? How long have they been in the business?
- Does the investment provider offer research or advice, if I wish to manage my own portfolio?
In getting the answers to these questions, you will be in a more informed position to select an investment provider which you may be most comfortable working with.
For more information on these and other investment themes, please contact Bourse Securities Limited, at 226-8773 or email us at invest@boursefinancial.com.
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