Paul Taylor, Contributor
AS A financial sales executive, I am often consulted by clients wishing to invest their financial resources in safe and attractive instruments. Like all rational persons, these investors seek to maximise returns whilst minimising associated risks.
Indeed, I am often fascinated by how sophisticated the ordinary investor has become. Not only is he more aware of prevailing market conditions or have a fair sense of it, he is better informed, more proactive and decisive when it comes to the placement of his funds.
Recently, and by coincidence, a colleague and I had a rather interesting discussion about this very subject. Like me, he was just as fascinated about the fact that the ordinary investor was now a transformed being, asking the importance questions about financial instruments, having a sense of the risk-return relation and, in many instances, wanting to see the financials before making the all-important investment decision.
My colleague opined, with my agreement, that as more persons are forced to deal with the reality of job losses, a insurgence of a spirit of entrepreneurship and self-determination is now more apparent, which arguably is an emerging phenomenon of the current globalised environment. This environment cherishes new modalities of production, competition, technology utilisation, and advocates flatter organisational structures where managerial talent, innovative flare and leadership skills are treasured commodities. Indeed it is an environment that glorifies foresight and proactive action; it has no vacancy for inaction and scorns bureaucracy and inefficiency.
However you see it, we are all agreed that the current environment continues to transform and impact our lives in important ways, not least of which being our finances. To be sure, as more and more persons discover that they have to take charge of their own destiny, they are becoming more cognisant of the need to manage and utilise available financial resources in a manner that optimises returns received, as they seek financial well-being and independence.
At the end of our discussion, my friend and I were agreed that it is important that clients receive sound advice on investment options, which is an important precursor to making wise investment choices and taking wise investment decisions. Addition-ally, we were in unanimity that there were a number of other factors, as elaborated on below, that were critical to making sound investment decisions.
FINANCIAL GOAL SETTING
It often said that the journey of a thousand miles begins with taking the first step. This is true of your own financial journey as it is of other aspects of your life. Before investing, determine your financial goals. What is it you want to achieve? What are your current needs and what are your plans for the future. Is it acquiring a house, a car, going into business, furthering your education, investing excess funds or simply achieving financial independence? Whatever your plans are, document them and establish a time frame for their achievement.
It advisable that the goals you set be specific, measurable, attainable, realistic and are set in the context of a time frame for their achievement. It makes little, if any sense, to establish goals that are not specific and measurable. Goals that are, are usually more easily achieved as you can pursue their attainment in an incremental fashion. For example, if you wish to acquire funds to meet the down-payment on a house, then you are advised to look at your incomes and establish a time frame (depending on available of resources), so that you can sensibly put aside pre-determined amounts that will allow you to achieve the objective in a realistic and set time frame.
In more ways than one, goals set without regard to time are seldom achieved in a timely manner. Setting goals in a time oriented manner provide a planned context in which to work towards their achievement. Indeed, time provides a framework for decisive and determined action, an aim, urgency and propulsion to act towards some stated ends. To be sure, it provides a structured frame of reference within which you can work towards the achievement of set financial goals and objectives.
PERSONAL NEEDS ASSESSMENT
Once you have determined your financial goals and objectives, it is always useful that you do a thorough self-assessment of your general knowledge of the financial markets, the players involved and the financial assets or instruments that you can invest in. It is also useful to assess your own risk profile or appetite for risk. An understanding of your risk appetite provides an important foundation for making sound investment decisions.
Investors that are risk-friendly will be more ready inclined to invest in financial products that offer attractive returns, particularly in the long run and, as such will be more comfortable in accepting adverse changes in returns, particularly in the short run, than the risk averse investor.
As the name suggests, the risk-aversed investor tends to invest primarily in government securities and other products that provide a 'risk-free' rate of return. However you take it, it is always important to understand your own risk appetite so that you can pursue your investment decisions in a manner that provides peace of mind.
ASSESS FINANCIAL MARKET OPPORTUNITIES
The Jamaican financial market, like any other around the world, is the place where borrowers and lends of financial resources meet to buy and sell financial assets. In other words, it is the place where financial intermediation takes place, where those wishing to borrow funds and those wishing to lend, create values for themselves; for the borrower, attractively priced funds and for the lender, attractively determined returns.
In Jamaica, banks, money market companies, investment houses, merchant banks, stock and unit trust entities, building societies, credit unions you name them, are all active players in the process of financial intermediation, so are companies and individuals like you and me.
Indeed, each participant in the financial intermediation process has a unique role to assist you in achieving your financial goals. Here again is another reason why it is important to determine your financial goals and objectives, as this information will assist you in determine which participant(s) to approach and when.
RESEARCH INTERESTED FINANCIAL INSTITUTION(S)
Having decided which financial institution(s) would play a role in helping you achieve your financial goals, research or investigate the institution(s). Ask your friends and acquaintances about the institutions and solicit your ideas on where best to invest considering your needs and goals.
Use advertisements, appearing in both the print and electronic media, to identify possible institutions. Moreover assess the technical competence of the management of the institutions being considered, as management's achievements, education and experience can provide useful insights into the institutions successful operations and longevity.
Is management proactive, innovative, visionary in its thinking and thus it adopt to change readily and operate in an ethical sound and prudent manner? These are all important questions to ask and to get answers to.
Additionally, call around and find time to visit the institutions, leave nothing to chance. Don't take it for granted or just take it from someone. See for yourself how the institutions you wish to interest your hard earned resources operate.
Are they customer-friendly and proactive in meeting customer requirements and needs? Even more importantly, do they seem interested in your best interest; are they intimately attentive to ensuring your full satisfaction? And finally do they make eye contact and smile at you? You will agree with me that a smile can make a world of difference in today's environment, where coarseness seems common-placed.
EXAMINE PRODUCTS IN LINE WITH NEEDS
Examine product offerings in line with your personal needs and pre-determined goals. Are products flexible, and come with a bundle of services that make it hassle-free and convenient to do business? In other words, get intimate with the products of the financial institutions you are interested in doing business with. What services are available which are in line with your current and future needs?
How are returns determined and applied? What are returns like, how do they compare with the market for similar asset class or investment? Are the returns 'real' in other words, when you compensate or adjust them for inflation, are they attractively positive? These are all good examples of questions to consider and have answered, as they can be invaluable to the fulfilment of your financial needs.
CHOOSE WISELY
Having assessed your financial needs, examined interest players and products, you are now in a better position to make that important financial or investment decision. It can be helpful to run your decision(s) by a close friend or partner. Do not procrastinate; 'time is money' is a cardinal rule in making sound financial and investment decisions. Indeed, the time value of money is at heart of finance and does play an indispensable role in your quest for financial independence.
DEVELOP, BUILD A RELATIONSHIP AND KEEP IN TOUCH
Once you have made the investment decision(s), build a relationship with the entity in which you have placed your funds. All financial institutions welcome hearing from their clients on a regular basis, while many are increasingly employing sales and accounts executives to serve their clients in what has become a competitive marketplace. Web sites, automated voice systems, client care centres and ATM facilities are also increasingly being provided to financial entities to enhance the service experience and build mutually beneficial relations with customers.
MONITOR THE MARKETS
You may have heard from time to time the expression: "Monitor the markets". It's an important advice, as the paucity of timely access to updated corporate information, is a reality of the current local environment.
It is therefore important for the investor to follow the general financial happenings by listening and reading the business news provided by the local and international media.
Company reports, market summaries, financial programmes as well as financial and economic updates as provided by the Bank of Jamaica, the Statistical Institution of Jamaica, the Planning Institute of Jamaica and the Private Sector Organisation of Jamaica do provide useful insights and are usually available at libraries across the island and on the respective entities' Web sites.
You are advised to consult these resource materials from time to time to be apprised of the financial happenings. In a real sense, it is your hard-earned resources that we are talking about here and you need to ensure that you are aware of the environment in which you do business, so that you can continue to make sound and informed decisions.
GLOBAL REALITIES
Without question, the consensus is that the current realities of the globalised environment are forcing us all to powerfully and seriously take charge of our lives and affairs, not least of which is the financial. It is also generally agreed that it is a learning process and an interesting journey whose first steps may very well begin here and now for many of us. These suggestions are provided to assist us on our journey, wherever we are located along the path. Let's learn their lessons and apply them well.
Paul Taylor is Corporate Sales Manager at Jamaica Money Market Brokers Ltd and a team member of the JMMB family, who can be reached at 1-888-GETJMMB (1-888-438-5662) Ext 400.
