From left, Jackson and Street
Susan Gordon, Staff Reporter
THE STOCK market is a grim place for investors now and has been for about a year.
For many, this justifies their fear that stocks are too risky an investment. The market climbs spectacularly only to plunge even more rapidly, jeopardising whatever gains were made.
" I just never thought of playing the stock market," non-investor in the market Renee Pennant, told Sunday Business.
But industry experts say she is losing out. Weighing the benefits and risks involved in buying stocks, brokers and regulators say investors need a clear understanding of the market compared with other investments in order to make a good judgement.
Equity Trader of First Global Financial Services Limited, Neilson Rose, said with a market which rose by almost 40 per cent prior to the decline, "I don't think it's good advice to tell the client not to play the market with returns like that."
One of the best ways to educate yourself, according to financial analyst John Jackson, is to take the plunge directly. "Investing in it puts you in a better position to learn what it's all about," he said.
But investing in the market involves more than just buying some shares in a company. General manager of the Jamaica Stock Exchange (JSE) Marlene Street, says brokers need to educate investors on how to participate in the market. She said that in the past the JSE had received calls from concerned investors who wanted to know why share prices had fallen. But ultimately each investor had a duty to himself.
Mr. Jackson said education costs money so new investors may have to pay the price which could mean losing some money in order to better understand the market. He suggested that the new investor put in only what he or she can afford so if all is lost it would not devastate him or her.
REASONABLE COMPANY
Pinpointing Bank of Nova Scotia as a reasonable company to start out with, Mr. Jackson says the investor could put the money in such a stock and think beyond a one-year period for any return. "Lock it away and don't look at it. You have to change your psychology from instant gratification to long-term gratification," he said.
The reason behind this is that the prices for stocks in solid companies may rise and fall, but in the long term, the market provides one of the best investment options available.
But this message is still not convincing enough for some.
"The real reason I don't get involved is because I don't have enough money to put there and at this stage I don't want to lose what I have," said Yolande Walters who has a background in accounting. Ms. Walters, who invests in the, money market instruments, confessed she is too risk averse to participate directly in the stock market.
HER CONCERN
She is concerned that investment advisers are too aggressive in their approach to uninitiated people like herself, and "you don't know if they know their stuff."
But she would invest a small portion of her investments in the stock market through a fund which had a diverse mix of investments. This option offers those who are very concerned about the risks to get some of the benefits of the gains available in the market while minimising their risks.
Reiterating the need to point out the risk involved in the stock market, executive wealth adviser of NCB Capital Markets Limited, Vivian Bedassie, said when advising anyone he asks them whether they are investing for the long term or the short term. Stock market investing is for the long term so, "you have to match them up like that."
This was the consensus at The Gleaner Editors' Forum on the stock market held at The Gleaner' downtown Kingston office in Kingston on Friday.
"Everybody should be in the stock market unless their liquidity requirements or risk tolerance suggests otherwise," says financial analyst Keith Collister.
