Home' Trinidad and Tobago Guardian : August 30th 2015 Contents AUGUST 30 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG5
Stocks are something of a financial frontier
to many people. While they may boldly go
into investments in a mutual fund, bonds or
take out an annuity, many people are hesitant
with equities, largely because these are seen
as the territory for wealthier, more sophis-
ticated investors. But they may be denying
themselves the opportunity, not only to increase
their wealth, but to bulk up their retirement
Brent Salvary, fund manager at KSBM Asset
Management Limited, said stocks should be
the bedrock of any investment portfolio.
"Historically, stocks have been one of the
best performing asset classes that you can
find," he said.
So, what are stocks?
"Stocks represent ownership in companies,"
said Salvary. "When you buy a stock, you are
a part owner of a company and you partake
in the profits of that company."
Some of the profits of the company are paid
out as dividends. All things being equal, if the
company continues to do well over a period
of time, then the value of its stock should also
"It is one of the purest ways to hedge against
inflation," said Salvary. "Inflation is produced
when companies raise prices on the goods
that they sell. Why not own those companies
and benefit from increasing revenues and sales
based on these prices and these volumes?"
Are stocks that risky?
But isn t investing in equity really risky, a
potential investor might ask.
Salvary agreed that there is a component
of risk when investing in equity, but said that
risk was present in any investment.
"You may get an expensive education but
not get a job paying a salary commensurate
with your education. You may invest in your
own business. You may also invest in real
estate. But most people don t see this as being
inherently risky," said Salvary. "You see stocks
as risks because you see the price changing
everyday. On the real estate market, you don t
see real estate market prices and the volatility
in that market. But house prices fluctuate
greatly too. You don t have that fear about the
value of the volatility of your home. But that s
because you don t see it changing when you
are reading the papers everyday. But it exists.
People view holding stocks as being risky, but
I don t think there is an asset class that has
performed as consistently through the years
as a well diversified stock portfolio."
Using stock to prepare for retirement
The Sunday BG asked Salvary for some tips
on how to go about preparing for retirement
using equity as part of an investment portfolio.
He advises starting young.
"When you are young, the last thing on
your mind is saving for the future. You just
finished university. You just got a job. You
have money for the first time. The wise among
us will start putting away something for the
future," said Salvary.
The fund manager said younger people can
start with what would be considered safer
instruments, such as mutual funds and annu-
ities and build stock into their portfolios as
their risk tolerance grows. As a younger
investor, Salvary said, investments have more
time to grow.
"The earlier you start, the greater the prob-
ability that you will end up with something
really significant once you keep that discipline
and don t keep pulling from it for consumption
purposes. That delayed consumption attitude
is something that we should develop more of
in this country."
Younger people also have time to recover
from periods when stocks they have invested
in aren t doing well.
"You have a longer time horizon under
which you can recover losses if any over time
and you can match that volatility by length-
ening your investment period," said the fund
As you age, your portfolio will have to rebal-
anced as you approach retirement. A general
rule of thumb to determine the amount of
stock you should have in your portfolio, said
Salvary, is to subtract your age from 100.
"If you are 20, you should have 80 per cent
of your portfolio in stocks. When you are 50,
you should 50 per cent in stocks. When you
are 70, you should have 30 per cent in stocks.
The rule holds them in good stead too because
it reduces the risk profile automatically as you
age," he said.
Trading and trends in local stock
Currently, it is a legal requirement that stock
purchases be made through a brokerage house.
The Sunday BG asked Salvary if trading
bots are likely to be used in the local stock
market. He said while that was more easily
accomplished in foreign markets, he didn t
see this happening anytime soon here.
"There is no facility where you can actually
go and trade online on the local exchange. I
know they wanted to open it up not only to
people who own seats on the exchange but if
I am not mistaken they want $3 million for
that. We don t have that facility here. We don t
have the technology available."
The local stock market also hasn t been per-
forming as well as it had been in the past.
"Trading on the local market is going to be
tough because we have a very illiquid market
and it is getting more illiquid by the day. For
the first six months of 2015, stock volumes to
mid year were 25 per cent less than the same
period last year and it is a clear trend. Activity
is declining." said Salvary, "Interest is shifting
to overseas assets. You are not getting the
interest you would have gotten before."
Salvary said purchases of stock in foreign
companies can be made without a broker.
However, he noted that in the past foreign
brokerage houses have closed accounts of T&T
citizens, largely because of T&T s presence on
the Financial Action Task Force s grey list in
Placing stock in stocks
Equities as part your retirement strategy
Brent Salvary, left, fund manager at KSBM Asset Management Limited.
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