Home' Trinidad and Tobago Guardian : March 17th 2016 Contents What happens if you suddenly find
yourself in receipt of a large sum of
money? Would you take early retire-
ment? Take a well-deserved cruise
with your spouse? Adopt a charity?
Receiving a lump sum can be very
exciting and exhilarating because it s rare to have the opportunity
to spend or invest a large amount of money at one time. But,
figuring out what to do with a lump sum payout can also be
very stressful, especially if you aren t comfortable making
sound financial decisions. It can easily be squandered on friv-
Many people would feel burdened and intimidated with the
responsibility of managing any kind of excess money. It is
recommended that you should take a few months or even a
year to decide how you ll use the money, especially if the lump
sum is tied to an emotional event, such as a death of a family
member, a separation from your job or winning the Lotto.
The first step is to take an honest look at your current
financial situation and develop a financial plan based on your
goals. What you need now is the temperament to control the
urges that leads to negligent spending or investing in an ad
Remember, by making a prudent assessment of your financial
condition and allocating assets in line with the level of risk
you are willing to take, you can take away some of the fear
associated with investing a lump sum. As a general rule, it s
never a good idea to put all your assets and all your risk in
a single asset class or investment.
Maybe you ve never had a financial plan or lived on a budg-
et. Now is the time, even before you go on that cruise you ve
been dreaming about. If you sit down and take an honest look
at your entire financial situation, you will be in a better position
to use your lump sum wisely.
A lump sum payout may give you the opportunity to buy
a home, live a comfortable retirement, save for your children s
education or reach another investment goal. If you re the type
of person who will read as much as possible about your options
and ask the right questions about them, you may not need
But, if you re busy with your job, your children, or other
responsibilities, or you don t feel comfortable making important
financial decisions on your own, then you may need professional
advice. Even if a financial professional has been recommended
by friends and others you trust, we encourage you to thoroughly
evaluate the background of any financial professional with
whom you intend to do business.
Whether you put all your cash to work immediately or peri-
odically invest portions with dollar-cost averaging, you need
to make your decision completely upon your investment objec-
tive and risk tolerance and not based on emotion. Fully under-
stand and prioritise your options, chief among them should
be seeking to generate some sort of income from your lump
sum, reducing your expenses and seeking a new, regular income
Investing in income-generating property, a business or div-
idend paying stocks or a judicious mixture of mutual funds
are some of the options to consider that could enable you to
build a strong investment portfolio. Some people take the
opportunity to learn a new skill and improve their capabilities
to reposition themselves in the job market.
For example, if your time horizon is 20 years, you can invest
the entire lump sum of money into long term investments,
such as the UTC s Growth and Income Fund, an investment
vehicle specifically designed to provide the investor with the
potential to earn capital growth and dividend income and a
price guarantee feature which affords investors protection of
capital once the funds remain invested for a minimum of three
years. It is invested in shares of local companies trading on
the stock exchange, government and government guaranteed
bonds, short-term securities and foreign equities.
It could mean simply allocating your income between savings
and different categories of expenditure and debt repayment.
Once you fully understand all of your options, you ll be in a
better position to make good financial decisions. So try to
resist the temptation to splurge and save yourself a lot of
For any investor, the key to investing a lump sum is to
ensure that your portfolio is well diversified and one avenue
is through a mutual fund, which typically involves building
a diversified portfolio of stocks, bonds and cash or short-term
Such asset class diversification allows you to limit your risks
by reducing the effect of a possible decline in the value of one
any asset class or security, so if one asset class or security
underperforms the others can offset the impact.
By having a well-diversified portfolio with a mix of these
asset classes, you can participate in the gains of the best-per-
forming assets while being cushioned from declines in others.
Remember that the asset allocation that works best for you
at any given point in your life will depend largely on your time
horizon and your ability to tolerate risk.
Pay off debt
This should be a priority for anyone that gains a large lump-
sum of money. Try and clean up your consumer debt such
as car loans, mortgage debt, credit cards or even student loans.
Not only does paying off your debt free up your money but
it could boost your retirement strategy.
Consider investing in our retirement instruments, such as
the UTC s Universal Retirement Fund (URF) or the Individual
Retirement Unit Account (IRUA), ideal vehicles to consider as
part of your retirement planning. They can provide the keys
to dealing effectively with the prospect of retirement and old
age by allowing an investor to maintain an investment portfolio
that provides financial options in the golden years.
Whether you put all your cash to work immediately or peri-
odically invest portions, you need to make your decision com-
pletely upon your investment objective and risk tolerance -
and not based on emotion. No matter your status, what is
required is a judicious mixture of mutual funds, equity and
fixed income investments that will enable anyone to build a
strong investment portfolio.
BUSINESS GUARDIAN www.guardian.co.tt MARCH 17 • 2016
Unit Trust Corporation
Don't be a
Lump sum tips:
• Resist the urge to splurge
• Be responsible and take care of your financial priorities first
• Whether it's an inheritance, bonus or redundancy pay-out you
should put it to work by making wise investments to secure
your financial future.
• Diversify so you don't put all your eggs in one basket.
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