Home' Trinidad and Tobago Guardian : June 1st 2017 Contents JUNE 1 • 2017 guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG19
Don't let lumpsum get you down
Do you ever ponder what would
happen if you were given a
large sum of money?
Would you take early re-
Take a well-deserved
cruise with your spouse?
Adopt a charity?
Many people feel burdened and intimidated
with 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 even winning the Lotto.
No negligent spending
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 hoc manner. 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.
Remember, by assessing your financial con-
dition and the level of risk you are willing to
take, you can take away some of the fear as-
sociated with investing a lumpsum. As a rule,
it's never a good idea to put all that money in
a single asset class or investment.
Maybe you've never had a financial plan or
lived on a budget.Now is the time; even before
you go on that cruise you've been dreaming
A lump sum payout may give you the op-
portunity 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 ex-
Whether you put all your cash to work im-
mediately or periodically invest portions with
dollar-cost averaging, you need to make your
decision completely upon your investment
objective and risk tolerance and not based on
Fully understand and prioritise your options,
chief among them should be seeking to gen-
erate some sort of income from your lump
sum, reducing your expenses and seeking a
new, regular income source.
Investing in income-generating property,
a business or dividend paying stocks or a ju-
dicious 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 vehi-
cle 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 se-
curities 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 op-
tions, 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
For any investor, the key to investing a lump
sum is to ensure that your portfolio is well di-
versified and one avenue is through a mutual
fund, which typically involves building a di-
versified portfolio of stocks, bonds and cash
or short-term deposits.
Such 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-performing assets while
being cushioned from declines in others.
Remember that such allocation 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 lumpsum 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 retire-
Whether you put all your cash to work im-
mediately or periodically invest portions, you
need to make your decision completely upon
your investment objective and risk tolerance;
and not based on emotion. No matter your sta-
tus, what is required is a judicious mixture of
mutual funds, equity and fixed income invest-
ments that will enable anyone to build a strong
Whichever route you are considering, focus-
sing on wealth management can help enhance
the performance of an investment portfolio
and identify ways for you to continue to save
and invest effectively and generate wealth.
• Resist the urge to splurge
• Be responsible and take care of your fi-
nancial priorities first
• Whether it’s an inheritance, bonus or re-
dundancy pay-out you should put it to work
by making wise investments to secure your
• Diversify so you don’t put all your eggs
in one basket.
If you're busy with your job, your children, or
other responsibilities, or you don't feel com-
fortable making important financial decisions
on your own, then you may need professional
Even if a financial professional has been rec-
ommended 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.
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