Home' Trinidad and Tobago Guardian : March 27th 2014 Contents BG18 COMMENTARY
BUSINESS GUARDIAN www.guardian.co.tt MARCH 2014 • WEEK FOUR
Over the past couple of
weeks, I have received
numerous questions on how
to invest. Many have asked
about the process, some
have asked about who they
should be speaking to, but the primary ques-
tion surrounds how much money does one
need in order to invest.
The first thing that you should appreciate
is that investing is part of a process. If you
wake up one morning and suddenly decide
you are going to become an investor, then in
all likelihood, you will lack the discipline to
stick to succeed, simply because you did not
take the time to understand the process and
what it entails.
You go to work and you earn a salary. Every
step that you take, once you have your pay
cheque in hand, should be a consequence of
deliberate and calculated actions geared
towards improving your finances.
First question is whether you are, in fact,
satisfied with the salary you are earning. The
most likely answer to that question is "no".
Appreciate that salary is a function of a num-
ber of factors most of which are, contrary to
what your union leader may tell you, within
First of all, you are paid based on your level
of knowledge and skills. If you are not satisfied
with where you are, then the first investment
is in yourself in order to improve your skill
level. May I suggest that regardless of your
profession, whether chosen or imposed, the
best in a particular field will never be out of
Beyond your skill level, you are paid for
your level of productivity. The most talented
individual, but one who lacks the discipline
of hard work to develop his skills, is unlikely
to achieve his full earning potential.
The irony in T&T is that we all complain
about the level of service delivery in this coun-
try, especially when it comes to dealing with
the public and state sector. Yet these sectors
are in aggregate the largest employers in the
country and so it is reasonable to assume that
everyone knows someone or has a family
member employed there. Despite this reality,
you would swear it was "other" people who
are delivering the poor service in these places.
If your wage does not match your produc-
tivity, then eventually you will be out of a job
because your situation would become unsus-
tainable. It may happen through the inter-
vention of your employer, or at the national
level, it can happen because our economy
deteriorates. External parties, such as the
International Monetary Fund, may impose
measures on us that results in lost jobs. If we
escape that net, then it could very well be
that you get to retirement and the state cuts
your benefits because it is no longer able to
afford. Bottom line: there is always a price to
pay for a lack of productivity. The only ques-
tion is when you pay and the way in which
it affects you at that time.
Appreciate that if a country grows its pro-
ductivity by 2.5 per cent per year, it will double
its standard of living in 28 years. If productivity
increases at a rate f 1.5 per cent per year, then
it takes 47 years. If productivity is declining,
well, you are relying on luck and eventually
our luck (oil and gas) will run out, so be
warned out of our collective complacency.
After you have done your best to increase
your earning capacity, the next step on your
financial journey is to cater to your necessities.
Many people mistake wants for needs and
this contributes to the reason why you are
unable to find the resources to invest to secure
In 1998 a study was conducted to attempt
to explain the rise in employment of married
women in the United States over the last cen-
tury. The research found that married women
are 16 to 25 per cent more likely to work out-
side of the home if their sisters husbands
earn more than their own husbands.
In other words, whether it is the result of
"sibling rivalry" or "keeping up with the Jone-
ses", comparing to others affects us in so many
profound ways that we don t even notice.
This manifests itself in the way we dress,
what we eat, who we marry, where we work,
the type of car we own, the size of our home,
It causes us to not live within our means
and, in so doing, we spend what we ordinarily
should be saving. When taken to the next
financially debilitating level, we seek to borrow
to keep up with the Joneses, thus going into
debt in order to consume.
If we can manage this propensity to con-
sume, then we would be well on our way to
financial freedom. This is easier said than
done. Why? The issue of "keeping up with
the Joneses" speaks to our desires and our
sense of self-worth. The key to managing this
issue is to have a set plan, goals and life objec-
tives. With that it place, it becomes clear that
your present circumstances is a function of
time and you have a plan in place to execute
for a better future. Who has more or less than
you at a point in time fades into irrelevance
as your goals and objectives take centre stage.
The problem is that many of us do not take
the time to plan so we end up focusing on
all that is around us and consume in an effort
Appreciate that getting this part of the
process right is more important to your finan-
cial future than selecting the right stocks,
knowing when to get into or out of the market
or understanding when interest rates are going
to rise. You have total control over all that
has been detailed so far.
Spend based on your needs and save
towards your wants and your goals. Done
consistently and you are well on your way to
getting the money that you need to invest.
An often-misguided impression concludes
that it is only the poor and the middle class
need to plan their finances and manage their
needs versus wants. Those with surplus cash,
especially the wealthy, don t have to plan.
Nothing could be further from the truth.
So long as there is the propensity to con-
sume without the context of clear financial
goals, then you are set up for failure. It may
or may not manifest itself, but at least
acknowledge the risk.
If things go wrong with your business or
source of cash flow and your lifestyle is not
adjusted to suit just as quickly and you don t
have the buffers in place, then big spending
can quickly erode what can appear to be a
substantial sum of money.
After managing your finances with goals
and objectives in mind, it becomes easier to
generate surpluses. These surpluses are your
savings and it is necessary that you build up
a pool of savings that can serve as a financial
buffer in case things go wrong in the short
term. A rule of thumb is that you should try
to accumulate six months worth of expenses
as savings, but this is largely dependent on
what you feel comfortable with.
These savings should be placed into an
income fund as these offer access to your
funds in the short term while still providing
a rate of return above bank deposits. If you
have more than your current spending needs
in bank deposits or more than six months
worth of expenses deposited in an income
fund, then you are, all other things being
equal, not maximising your financial oppor-
It is only when these matters are taken care
of, then you should move to become an
At this point, you have a solid foundation
and you are working to a plan with clear
objectives and milestones. When you invest
you are taking on greater risk for greater return.
The foundation established allows you to han-
dle the risks of stocks, bonds and real estate
and stay the course.
From there it becomes quite easy as the
compounding effect of staying invested allows
you to generate wealth over time. Whether
prices rise or fall at a point in time becomes
Everything described here is quite achiev-
able; you simply need to be committed. Having
a financial adviser who understands these
issues and can guide you through the ups and
downs will no doubt be as asset as the trials
of daily life sap your discipline.
Ian Narine is a broker registered with
the Securities and Exchange Commission.
Help! I don't
money to invest?
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