Home' Trinidad and Tobago Guardian : April 9th 2014 Contents A22
Guardian www.guardian.co.tt Wednesday, April 9, 2014
Managing your money ultimately involves your
building of an investment portfolio that strives to
achieve your investment goals within the context of
your own risk tolerance. Over the past several weeks,
we have been working towards the construction of
a representative portfolio for the conservative
We are now at the stage where the selection of spe-
cific securities/investments would be needed to round
off a portfolio to which you may be aspiring. But
before moving to specific security selection, let s take
some time to reflect on the areas covered in this series
thus far and how they fit together.
Recall that we would have spoken to the distinction
between a passive savings culture and that of the active
investment approach. We would have shown that,
over the past five years, a saving culture would have
generated a low level of return (approximately 1.88
per cent per year). This was compared to an active
investment portfolio, with our take on the conservative
investor. Here, it was shown that, over the past five
years would have generated annualised returns in
excess of ten per cent, significantly higher than the
passive savings approach.
Investment mindset and skillset
However, these are just numbers. In order to achieve
them, one must have a certain investment mindset.
This investment mindset is part of the critical discipline
of investing. There may be times when returns are
good, while other years may produce low or negative
returns. Over the medium term, however, it has been
shown that the aggregate returns from investing add
far more to your wealth base. The investment mindset,
therefore, is the elemental starting point.
Equally important in the journey of building an
investment culture is having access to certain skill sets
requisite to the investor. What do the skill sets include?
We have mentioned specific areas being: constant
monitoring of markets and potential investment oppor-
tunities, relationship building with a reputable, trusted
and longstanding investment adviser, asset allocation
and securities selection. All these skills are essential
prerequisites---technical and behavioural---for building
a portfolio that gives you positive returns over its life.
Next, our investment themes have focused on the
1. Target Positive Inflation Adjusted Returns;
2. Lengthen Your Investment Horizon;
3. Diversify Across Currencies;
4. Diversify Across Asset Classes.
On these bases, our view for a representative portfolio
of the conservative investor was crafted as follows:
1. TTD Fixed Income
2. USD Fixed Income
3. Regional Equities
4. International Equities
We are now at the stage of securities selection. Here
are some of the critical questions often asked in realising
the securities selection.
1. For a T&T investor, how do you access hard cur-
rency which will be required to flesh out such a port-
folio? In our suggested portfolio, for every TT$100,000,
approximately 43 per cent or TTD equivalent $43,000
would need to be invested externally by way of hard
2. Investing internationally, how do we go about
accessing such investments? There would be some
need for execution services. By that, I mean if you
were buying shares or bonds, for example, you would
Managing Your Money
Moving to securities selection
need broker support to execute transactions.
3. Where can you access appropriate investment
4. How do you monitor and measure per-
formance against set investment goals?
If you are a small, or an "aspirational investor",
how can you get to the point of a well-structured
portfolio, as well as have affordable investment
advice and execution?
Portfolio construction is a work in progress,
especially for the small/aspirational Investor.
Regardless of portfolio size, discipline remains
the most important ingredient in working towards
your investment targets. As part of that work in
progress, the aspirational investor should consider
moving from product to portfolio .
Put differently, the goal of portfolio construction
can be met by incrementally building on a suite
of investment products over time. The continuous
process of "pruning" this suite of products into
a portfolio will help you achieve the right balance
and mix as deemed appropriate.
As we next move forward into specific securities
selection, we will address these various ques-
Subhas Ramkhelawan is the managing direc-
tor of Bourse Securities Ltd.
This document has been prepared by Bourse
Securities Ltd, ("Bourse"), for information
purposes only. The information in this document
is not intended to predict actual results and no
assurances are given with respect thereto.
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