Tuesday, May 26, 2015

U and your money

For 2013, Keep Planning and Investing

2013 is right around the corner, so it's time to start evaluating your success for 2012 and setting investment goals for next year.

You may have short-term goals you hope to achieve within a few years and long-term goals for the distant future. For example, you may be saving for the down payment on a home or perhaps you want to provide university education for your child or children. Maybe your goals are even longer term and you're building a nest egg for retirement or planning to get married. Whether you are kick starting your investment or already a seasoned investor, setting goals is the foundation upon which long term wealth is built.

In order to reach your goals, you need to determine their practicality and outline each goal's investment time horizon. Time is important because the longer you have to achieve a goal, the more aggressive you can be in your investment choices. Conversely, when you have less time to achieve a goal, you are more likely to consider lower risk investments.

After establishing your goals, the next step is to determine what your current financial picture looks like. To see through the maze, the easiest way is to start a budget which is the bedrock upon which lies your investment strategy. It could mean simply allocating your income between savings and different categories of expenditure and debt repayment. Establishing and sticking to a budget leads to financial discipline and helps you to understand how much cash flow is available each month for investment and savings. It is a rule of thumb that establishing a regular monthly savings plan is recommended over one-time lump sum investments to reduce stress on cash flow.

For any investor, the key to investing 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 deposits.

Such asset class diversification allows investors to limit their 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 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.

Once you have determined what type of investor you are and what your ideal asset mix should be, you should re-visit your financial goals and investment strategy required to meet those goals. Testing the waters of global investing, for instance, will require a different strategy from someone now entering the investment arena.

At the Unit Trust Corporation, the Growth and Income Fund (GIF) is 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.

As we have noted throughout 2012 and will continue to reiterate in 2013, diversification involves not only investing in equities but also fixed income instruments : Treasury Bills (T-Bills) and high-quality bonds via bond or income mutual funds, such as the UTC's Global Bond Fund and UTC's US$ Income Fund. While T-Bills can help weather financial storms and buffer against volatile markets, the global bond fund can generate income and is an effective means of achieving global reach for an investment portfolio. On the other hand, UTC's US$ Income Fund offers capital preservation as well as current income.

With 2013 on the horizon, investors need to consider adjusting their investments in order to keep to the desired allocation between stocks, bonds and cash. In the long run, it is difficult for investors to forecast market moves, hence, investors should spread their eggs among many baskets and remember that drastically altering their portfolio too often can bring negative results.

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 in 2013.

The path to investing success takes time, serious study, disciplined effort and most importantly, patience and UTC portfolio managers can help investors enhance the performance of their investment portfolio and to identify ways for them to continue to save effectively and generate wealth.

By setting sharp, clearly defined investing goals, you can measure and take pride in the achievement of those goals, and you'll see forward progress in what might previously have seemed a long, pointless grind.

As author and investor Robert Kiyosaki once said, "It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for." We wish you a Merry Christmas and a bright and prosperous New Year.