Financial literacy advice for young economists

Caribbean students are being encouraged to invest in the green energy sector.Associate Director, Sales and Business Development at CIBC FirstCaribbean International, Gregory Blackman, gave this advice to economics and accounting students of the University of the West Indies, Cave Hill Campus, during an interactive webinar on Financial Literacy hosted by the bank in association with the Young Economists Association.

Blackman noted that Caribbean countries, including Barbados, had become green energy conscious, and governments were introducing favourable renewable energy investment policies.

“This may be an opportunity for you to not only help the environment; it is a source of passive income, saves the outflow of foreign exchange from our countries, … reduces the level of CO2 emissions and can be a source of intragenerational wealth,” Blackman said.

“In the case of Barbados, where there is a fixed rate of return for licences for 20 years based on the date of approval and the actual return is also fixed, it means that anybody that has a roof, should take advantage of this unique investment opportunity,” he suggested.

Blackman urged students from other countries to be vigilant for the emergence of similar opportunities or opportunities in a similar industry.

He also gave them pointers to consider concerning the structure of their investment portfolio. Diversification, he said, was important and he recommended limiting the size of their investment in a single entity to around ten per cent; and diversifying if an industry was taking up the lion’s share of their investment portfolio. This approach, he explained, would help to restrain their downside risk.

In addition to green energy, the webinar touched on other assets such as stocks and bonds and land. Regarding bonds, Blackman said that both corporate and government paid a fixed income, but he noted that not all governments were low risk nor were all governments no risk.

He said they were some solid corporate bond issuers; and mutual funds that were professionally managed with several years of performance data and stocks that could be considered.

Overall, Blackman advised students to be aware of the economic circumstances and the history of default when making investment decisions. He told them to read beyond the headlines and do exhaustive research particularly when new investment options were tabled.

“You have to understand the underlining intrinsic value of an asset and consider all the factors that impact that asset before you hand over your hard-earned cash (if not, it could) shift from being an investment to being more of a gamble  or speculative venture. Do your research, don’t follow fads and ask a lot of the important questions before jumping into an investment.”

On the issue of land, it was noted that some people considered land as an asset whose values always grew, but Blackman debunked that myth stressing that like with any asset, land prices fluctuated.

He explained that in most instances, residential land was based on comparable sales and when there were market events or economic downturns, similarly market prices shifted. Using Barbados as an example, he said there were instances where people bought land at $20 a square foot and a few years later it was trading barely at $14 or $15 a square foot.

During the webinar, the bank official and students also discussed pensions and retirement plans, insurance, credit card use, personal emergency funds as well as issues related to embarking on careers.(PR)