Despite a challenging economic environment, experts are advising that now is still the time to invest, no matter how small.
“The idea is to take risk sensibly and consistently over as long a period of time as you can,” said Peter Arender, Chief Investment Officer of Fortress Fund Managers.
“Good investment risk depends on price. It involves paying attention to the price you are paying for the assets you are buying. It doesn’t do good to buy risky assets at high prices; that just sets you up for disappointment.”
He also pointed to the importance of having a variety of investment options.
“The last thing is the time horizon. The way to take a good risk is to
have a time horizon that is long enough for these assets,” the senior investment advisor said, recommending a five-year or more time horizon for good returns.
“So, pay attention to price, diversify properly, and then ensure you have a good long-time horizon and keep at it steadily. That would be the ways we think taking good investment risk should be done,” Arender told Barbados TODAY during a recent online lunch and learn session.
He suggested that a lot more residents were not investing because they were either not financially literate or simply scared.
“It is not scary. It is just like anything you don’t know. Like anything else, sit down and get yourself familiar and start asking questions. It is an essential part of life. This is not an optional thing . . . Understanding how basic financial products like mutual funds work is definitely worth a little time,” Arender said.
However, with commercial banks offering next to zero interest on savings and very little trading taking place on the stock exchange, one might ask what other options are available for people with cash on hand.
“I guess you can presume that more and more people are putting their funds in their credit unions. The credit unions have been expanding,” said senior chartered accountant Douglas Skeete.
“So we have the credit unions, the commercial banks we still see [some activity]. Although the interest rates are negligible, individuals still seem comfortable with putting their monies in the commercial bank.
It will be difficult for them to get out of that thinking because it is something that we came up with from we were 10 years old and seeing our parents putting some money on the savings account.”
He said Barbadians who have access to extra funds may also consider investing in real estate.
Agreeing that having a diversified portfolio of investment was important, Skeete told Barbados TODAY, “you don’t want to take all your money and put it in land. You don’t want to take all and put it in the commercial bank or the credit union either. So, you can parcel these out so when things happen and one goes down you can still have five or six others you can rely on.”
He also pointed to Government paper as viable investment instruments.
However, with a recent debt restructuring, Skeete believes it may not appear as attractive as it once did, even though “there is still some Government paper that people might be interested in”.
“It is difficult to explain to people there is a risk when you are investing, whether it is Government or private sector,” he added.
In a separate interview with Barbados TODAY, economist Jeremy Stephen also shared his thoughts on investing now, saying he believed a lot more people would seek to hold on to whatever little cash they had, given the uncertainty of the various markets at this point.
“Right now, it’s people sitting on cash because a lot of people have a very negative view towards where the economy is going. COVID-19 very much affected the entire world and given Barbados’ mono industrial model, all driven by tourism or financial sector . . . we will be feeling the effects of COVID-19 more than [some other countries],” he said.
He explained that with people suffering from job losses and high inflation, they were simply trying to keep their heads above water.
The kind of investment Stephen believed more people have been taking on since the pandemic is entrepreneurship.
“Since there is so much doubt on what is going on in the formal economy, a lot of people aren’t necessarily going to invest as they were before.
What you might see people invest in more is themselves, to start businesses,” he said.
“It is my belief that kind of income is going to be far and few in between over the next few years. So you will see more people trying to set up businesses,” he said.
“I have seen more people going back into agriculture than ever before.”
Managing Director of Fortress Fund Managers Roger Cave told Barbados TODAY he believed more residents would invest if they were financially literate.
Welcoming the recent launch of the National Financial Literacy Bureau, he said he hoped it would result in an improvement of the current investment climate.
“There are lots of areas for improvement in financial literacy and I am glad we are making a positive step towards that,” Cave said, adding that it was up to residents to seek advice, carry out adequate research, and choose the investment options most suited to their needs.
“There are investment opportunities available locally from the main providers and persons can get informed and get involved.”