by Marlon Madden
With local savings climbing to more than $14 billion at the end of March this year, Barbadians are being described as “chronic savers” by one wealth management official, who is urging them to start investing more.
Head of Wealth Management for Sagicor Investments Michael Millar made the observation and recommendation recently as he joined other panelists in calling on residents to start investing early and engage the services of wealth management and investment officials to help them with their investment options.
The issue came up for discussion during a recent Sagicor Let’s Talk webinar, under the topic Investments: Building Your Financial Foundation.
Insisting that now is the best time to invest, Millar also stressed the need for investment to become more discussed among family members including the children.
“I think it is something we need to instill in our families, in our children. I think there should be a mutual fund account almost in every home.
The same way you open a bank account from early, you should open a mutual fund account, because you are buying into a diversified fund, you are not concentrating your investments and when you look at it pound for pound it is a relatively moderate risk profile type of investment,” he said.
“The other thing is that we need to shift the culture. So we have a culture of chronic savers. Back in the day when I was five-years-old, the environment for investing and saving was a lot different.
You could have put it in the bank and still earn a reasonable rate of interest. So in your mind, if you are getting a rate of interest for almost taking on no risk then for you that is fine,” he said.
However, Millar added: “You have a case now where the banks are giving you effectively zero in terms of yield and interest rates.
So it means you now have to really go about looking to actually invest if you are looking for a return, especially a return that outpaces inflation over time and give you some real growth on your wealth”.
“So ideally, it means that even though it is good to save, and saving has a purpose because it is liquidity management – management of day-to-day expenses – ultimately, growing at a rate of zero is very limited growth. So you need to look for opportunities that can actually grow your wealth in a meaningful, real tangible way,” he recommended.
According to Central Bank data, despite historically low interest rates, total deposits in commercial banks, credit unions and other deposit-taking institutions stood at $14.2 billion at the end of March 2022, compared to $13.1 billion at the end of the corresponding period last year.
Of this amount, $13.1 billion accounted for local currency deposits while foreign currency deposits are $1.1 billion.
Acknowledging that there are different types of investments and different approaches that individuals can take when deciding to invest, Millar said he would recommend putting aside the amount to invest from one’s salary before doing anything else.
However, he said it must be done in a way that individuals are able to be disciplined by sticking to it each week or month.
“Sometimes you have to set aside the investment upfront and kind of spread your residual. That way, you make investing intentional, you make it consistent.
We always say to that same individual, tomorrow if the government were to go and raise tax you would see a case where that person will have no choice but to live on the residual.
So why can’t we ‘tax’ ourselves and ‘tax’ ourselves in a way that could potentially build our wealth through compound interest over time? So take it off upfront,” he explained.
Portfolio Manager with Sagicor Investments Nicholas Neckles described investment as a process, explaining that individuals should start out with a specific financial goal in mind and based on that goal set the amount to be invested while considering the level of risk they are willing to take.
“I know once we hear accounting, we get nervous but you can basically look at your bank statement, which ever account you have where you receive your salary – look at your opening balance for one month and look at the closing balance, take an average of what that opening and closing balance is and if you have a positive closing balance each month, that suggests the amount you have to invest,” he explained.
“Some may say ‘when I do that it is not looking too good. It is less’. That is where you have to make tough decisions and sacrifices. When there is something we like to do we always find a way to do it.
If you really want to invest you will find a way to do it. For instance, you can look at subscriptions you have that you don’t always use and cut down on those, avoid impulse buying, when you leave your home know exactly where you are going and go there to [lessen your use] of gas,” he recommended.
marlonmadden@barbadostoday.bb
