How do I earn above-average returns without taking on too much risk?

Every saving and investment product has different levels of risks and returns. Some of the differences include how easily investors can get their money when they need it, the rate of growth on their money and how safe their money will be. Generally, the greater the potential return on the investment, the greater the risks the investment carry.

When trying to determine your choice of investment, it is therefore crucial that you know your own risk tolerance. That is, how much risk you are comfortable taking on, in order to achieve your financial goals. It is important to understand that taking financial risks, which may include an erosion in your principal during the short term, may be required to achieve your long-term financial goals. With that said, the markets have a wide selection of securities and funds from which you may choose, regardless of your appetite for risk.

If you are a risk-averse investor of any age, here are a few tips to help you try out stock investing successfully.

If you are a beginning investor, get a basic understanding of how things work first. Know: what is a stock, what is a bond, what is an investment allocation, what’s a unit trust, what’s a pooled investment. It is important to set realistic expectations; one common mistake many new investors make is believing they can double their money overnight with the right stocks. An investor just starting out can usually benefit from the guidance of a licensed financial advisor.

To mitigate your risks, avoid investing money that you need to meet your livingexpenses, in stocks. Once you have a nice nest egg put aside, you can consider investing in stocks. When buying a stock, think of it as owning a piece of a company. For most people, investing some money in stocks or stock funds is one of the best ways to keep up with inflation. However, since stocks fluctuate in value , they are among the riskiest investments. One protection against risk is time, and that’s one of the advantages long term investors have. With this in mind, a good rule of thumb is to only invest money that you can afford to keep in the stock market for a minimum of five years.

To mitigate your risks even further, consider investing in a broad range of investments – that is called diversification. Even though stocks can really increase your investment returns, you can reduce your risk by buying shares of professionally managed funds that own real estate, bonds, and commodities, in addition to stocks, so you manage risk by spreading it out among multiple investments. That way, if one investment declines in value you will more than likely have other winners to count on.

A conservative investor may be more suited to putting money into stable, dividend-paying stocks of well established companies. Investors who build a portfolio that includes stocks that pay dividends regularly, can look forward to reliable income. Well established companies often have the financial stability to maintain their promised dividends over the long term, and are commonly regarded as dividend stocks. There are many dividend stocks that are perfect for conservative investors.

The best way to get a good return on your money without taking too much risk is to start early, diversify your investments, keep enough cash on hand for emergencies, and to consider having a financial advisor guide you. If your goal is to build wealth over the long term, what your investments do on a day-to-day basis is largely irrelevant. Monitor your monthly or quarterly investment statements to stay on top of their performance, but be cognizant that what really matter is how much your investment will be worth in 10, 20, or 30 years from now, when you need to spend the money. Overall, you want to see a trend of growth in the value of your investment, but do not get sidetracked if you experience temporary setbacks in some years.

If you need advice in building a diversified investment portfolio, FHC Investments Limited can guide you in achieving your financial goals. Feel free to give us a call today.

The following are the current Government of Jamaica bond prices as at September 10, 2021:

*All rates quoted are opening indicative levels in the international capital markets and are subject to change based on market conditions.

The Jamaican dollar appreciated by $1.08 relative to the US dollar week-over-week, moving from a selling rate of $151.34 on Friday, September 3rd to $150.26 on Friday, September 10th. The closing BOJ weighted average selling rates are as follows:

The following are the average Treasury bill rates:

Jamaica Stock Market

Movement of the JSE Indices

This week’s Market activity resulted from trading in 107 stocks, of which 39 advanced, 58 declined and 10 traded firm. Market volume amounted 186,782,791units valued at over J$1,035,325,415.95.

FHCIL’s STOCK PICKS

This information should not be relied upon by the reader as Research or investment advice. If you need advice in building a diversified investment portfolio, FHC Investments Limited can guide you in achieving your financial goals. Feel free to give us a call today.