What is the first step of someone starting to invest - Alesha Phelps

What's the first step for someone starting to invest?

A1: Starting your investment journey begins with setting clear, tangible goals, such as saving for retirement or building wealth, and understanding your risk tolerance. Mutual funds emerge as a compelling option here, offering a way to diversify across various assets with a single investment, which can be tailored to match your risk appetite and investment horizon. Mutual funds simplify entering the investment world by pooling resources with other investors under professional management, aiming to strike a balance between risk and return which would be noted in a fund’s prospectus.

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MFATT and the Mutual Fund Industry - Abbey Mohammed

What is MFATT?

MFATT is the Mutual Fund Association of Trinidad and Tobago. It is the representative body of mutual fund practitioners.

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How inflation impacts your savings and investments- Keshala Mahabir

Q & A with the Mutual Fund Association of Trinidad and Tobago (MFATT)

Keshala Mahabir-Gosine
Portfolio Manager- Maritime Capital Limited

MFATT: Designated Representative of Director

How Inflation Impacts Your Savings and Investments

What is inflation? 

We hear this term often, whether through Central Bank Reports, Government Bureaus or Annual Budget Presentations. Today we will delve a little deeper into what inflation really is and how it impacts our savings and investments.

Inflation is the rate at which the overall level of prices for various goods and services in an economy rises over a period of time. We experience this in our everyday lives when we observe the prices of basic staple items go up as time goes by. For example, a doubles which costed $3 in 2003, costs $6 now, 100% more than it did back then. Effectively, the purchasing power of our money is decreasing over time; this is inflation.

What causes inflation?

Inflation is caused by many factors, one of them being rising demand for a good or service where there is limited supply. Consumers are therefore willing to pay more for the same product, in turn pushing prices higher. If we look at the ongoing war between Russia and Ukraine, with Russia being one of the world’s largest suppliers of oil, the production output of oil was cut resulting in its lowering supply. Since then we have seen the price of oil rising to highs of over US$100/bbl and levelling off at US$ 79bbl as of 13th June 2024 date. In addition to energy production being lower than the world’s demand, we cannot forget the implication of the reopening of economies post Covid -19 and its impact on supply chains globally. These issues caused systemic rises in transportation and freight costs as there were massive bottlenecks in production and supply of metals and other commodities.

Rising production costs resulting from these factors cause inflation as these are passed on to consumers in the form of higher prices. In our economy, inflation had averaged approximately 1.68% per annum for the 7 years prior to and including 2021. During 2022, (year of Russia Ukraine war) we saw inflation climbing to 8.70%, effectively lifting our inflation average to 2.55%.

How does inflation impact us?

As we have realised by now, if our money sits in a bank account, its purchasing power will fall as prices continue to rise every day. In Trinidad and Tobago for example, for the 9.3 years covering December 2015 to April 2024, inflation has risen by 21.23% or at an average rate of 2.28% per annum, tracked by the CPI Index developed by the Central Statistical Office. If your wages did not increase by at least 20% over this period, you would not have been able to enjoy life in 2024 as you did in 2015.

What can we do to combat the effect of inflation?

Suppose through your savings you accumulated say $50,000 and banked it in December 2014. This same $50,000 in April 2024 will be worth approximately $39,385 all else being equal. If you had invested in a 10 year Government bond with a yield of 2.7% at that time (Central Bank Yield Curve December 2014 at the 10 year tenor), you would have been able to maintain the value of the savings and have a little extra to spend. Of course this is all in hindsight; we cannot predict what the future holds. Nobody holds a crystal ball therefore nobody could have anticipated the impacts of Covid 19, the Russia Ukraine war and the ripple effects of these on us and the economy has a whole.

While we cannot change the past, we can prepare for the future by putting our money to work smartly so it provides returns which are greater than the rate of inflation.

Can investing add value?

When we buy stocks of a company, we own a piece of that company. The company’s performance in terms of earnings generation in theory drives the share price of the stock. When companies are able to successfully pass on rising costs onto consumers, this is filtered into share price increases which adds to our investment value. In this way equities can act as an inflation hedge. Our Composite Index (which tracks the performance of the local and regional stocks) has returned 8.18% for the period December 31st 2014 to May 31st 2024. Appropriate sector allocation and stock picking can assist with achieving above average returns when done right.

Investors seeking less volatile options can take advantage of the Government Bonds with benchmark yields of 5.32% for a 10 year period.

In Trinidad and Tobago investors have subscriptions in excess of 60Bn in Mutual Funds. These mutual funds are invested in diversified buckets of stocks and bonds and seek to provide stable and /or superior returns to investors. There are currently 16 issuers of Mutual Funds in Trinidad and Tobago and many options to choose from; 12 of these form part of the Mutual Fund Association of Trinidad and Tobago (MFATT). Investors should seek out a trusted investment partner that has a track record of outperforming the financial markets. For more information on Mutual Fund providers in Trinidad and Tobago, investors can visit the MFATT’s website at https://mfatt.org/.

Riding the Market Rollercoaster: How Mutual Funds Help You Stay Grounded in Volatile Times

Q & A with the Mutual Fund Association of Trinidad and Tobago (MFATT)

Racine McKenzie

Manager, Asset Management

Scotia Investments Trinidad and Tobago Limited

MFATT: Designated Representative of Director

Riding the Market Rollercoaster: How Mutual Funds Help You Stay Grounded in Volatile Times 

If you have ever felt anxious watching the value of your investments drop or overly excited when markets surge, you are not alone. Investing often feels like a rollercoaster, filled with thrilling highs and heart-clenching lows, but when your financial future is on the line, those emotions can lead to decisions that can hurt you more than help you. That’s why mutual funds play such a powerful role for everyday investors, offering access to diversified portfolios managed by professionals. Mutual Funds can help cushion the ride in times of market volatility, providing the structure and strategy that many individuals need to stay invested and on track.

Not All Mutual Funds React the Same to Market Volatility

Market ups and downs affect all investments, but the impact is not the same across all mutual funds. For example:

• Money market and income funds, which hold short-term instruments and high-quality bonds, tend to be less volatile. These funds are generally more stable and suited for conservative investors seeking lower risk.
• Balanced funds, which combine both stocks and bonds, tend to experience fluctuations, providing growth opportunities while also helping to reduce the impact of market downturns.
• Equity funds, on the other hand, are more sensitive to market turbulence, often seeing larger price swings in both directions.

While volatility is part of the journey, finding the fund that fits your risk level and financial goals makes all the difference.

4 Things to Keep in Mind When the Market Gets Bumpy

1. The Cycle of Market Emotions Is Real

Investors often go from optimism to excitement, then to fear and panic when markets drop, before returning to hope and relief during recovery. Reacting emotionally when markets drop can lead to costly mistakes, like selling low and locking in losses. Mutual funds offer the benefit of professional management, helping to take emotion out of the equation and keep your investments aligned with your overall goals.

2. Market Corrections Are Normal

All assets go through periods of decline, including those held in mutual funds. History has shown that even after sharp corrections, markets do recover. For example, equity funds may experience short-term losses during a downturn, but they also rebound more strongly when conditions improve. Staying invested, especially through a diversified fund, can help you benefit from that recovery.

3. There Has Always Been a Reason Not to Invest

From global recessions to geopolitical conflicts, every era has had reasons to feel uncertain. Also, as an investor trying to move in and out of the market at just the right time is nearly impossible. Mutual funds help remove the burden of timing the market or picking individual stocks even in times of uncertainty. Even when markets are choppy, staying disciplined can make a big difference over time. It has been proven that long-term investors, who stayed the course were often rewarded.

4. Don’t Avoid Risk; Understand It and Choose the Right Fund for You

All investing involves risk, but not all risks are created equal. Mutual funds come in different risk categories, giving you the flexibility to choose based on your comfort level. Whether you prefer the stability of an income fund or the growth potential of an equity fund, there’s a mutual fund that matches your journey.

Stay Buckled in and Stay Invested

While markets will always have ups and downs, the long-term direction has consistently been upward. Mutual funds offer a smart way to stay the course with built-in diversification, professional guidance, and strategies tailored to your financial goals.

So, when market swings make you second guess your decisions, remember mutual funds are designed to help you grow your wealth, manage risk, and stay focused, no matter the noise.

Winning with Mutual Funds - Tricia Kissoon

What is Strategic Asset Selection and Diversification? Lessons from Professional Football

In professional football, the most successful teams are those that excel not just because of individual talent but because of a well-crafted strategy that leverages the strengths of each player. This concept extends seamlessly to the world of investing, where success is achieved by thoughtful asset selection and diversification, which is a strategy as integral to winning in the markets as it is on the football field.

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