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Investing Myths Busted: Change Your Money Mindset

We’ve heard them all. We’ve heard from our parents, friends, teachers, pastors and that smart guy on the street, countless myths surrounding money and investing, that make it all seem like an unsolvable mystery. We all have good intentions when it comes to our financial development; however these common placed fallacies, misjudgements and misunderstandings regarding money and investing can actually hamper our financial health. Here, we seek to bust three money and investing myths. 1. Investing is only for people with a lot of money or for millionaires This is perhaps one of the most common misconceptions and is usually the first response to the question “Do you have any investments?” The definition of investing speaks to money, interest rates, returns and timeframes. There is no reference for a threshold to be able to invest. It is valid to consider the size of the investment, as it is one of the determinants for your returns. However, there are many affordable and easy ways to invest. There are investment products tailored to suit practically any pocket. For example, retirement investment plans offer investing opportunities starting at minimums of EC $100 a month. In addition, it takes as little as EC$50 to purchase shares on the Eastern Caribbean Stock Exchange (ECSE). These types of products make investing accessible to virtually everyone. 2.

It’s too risky to invest Many people shy away from investing as they have deemed it too risky. They have heard awful stories of questionable investment schemes, corporate failures and debt defaults. It would be misleading to ignore that risks do exist and therefore it is pivotal to be a smart and realistic investor. A smart investor takes the time to understand the basic principles of investing and seeks financial advice to develop a sound investing plan. Smart investors keep track of their investments, continuously adjusts their investment plan to suit their needs and the investing environment and looks out for warning signs with each investment. A realistic investor takes into consideration the risk-reward ratio. The risk-reward ratio refers to the relationship between the risk level of an investment and its potential returns. In a nutshell, the higher the risk, the higher the expected return,

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while the lower the risk, the lower the expected return. It is up to you, the investor, to determine the return that you desire while being cognizant of the level of risks your investment is exposed to. 3. Put your money in the bank… that’s the best place for it! This was true about 60 years ago. There were fewer options to save money and interest rates also allowed our grandparents to keep their money in the bank and attain a good enough return. However, with current reducing interest rates existing at banks, a regular savings account may actually result in you losing money over time. This is because the interest earned may not sufficiently compensate you for inflation and service charges and transaction fees. This does not mean you should hurry down to your bank and withdraw your funds. That would be premature and impractical. However, you should seek out higher interest yielding investment opportunities such as bonds, fixed income repurchase agreements, treasury bills and stocks, bearing in mind your risk tolerance and investment objectives. These are options generally offer better returns and may well be the best place for your hard earned money. We could continue to debunk every myth regarding money and investing, however, as an investor you will need to consciously recondition your mindset and eliminate these misconceptions which can hamper your financial development. Seek the assistance of a financial expert and ask him/her to provide you with the necessary information to invigorate your mindset and help you develop an investment portfolio that suits your needs.

St. Lucia Business Focus 82  

Our special feature in this issue is the 10th Anniversary of First Citizens Investment Services Ltd. which has grown into a regional powerho...

St. Lucia Business Focus 82  

Our special feature in this issue is the 10th Anniversary of First Citizens Investment Services Ltd. which has grown into a regional powerho...

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