Everyday we hear this jargon being tossed around. They are topics of conversation in just about every media outlet, coffee shop, bar, and other social gatherings. These gatherings often turn into a replica of Gordon House as people propose amendments to fiscal policies, structural economic reforms, capital control, and various other measures to be taken in order to counter the increasing rate of depreciation of the Jamaican dollar relative to the US counterpart.

Today, I am not here to assume a seat in Parliament, dissecting and making suggestions as to which economic change needs to be made to tackle the issue of increased devaluation and rising inflation. Instead, I am here to represent the layman, shedding some light on their effects and how we can take matters into our own hands to protect the value of the money for which we work so hard for.

It is imperative that the general public becomes more cognisant of the effects devaluation and inflation have on the value of the dollar we hold and its subsequent purchasing power.

Devaluation speaks to the reduction in the value of a country’s currency relative to another foreign currency. Devaluation or depreciation means that the purchasing power of the general public’s money has declined.

Let’s put things into perspective. At the start of the year the exchange rate was approximately $120.37 to US$1. By the end of October the dollar devalued by 7.2 per cent, exchanging at $129.11 to US$1. What does this 7.2 per cent devaluation mean for us?

Well, devaluation may result in a host of negative effects. It may give rise to inflation as imports become more expensive, and we see this reflected in the increase of prices of goods and services. Individuals who have debts in foreign currency will significantly feel the effects of devaluation when the cost of their debt repayments increase.

The most prevalent effect is quite possibly the reduction in the purchasing power (the amount of products/services our money can buy) of our money. In every area we do feel its effect. We now have to ‘fork out’ more of our money to buy the same items we could have bought for less a few months ago.

Foreign goods, travelling, vacationing and general shopping become more expensive. In essence, we now spend more money to buy one US dollar.

The million-dollar question: How exactly do we beat these two daunting factors that seem to be inevitable and how do we assume that vantage point?

The simple answer: Invest, regardless of how small. Taking a portion of your hard- earned money and allocating it to investment instruments, thereby maximising its earning potential.

The next line of questioning may be, where do I place my investments? Will my money gain a better return in the US market or in the local market? The truth of the matter is that there is great earning potential at either end of the spectrum.

One thing that is worth mentioning is that investing in hard currency (such as the USD) may act as an automatic hedge against the effects of devaluation. If you had US$1,000 at the start of the year and did absolutely nothing with it, by the end of October in the same year, the value of that US $1,000 would have grown upwards of seven per cent relative to the Jamaican dollar. Now, let’s imagine if you had invested that same US$1,000 and the investment appreciated by 10 per cent. That is a 10 per cent gain on your US denominated investment, thereby further increasing the purchasing power of the US you hold.

The local market is also quite attractive for investors looking to capitalise on capital appreciation.

Let us look at a few local securities on the Main and Junior Market and their year-to-date (YTD) increase in stock price as at November 16. Palace Amusement — 124.68 per cent YTD, Caribbean Cream Ltd — 90.30 per cent YTD; Berger Paints Jamaica — 98.44 per cent YTD; Caribbean Cement Company Ltd — 59.33 per cent YTD; Lasco Manufacturing 36.41 per cent YTD.

These are excellent gains that we can all take advantage of by investing. I am by no means saying that similar profits occur right across the board, or that past performance is indicative of future results. I am simply highlighting that there are additional revenue streams that can benefit the regular investor.

Local investments are generally more affordable, allowing a wider range of people to start investing without the need of having large sums of money. However, considering that investing in the local market still exposes the value of your money to devaluation, any investment that you undertakeneeds to outperform the rate of the devaluation — and then some — for you to realise an actual net positive increase.

Investing is not only for the rich! It is where we go to become wealthy.

Various brokerage houses offer expert advice on being a prudent investor. At Stocks and Security Ltd, you will be guided by our highly experienced brokerage team who will analyse your investment goals and objectives and assess your risk appetite.

They will also use research- driven analysis to recommend and aid in the construction of a diversified and balanced portfolio tailored towards your investment goals. This team will guide you along your investment journey in building your wealth and securing a more comfortable future.

With that said, it is important for us to consider investing as an alternate avenue to generate income and grow your wealth. Take matters into your own hands, protect the value and increase the purchasing power of your money!

Kris-Andrew Brown is a sales associate, Managed Products at Stocks & Securities Ltd.