Sterling Asset Management (SAM), in a webinar held last week Tuesday, sought to allay the fears of those individuals who have apprehensions regarding investing and insurance.

The investment house joined with Caribbean Assurance Brokers (CAB) to debunk myths surrounding the topic ‘Insurance and investing are a waste of time — I don’t need it and can’t afford it’ in a panel discussion moderated by SAM Vice-President — Sales and Marketing Toni-Ann Neita Elliot.

As panellists, CAB CEO and Chairman Raymond Walker and SAM Assistant Vice-President — Personal Financial Planning Dwayne Neil sought to answer three questions: (1) why your savings are not enough if you get sick, (2) why your savings are not enough for retirement, and (3) if your family will be okay if something happens to you.

“Although saving can be a good starting point, your savings are finite. Consumption and inflation may deplete them much more quickly than anticipated, especially if you get sick,” Neil stated.

He further explained that money held in a bank accounts for an extended period lose value overtime due to price inflation and low interest rates. However, he advised that allocating the same funds to a fixed-income investment such as a US-dollar bond will allow the funds to grow at a rate that outpaces inflation. In addition, Neil shared that such an investment could also be a source for individuals in retirement.

Although interest rates on local savings accounts and certificates of deposits will not exceed 1.5 per cent, the head of personal financial planning at Sterling Asset Management pointed out that there are investment options that offer good returns.

“Some investments not only provide a fixed interest rate but also capital gains… so look for investments with the potential to appreciate the price and can be sold to lock in gains,” he stated, adding that Sterling’s US dollar mutual funds averaged above 11 per cent in returns.

In addressing a point raised about investing in one’s own business, Neil argued that even entrepreneurs face the risk of losing money if their businesses are affected by factors outside of their control. Instead, he proposed that an individual should diversify his or her investment across various different asset classes to reduce the chance of loss.

“So it is best to invest in your business and other assets to generate additional income streams while keeping your principal intact,” he emphasised. Neil further advised an attendee to the webinar to begin small, investing until he achieved his minimal goal.

Walker, in adressing concerns raised about health and life insurance, said: “If you believe you cannot afford the premiums, then you cannot afford to be sick.”

The Caribbean Assurance Brokers head outlined that a proper wellness plan needs health care insurance to protect against unforeseen events that affects both the individual and his/her family. To this end, he demonstrated how quickly savings can be depleted in the event of an illness that may require treatment abroad.

Adding to this point, Neita-Elliott pointed out that some financial houses help their clients to fund insurance premiums.

“Some Sterling clients use their interest payments from their investments to pay their insurance premium,” she said, adding that they can also borrow against their investments in the case of an emergency.

On the matter of retirement planning, Neil pointed out that for Jamaican dollar pension plans, by law, fund managers cannot invest more than 20 per cent of funds in US dollar-denominated assets. In this regard, he indicated that if someone were to begin contributing to a pension scheme in 1982, with the JMD/USD exchange rate of JM$1.78 to US$1, by 2019 that person would have lost 80 per cent of pension savings due to devaluation. As such, he reminded attendees that “USD mutual funds or unit trust type products can be a good complement to your pension plan.

As a parting shot, Walker noted that life insurance “safety net” benefits can extend even after the death of the policyholder to cover children’s education, debt, business continuity, and funeral expenses.