Financially Fit & FabuIous – Investing for Growth

INVESTING, the process of putting your money to work with the expectation of making a profit, should be an essential part of your wealth creation plan. Investing is an important money skill to acquire if you want to accomplish all your financial goals. 

There are various investment options which give different results, so you must be clear about your reasons for investing before you commit your money. Some people make poor investing choices by placing their funds on investments that will not meet their objectives. 

Consider all the things that you would like your money to do for you – think of your immediate requirements and your long-term objectives. If you need to have a lot of money at your disposal, then you should look at ways to grow your funds through investing. 

Experience greater returns

A growth strategy may be appropriate if you have an appetite to get big returns from your investing efforts. While others may be content with small or average profits from investing, if you want to have the possibility of gaining high returns, you have to invest for growth.

Be aware of risks

While you may achieve greater returns with a growth strategy, there is the risk that you could have an adverse result from your efforts. Risk, the possibility of losing some of your funds or getting less than you expected, must be considered before you make any investing choices.

Access diverse options

Another benefit of investing for growth is that you can open the door to a wider array of investment options. The global investing landscape is very diverse, and you must to be willing to explore the possibilities if you want to create an optimal portfolio for growth.

Gain investing knowledge

If you’re focused on growth, you have to become very knowledgeable about investing. Make it your duty to learn about various types of investments and how they work. The more adept you become at making investing decisions, the more likely you are to experience growth.

Go for the long term

When investing for growth, your general investment approach could be growing your principal in the medium to long term. This approach should be considered in tandem with your investment knowledge, appetite for risk and timeline for investing. You should also consider the mix of assets that will comprise your portfolio as the right portfolio mix, commonly called diversification, is still the best way to manage the risks associated with investing. 

Even in the most tumultuous market, it is unlikely that all investment asset classes will have a falloff in performance at the same time and at the same rate. Investing for growth requires a long term mindset. Be clear what your goal for investing is: will it be for retirement, your children’s education or a home purchase? Not losing sight of your goal can help you ride the tides of volatility which can cause fluctuations in the performance of your portfolio.  History has demonstrated that markets have trended upward over time, and that the volatility of a diversified portfolio is lower than individual long-term investments.

Understanding growth amid fluctuations

The old investment adage: “the higher the risk, the higher the potential return” still holds true but your risk appetite is a major determinant for your growth portfolio composition.  Portfolio growth can happen as a result of capital appreciation or interest income. Capital appreciation is increase in your investment following an increase in the current market value over the initial purchase price. For example, if you invested J$100,000 in an equity based unit trust product at a purchase price of 125.2960 per unit, you would have 798.11 units. At a future date, the price per unit moves up to 132.1016; this $6.8056 increase per unit translates to an overall increase of $101,432 and is referred to as capital appreciation.  

However an equity investment may move up and down in value even as it grows over the long term.  For example, an investment of $1,000 in the S&P 500 Index (U.S. Stocks) on January 1, 1975 would have reached a new height of $58,798 in May of 2008. If left alone to ride out various bouts of fluctuations, the same stock would have reached over $173,000 by the end of 2019. 

Seek professional advice 

Investing for growth will require the guidance and support of experts who can help you to make the right decisions. Investing in collective investment schemes holds a number of benefits to include access to markets and diversification.  Mutual funds provide access to markets and managed portfolios that are virtually unavailable to the individual investor. 

Consult with a Scotia Investments advisor who can assist you in designing a portfolio of investments that will give you the growth you desire.

Odeon Wilmot  is a licensed Investment Advisor from Scotia Investments Jamaica Limited.