Q&A with CMMB Securities

Q: What is the percentage of tax that has to be paid on profits made through investments in the stock market?

Jason, Point Fortin

A: While we are not qualified to act as tax advisors our information is that in Trinidad & Tobago there are no taxes to be paid on dividends. Similarly, our information tells us that the capital gains, which arise from investing in stocks, are also not subject to taxation in Trinidad & Tobago. However, there are certain instruments on which the capital gain component is taxable if it is derived in a less than six-month period. The principle being applied in determining whether investment profits are taxable or not has to do with the risk exposure taken.

When one invests in stocks there is significant market risk to the funds invested. The value of the share can go up, but it may also decline significantly in down markets. Therefore, in order to compensate the shareholder for bearing the risk, all of the return is passed on without being taxed. The effect of this is that investors are encouraged to invest in shares and so capital is made readily available to companies listed on the stock exchange, which helps the growth of the business sector and as a result increases employment in the country.

Q: I keep seeing lots of ads on cable television claiming that investing  in gold is the best bet at this time. Would that also be true for us in this country and how would I go about investing in gold?

Sharmala,  St James

A: Gold is indeed a good investment at this time for many reasons. Gold is a safe haven in times of economic and financial instability, a good hedge for inflation and reduces the overall risk of investment portfolios through diversification. For currency investors the price of Gold has an interesting relationship with the price of the US dollar, as the value of  the dollar starts to depreciate they can switch to gold to preserve the value of their funds. There are many ways in which one can invest in gold. These are Gold bullion bars and coins, gold statement accounts, gold accumulation plans, gold mining shares, gold options and gold mutual funds. Financial institutions such as banks and brokerage companies in the international markets offer these.

Gold statement accounts and gold accumulation plans are similar to a savings account, but the underlying return is based on the price of gold. Gold mining shares is the process by which you invest in companies which mine gold. Gold options are basically contracts to buy or sell gold in the future at fixed prices, a premium for which is paid upfront. Gold mutual funds involve investing in different companies involved in gold mining. It is possible for investors in Trinidad & Tobago to access these instruments through a local broker, which has a relationship with a US broker that trades in gold. Talk to your local broker as to which instrument is most suitable for you.

Q: What is the difference between a Chartered Financial Analyst and a Certified Financial Planner and which one should I be looking for to help me invest money I recently came into following the sale of some property?

Ashram,  Sangre Grande

A:These are two professional designations in the field of finance. They require the candidates to invest considerable time and energy in learning and acquiring knowledge about the different aspects of investing. For example in order to become a Chartered Financial Analyst, candidates must sit one six hour exam at each of three levels testing the knowledge in different areas such as accounting, economics, asset valuation ethics and portfolio management, to name a few. A Certified Financial Planner also has to go through similar requirements to attain the designation. The only difference that can be discerned between the two qualifications would be based on the quality of advice, which clients receive over time. In essence, you would have to judge for yourself, over time, the quality of advice you receive from an investment professional regardless of the designation that he or she holds. The best way is to get a referral from someone who has had a good experience with a particular investment professional.

Questions can be sent to PO Box 1830, Wrightson Road, Port-of-Spain Or Email: cmmbsecurities@
mycmmb.com