Q&A with CMMB Securities

Q. Watching a money programme on cable recently they were saying that women face unique financial risks because they usually earn less than men, but live longer than men. Are there any special investment concerns women in this country should consider?

Sarah, Santa Rosa

A: A cardinal principle in investing is that the choices made are linked to the specific needs and circumstances of the individual. This means investment strategies must be tailored to suit the unique situation facing each person. The case being made that investment needs are gender specific may be quite correct. If it is true that women get into the labour force later or may have put a hold on a career to raise children and earn less than men, then they may have to start setting aside a greater percentage of their income towards retirement than men. Women may also want to have a greater percentage of their portfolios in equities so as to benefit from the capital gains on stocks and so enhance the value of their wealth for retirement. At the same time they may want to have a portion set aside in a money market account which can be immediately accessed in case of pregnancy when they may not have enough from paid maternity leave. Then having amassed a sizeable nest egg by retirement, a woman should have security of income since she can access a retirement plan that pays until death. This would take care of the longer life expectancy. However, there is the concern about the fall in the purchasing power of money, as a fixed pension per month in a rising inflation environment would reduce the size of the basket of goods, which can be bought. So women should get into a retirement plan that pays a fixed amount per month and an initial lump sum at retirement which can be invested in a safe money market account which tracks the rate of inflation. Apart from the practical investment differences between the genders, there also may be a psychological element as well. Some studies have shown that women are able to deal with uncertainty much better than men and so are able to tolerate more risk than men. Therefore, there may be a case that women are much more able to tolerate the uncertainty which comes from investing in the stock market where there could be short-term volatility in prices.

Q. What is the Second Tier Market all about on the T and T Stock Exchange?

Lall, Fyzabad

A : The stock exchange is sectionalized based on the type of company and the amount of share capital. The second tier market is that section of the stock exchange where small companies can apply for listing. For these companies to be approved for listing they must have a paid up share capital of $1 - $4 million. For larger firms to be listed as part of the first tier market they must have a share capital of $6 million and above.

Q. What is estate planning and is it something the average person should consider?

Marjorie, Belmont

A: First a definition of estate would be instructive. Some people confuse property with estate, but the latter really refers to all of an individual’s assets and liabilities. Apart from retirement planning, an important component of estate planning is creating a will or trust to pass on to your heirs when you die. This is to avoid the complications which could arise if someone dies intestate, that is, without instructions as to distribution of assets. In such a case there is a process called probating where the State has to identify the heirs and allocate the shares according to their formula. The result may not be in line with what you had intended. The process is expensive and time consuming and could well erode a portion of your estate in fees. Also, even if you have a will, retitling would have to be done through a Court of Law which is also time consuming. Therefore it is advisable to set up a will and a trust arrangement such that you have complete control of your assets while alive, but the trust is considered legal owner for transfer of title purposes. This would take place smoothly without lawyers, court supervision, excessive costs or delays. You want to make sure your loved ones are protected and are given their just due according to your wishes.  Talk to a qualified financial planner for further guidance as this is a highly technical area where you would need advice.

All information contained in this article has been obtained from sources that CMMB believes to be accurate and reliable. All opinions and estimates constitute the Author’s judgment as of the date of the article; however neither its accuracy and completeness nor the opinions based thereon are guaranteed. As such, no warranty, express or implied, as to the accuracy, timeliness or completeness of this article is given or made by CMMB in any form whatsoever.
CMMB and/or its employees or directors may, where applicable, make markets and effect transactions, or have positions in securities or companies mentioned herein. Neither the information nor any opinion expressed, shall be construed to be, or constitute an offer or a solicitation to buy or sell.