Q&A with CMMB Securities

Q. I know people don’t like to think about it, but from a financial point of view are there any specific areas people need to be aware of when it comes to death (costs, what happens to investments, etc)?

Bharat, San Fernando  

A: Estate planning is the process of creating a will or trust to pass on to your heirs after death. This is critical as it avoids the complications, which could arise if someone dies “in estate”, 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 apportion the shares according to their formula, which 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. This is a highly technical area where you would need advice, so talk to a qualified financial planner for further guidance.  

Q. I heard someone say that a good way to get started in the stock market and measure your feelings about risk is to invest on paper. Something about building a portfolio on paper. How does that work? 

Danny, Cascade  

A: Building a portfolio on paper, or paper trading, is a very useful way of testing your risk tolerance. Even experienced traders, entering a new area for the first time, adopt this method to better understand the risk dynamics of the investments they are considering. Paper trading is essentially hypothetical investing. For example, let’s say you have $20,000 with which you want to invest equally into two companies on the Trinidad and Tobago Stock Exchange. Instead of actually buying the shares you can be hypothetical and assume you bought the shares on a particular day. Then from that point on you can track the prices of the two shares, over time, in order to get an idea of how the prices of these particular shares behave.

You can repeat this exercise for a number of companies you are considering to determine their price movements as well.  Using this strategy you get a good feel for the money you would have made or lost over the time that you would have held these shares. By repeating the process you would then get an even better understanding of the risks you can take and the ones which you cannot afford to expose yourself to. So when you actually start putting “real” money into the market, you would do so in an informed manner, knowing full well the value at risk. In short, paper trading allows you to learn the pitfalls of investing in the market without actually losing money in the process. It is a “virtual” way of getting into the market and learning by experience.

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 judgement 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.