Q&A with CMMB Securities

Q. What is an Investment Club?

Tiffany, St. Joseph  

A: Basically an Investment Club is a group comprising of about 12 - 15 people who have come together to invest and make money.  Most clubs have two main goals, to learn about investing and the stock market and to make a return on their investments. Members are expected to attend monthly meetings, make a minimum monthly contribution and research the progress of any stock the Club has bought or is considering for purchase. Using the members’ monthly contributions, the Club aims to maintain a balanced portfolio that may include stocks, mutual funds, money market funds, equity funds, etc. The value of each member’s share is determined by the capital contributions made and the total value of the portfolio. The Club can be either formal or informal, but should be approached as a business partnership.

A long-term commitment is expected and members usually decide on any clause that would address early withdrawal of funds.  The idea of an investment club is good as you may not have the time to research the stock market on your own, but want to share investing ideas and knowledge in a group. Also, while the Club may decide to purchase only a few shares, members often go home and decide to buy more shares on their own accounts and begin their own portfolios with the knowledge, tips and pointers gained from the Investment Club.

Q. I’m in my late sixties and rely on the financial package I got when I retired for my income. Is it too late for me to get involved in investing? I would really like my money to be growing a bit, so that I don’t outlive it. 

Pearl, Siparia  

A: It is never too late to get involved in investing. The key is to identify your particular investment needs and objectives. Since you have retired and are not drawing a salary, security of income would be most important to you. By extension, your risk tolerance would be low, since you would want to protect the principal you received at retirement.  In such circumstances, you may not want to invest too much of your funds into the stock market as there may be a degree of short-term volatility which can erode the value of the funds invested. Therefore, the amount invested in the stock market should not exceed 10 percent, depending on the value of the savings you currently hold. Additionally, you may want to invest your stock portfolio into “value” stocks.

These are large mature companies which pay high dividends, as opposed to “growth” companies which reinvest dividends and which may be exposed to a higher degree of volatility than “value” stocks. Talk to a broker to construct a value-driven portfolio. The other 90% or so of your portfolio should be invested in fixed income securities, such as a money market account or long-term bond. Once these investments are held to maturity the value of your investment is protected and not exposed to market volatility. However, it is possible that interest rates on TT dollars may fall further in the money market, so it may not be wise to invest in a Money Market Account whose interest rate floats with market conditions. Rather, you may want to lock in a yield from now for a ten or twenty-year period since rates may fall over that time period. 

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