Winning the Financial World Cup
“Goal!” You watch the game just for it, waiting on the edge of your seat. You pray that your defence is solid and that your goalkeeper can block all the opposing strikes. You do not want players simply running around for 90 minutes, no goals scored. Instead you want your team scoring goal after goal and ultimately moving on to claim the World Cup title.
Off-field, do you also want the investments in your portfolio to lead you to achieve your ultimate goal? Who are the “players” you will need to score goal after goal?
In investing, much like football, the objective is to win; not lose or draw. Therefore, to defend your portfolio from expenses, run pass inflation, tackle withholding taxes without getting a yellow card and score your goal; you need three categories of strong players namely: defenders, forwards and midfielders.
Defenders: These are your cash instruments and/or accounts, including treasury bills, repurchase agreements (repos), fixed deposits, savings and chequing accounts. They protect you from going into debt or having to sell investments to meet the challenge of unexpected and/or unforeseen expenses. Their primary role is to prevent “goals from being scored on you”. In other words they protect you from losing money. However, they typically do not help you to achieve the above market returns necessary for you to “win”.
Midfielders: These include your local and global bonds as well as preference shares. They add stability to your portfolio. Depending on the environment, you can use them as:
• defenders, since their income stream can combat expenses; or
• forwards, since in the right environment, you can sell them and make a profit, thereby ‘scoring a goal’ or use the income stream to purchase more equities (forwards).
Forwards: Your ordinary stocks and other potentially high yielding investments fit this profile. Their objective is to score goals, so you advance on to the next round. Although you may have a long-term view of investments, the aim is to achieve as many goals as early in the game and maintain that lead throughout. So if you find a stock that promises great gains, you should buy it and watch for the right time to “strike goal”. The exhilaration of making this quick profit can be likened to scoring from beyond the half line.
Positioning Players
During the match you may have caught yourself many times screaming at the television trying to tell an ace footballer what to do. You may be wondering “How could he have missed that clear shot or that penalty?” The answer is simply, you have the advantage of having a panoramic view of the field. The player has a more narrow view because he was busy playing the game, dealing with an immediate challenge like trying to get out of a tackle. The same happens in our financial lives too and that is why we need an excellent coach, who has a panoramic view. Based on his/ her experience and view, he/she will be better able to determine the right mix of players to face particular opponents and make key substitutions so that the team can claim victory.
Claim the Cup
As with football, in finance there are no guarantees. During this World Cup we have seen that several teams have been able to make it through the rounds because of the solid backing of several good players, thereby producing stellar results. Do you want a team of good players to support you in achieving wining results? Do you want JMMB to be your “financial coach”? If “yes”, please call 998-5662 (JMMB) or schedule an appointment by clicking https://jm.jmmb.com/schedule-appointment.
Written by: Michelle Sinclair Doyley, Manager, Client Financial Education, JMMB Group