Ashford W. Meikle, Staff Reporter
MCLEISH
FOR THE first nine months, however, of the year unit trusts and mutual funds products have been challenged in delivering healthy returns to investors against the backdrop of a miasmic stock market and low interest rate regime.
In many instances these products have struggled to keep ahead of inflation - in fact, in a number of instances investors have found their portfolio returning negative returns. For example, for the period January 6 - October 6, 2005 Capital and Credit Fund managers' saw a 25 per cent decline in the buying price and a 29.6 dip in the selling price of it's income and growth fund.
Notably, however, the buying and selling price of its Giltedge Fund grew by nine per cent.
So, where does that leave the risk-averse investor and what does it mean for the potential investor? Glenford McLeish, managing director of JMMB Securities, told the Financial Gleaner that investors should view mutual funds as a long term investment vehicle.
"For many of our fund investors, the current net asset value (NAV) represents as much as a 51.7 per cent growth in the original investment in the Fund so that even after inflation at 10 per cent there is a net real return in excess of 41 per cent."
Up to the end of September, the NAV JMMB's Select Index Fund was down by some 13 per cent.
SHORT-TERM FLUCTUATIONS
"For investors with a higher average cost, the decline in the NAV offers an excellent opportunity to acquire additional units in the fund at a discount to their historical average price. The (JMMB Select Index) Fund, like equities investments, is a long-term (investment) vehicle of, say a minimum five years. When this is at the foundation of an investor's approach, short-term fluctuations while noticed, does not become a source of concern, but windows of opportunity to increase one's investments," Mr. McLeish explained.
This is a view echoed by Clay Moodie, general manager of DB&G Unit Trust Managers Limited.
"For clients invested in any equity-based fund, they must have a long-term outlook as the stock market is prone to cyclical periods of performance owing to economic conditions, listed company performance and investor confidence. The stock market, however, does have an excellent long-term track record when compared to fixed income funds. The key here is to buy and hold."
He goes on further to say, "prudent clients usually buy when the market is at the bottom or whenever stocks are at their 52-week lows. Buying at lower levels also allows you to "average cost" downwards your portfolio. Optimally, you want to buy low and sell high ... so it's an excellent time to buy stocks now."
DB&G's Money Market Fund was actually one of the better performing unit trusts in the fixed income category. Between January 6 and October 6 its buying and selling price grew by some nine per cent.
IMPORTANCE OF LONG-TERM
Mr. Moodie stressed that DB&G's "policy for investment remains the same. We will continue to invest in profitable companies with good dividend policies and strong management teams. Unit Trust fixed income funds generally offer much higher yields than savings accounts, while investing in the same type of assets that commercial banks invest. Our job is to keep prospective clients very informed of this glaring fact."
For his own part, Mr. McLeish reflected that "The investor's horizon is the important variable and we at JMMB consistently stress the long-term when discussing equities and funds investing with our clients. We seek to align the investment strategy of the investor with that of the fund. It is proven that over the long-term stock markets out-perform other forms of investing and in our market the extent of the difference in performance over the past 20 years is about two times."
It is said that these instruments are ideal for the risk-averse investor. By pooling funds in a variety of instruments, the funds are diversified, spreading - or lowering - the risks involved in investing.
