Dennise Williams, Staff Reporter
Seprod executive, Sushil Jain, speaking of the benefits of global investments at the Investors' Forum hosted by Mayberry Investments Limited last week at the Knutsford Court Hotel.
GUEST SPEAKER Sushil Jain says holding assets in Jamaica or any one country is not real diversification.
The treasurer and corporate secretary at Seprod Limited for the last 15 years, Mr. Jain was the guest speaker at the Mayberry Investments monthly investor seminar held on Wednesday evening at the Knutsford Court Hotel.
"Say in Jamaica you already own a home, shares in 10 listed companies and certificates of deposit. Are you truly diversified? No."
The problem with holding many assets in one country is that all the assets are in one country.
Mr. Jain elaborated, "What we are saying is, when you invest in one country you are subject to a thing called country risk. That is what happened in Argentina. There, the money was frozen, and people with money in the bank couldn't buy groceries."
Therefore, he recommends that investors be "diversified in more than one country and in more than one asset class."
Mr. Jain then outlined the international investment
opportunities.
REAL ESTATE INVESTMENT TRUSTS (REITS)
"I like real estate, but I don't want to own a building. I don't want to handle the maintenance issues and deal with tenants. But I want to earn from such an investment. That is where these investments, which are very common in the United States, come in."
Essentially, REITs are publicly traded financial instruments that invest solely in income-producing real estate assets and pay out the income earned in the form of dividends.
MUTUAL FUNDS
For investors who don't want to or cannot manage their investments on a day-to-day basis, Mr. Jain spoke of the benefits of mutual funds.
"Many funds are available worldwide and offer investments in sectors, countries, regions and commodities globally. Therefore, investors can access investments in China, Asia, Europe, Eastern Europe, Latin America, among other countries."
EXCHANGE TRADED FUNDS
"An exchange-traded fund, or ETF, is a type of Investment Company whose investment objective is to achieve the same return as a particular market index."
An ETF is similar to an index fund in that it will primarily invest in the securities of companies that are included in a selected market index. An ETF will invest in either all of the securities or a representative sample of the securities included in the index.
Mr. Join explained that while there are only 300 in existence, investors flock to them because they have lower management fees than mutual funds.
Capital Protected Funds (CPF)
These investments I really like,? Mr. Jain pointed out. With these investments, your funds track the movement of a particular exchange. For example, if you deposit $10,000 with an CPF tagged to the FTSE (the London stock exchange) and the FTSE grows by 50 per cent for the year, then you get back $15,000.
However, there are risks. ?With a CPF, you have to lock your money away for an extended time, such as two to five years. Plus, the fees associated with a CPF are much higher than a mutual fund.
American Depository Receipt (ADR)
The ADR is way to access overseas stocks without buying on an overseas stock exchange.
ADRs are negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas.
Mr. Jain went on to explain that ADRs trade as shares, are easy to buy and sell and are a convenient way to invest in companies worldwide. His favourite ADRs are:
- Toyota Motors of Japan
- Aluminium Company of China
- ICICI Bank of India
- Taiwan Semiconstructor of Taiwan
Now that said, the question remains, how do you participate from Jamaica?
Brokers in Jamaica will facilitate it in some way, so it is not necessary to get on a plane.? And as a final thought, Mr. Jain noted, ?One of my biggest regrets is that I didn't start sooner. But years ago information was harder to come by, but with the Internet, you can access information instantly and across the globe.
