Looking at Investments? – Unit Trusts May Be Right For You.

As investors seek to make good of their investments in times of uncertainty, how one chooses an investment can make or break a good investment plan. Currently we are seeing a fairly attractive local equity market with many stocks trading at low Price/Earnings ratios and well below their book values. There is no doubt that it is a good time for investors to have their portfolios exposed in this type of investment. However, many persons are still not comfortable with the risks associated with equities and may not fully understand the factors involved in choosing the right stock. It is for that very reason why collective investment schemes have become so popular.

Small investors must recognize that the stock market is not an exclusive club where only high net worth investors and the brokers make money, but that the market allows for the small investor to participate with minimum trades. These investors should seek advice from brokers, as equity investments are more sensitive to new information than other types of securities. This being said, however, consideration should be given to collective investment schemes of which Unit Trusts is one of the best known in Jamaica, and which offer a number of benefits to the investor.

A Unit Trust (or Mutual Fund) provides a great deal of diversification to a portfolio, where the investor has instant holdings in several different companies and asset classes, giving a level of stability to his/her investment. These funds in the portfolio are also managed by experienced and competent investment managers, whose primary function is to ensure that the fund grows and performs well. Unit Trusts also offer investors tax-free benefits on the gains made in equity funds, as well as a level of liquidity where units can be converted into cash upon request, once the minimum holding period is achieved.

Presently in Jamaica, Barita Investments Limited is one of four investment houses which offer Unit Trusts products to the public. The investment policy of a Unit Trusts outlines the objectives and goals of the Funds and states what asset classes the Funds can and cannot invest in. It is important for you to identify Funds, whether it is a Capital Growth Fund (equity based), or a Money Market Fund (fixed income) which complements your personal financial goals. For example, if you are looking for principal protection, choose a Fund that invests primarily in fixed income assets which earn regular interests – like a Money Market Fund. On the other hand, if you are seeking equity growth, you may Sean Taylor Research Analyst Barita Investments Limited choose a Fund that invests in long-term blue chip stocks and real estate such as a Capital Growth Fund.

With the introduction of the Jamaica Debt Exchange (JDX) programme by the Government some months ago, yields on fixed income investments have declined considerably. With this in mind, unit trust investments may be the best way to go with the Money Market Funds leading the way and the Capital Growth (equity) Funds given serious consideration in positioning oneself for market movement.

The graphs below show the growth in unit value since inception and the growth of a monthly Investment of $2,000 in Barita’s Money Market Fund versus a Bank’s saving account.

Barita Money Market Fund for Outstanding Investment Growth
Just look at our past performance…

56% Average Annual Growth – that’s 787% since 1996!

Please note that the above graph uses the historical Commercial Banks weighted deposit saving rates as stated by the Bank of Jamaica.

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