Are you too young to plan for your retirement?

Many persons who are under 40 years old have not yet begun planning for retirement. However, is there such a thing as “too young to plan for retirement?” Does “the early bird catch the worm? The earlier you start to plan for retirement the more prepared and at ease you will ultimately be. Here are some helpful tips to help you grow your financial wealth and ensure that your retirement years will be well cushioned. Continue reading

What Is Insider Trading?

Part IX of the Securities Industry Act, 1995 (“the Act”) addresses “Dealing by Persons Connected with Issuers.” This practice is commonly referred to as Insider Trading.

Insider trading is the purchasing or selling of a security by persons who are connected to the issuer of the security and who have knowledge of price sensitive information by virtue of said connection.  

Section 120 (1) of the Act defines price sensitive information as “specific unpublished information which, if generally known, might reasonably be expected to affect materially the price or value of (a security.)” Section 120 (2) goes on to provide the circumstances under which a person is considered to be connected with an issuer of securities. Section 121 lists specific persons and the situations under which they are prohibited from trading and exceptions can be found under Section 124.

There are many forms of insider trading and it is important to note that you do not have to make a trade yourself to be held liable for insider trading. Once you share price sensitive information which is not publicly available with someone who makes a trade based on the information you have provided, (commonly referred to as Tipping), both you and the person who actually make the trade, may be found guilty of insider trading. The connected party is referred to as “tipper” and the recipient of the information is referred to as the “tippee.”

Additionally insider trading does not only apply to people who work directly for a company. In a nutshell, once an individual has access to material, non-public information, he/she cannot make a trade based on that information. This means that nearly everybody, including brokers, family, friends, and employees, can be considered an insider. A clear examples is  the CEO of a company telling his daughter to sell her shares of his company’s stock knowing that the imminent release of certain information will cause the value of the stock to drop. In such a case, although the CEO himself did not actually make a trade, he might nevertheless be  found guilty of insider trading. Furthermore, although not an employee of the company, his daughter might also be found guilty of insider trading.

The essence of timely disclosure is one of equal opportunity since investors must be allowed to be privy to all price sensitive information in order to reach an informed investment decision. In light of the potential liability and adverse publicity that may accompany insider trading allegations, it is imperative that companies establish, enforce and constantly review their policies and procedures to prevent and detect insider trading.

It is evident that insider trading undermines investor confidence in so far as it affects the fairness and integrity of the securities markets. The Commission has issued “Guidelines of the disclosure of Price Sensitive Information” as well as “Policy Guidelines for Listed Companies’ handling of Price Sensitive Information.”

These documents are available on the TTSEC website at http://www.ttsec.org.tt

Understanding Depository Receipts

What exactly are depository receipts?
• A depositary receipt (DR) is a transferable financial security that is traded on a
local stock exchange.
• A depository receipt represents an underlying security, that is issued by a foreign publicly listed company.
• Depository receipts are a popular way of allowing local investors to buy and sell
ownership/interest of foreign companies.

Characteristics of Trinidad and Tobago Depository Receipts (TTDRs)
• Trades on the Trinidad and Tobago Stock Exchange (TTSE)
• Traded in Trinidad and Tobago dollars;
• Pays dividends in $TT;
• Provides voting rights;
• Provides the option of conversion to the underlying foreign security

Types of Depository Receipts

Sponsored Depository Receipts 
• Foreign share issuers actively register with the Trinidad and Tobago Securities
and Exchange Commission (TTSEC) to have their securities traded in T&T and
takes ownership in the administration of the programme

Un-sponsored Depository Receipts 
• Brokers and DR Issuers arrange and administer DR programmes to satisfy local
investor appetite for foreign securities without any action by the foreign share issuer

For more information on the local securities market, visit our website at http://www.ttsec.org.tt

Make Your Retirement Dreams Come True

Wouldn’t you like to have a million-dollar portfolio when you retire?  Making that a reality requires some serious effort. While we cannot guarantee your success in making such a dream come true we have outlined some steps to help you achieve your objective. 

1. Map out your goals

The leading advice from persons who have acquired wealth is to state your goals and develop a course of action to achieve them. You can use the services of a registered financial adviser to help you map our your strategy to achieve your wealth.

2. Begin to save 

If you don’t save, you’ll never reach your goal. As obvious as this may seem, far too many people never even start to save. If your employer has a contributory pension plan, enrolling in the plan is a great way to put your savings on autopilot. Simply sign up for the plan and contributions will be automatically taken out of your salary,  thus increasing your savings and decreasing your tax liability. Furthermore,  if your employer offers to match your contributions up to a certain limit, be sure to contribute enough to get the full match. It’s like getting a guaranteed return on your investment!

3. Get aggressive 

The returns generated by an investment are dictated by the asset-allocation decision. This is the investment strategy that aims to balance risk and reward by apportioning your portfolio’s assets according to your goals, risk tolerance and investment horizon.

Although there is no simple formula that can determine the right asset allocation for every individual almost all financial professionals hold the view that asset allocation is one of the most important decisions that investors make. The three main asset classes – equities, fixed-income and cash and equivalents – have different levels of risk and return, so each will behave differently over time. If you are looking to grow your wealth over time, fixed -income investments, or a certificate of deposit (CD) aren’t likely to get the job done, and inflation can take a big chunk out of your savings.

4. Put aside for a rainy day

Part of long-term planning involves accepting the fact that setbacks will occur. If you are not prepared, these setbacks can put a stop to your efforts to save. While you can’t avoid all of the bumps in the road, you can prepare in advance to mitigate the damage they can do. Work with a registered adviser to help structure your finances to avoid financial disaster.

5. Increase the amount you save

A major mistake that persons make is to not adjust their savings as time goes by. Your income should rise as time passes due to the fact that you will get raises, you may change jobs, you may get married and you may have a two-income family. Every time more cash comes in to your pocket, you should increase the amount that you save. Unfortunately for many of us with the increase in our income, additional wants/needs arise which compete for the income. The key to reaching your goal as quickly as possible is to act as if there is no change in income and save as much if the increase as you can.

6. Watch your spending

Vacations, car, kids, and all of life’s other expenses take a big chunk out of your salary. To maximize your savings, you need to minimize your spending. Buying a home you can afford and living a lifestyle that is below your means and not funded by credit cards are key if you want to boost your savings. Develop mechanisms to make it to the end of the month before you run out of money.

7. Monitor your portfolio

If you’re a mid-to long term investor, there is no need to obsess over every moment of the stock market or investment products.  Instead, check your portfolio once a year and re-balance your asset allocation to keep on track with your plan.

8. Maximize your options 

Take advantage of every savings opportunity that comes your way.  Make the maximum contribution to tax-deferred savings plans. Tax-deferred accounts provide the greatest benefit for investments that generate frequent cash flow, or distributions, that would otherwise be taxable, thereby allowing these payments to remain whole and be reinvested most efficiently. Taxable mutual funds and bonds produce the most frequent taxable distributions, such as interest, dividends and capital gains and thus so are best suited for tax-deferred growth.

9. Catch-up contributions 

Look for more ways to save money and increase your nest egg for the fast -approaching golden years. When you reach age 50, you can check to see if you are eligible to increase contributions to tax-deferred savings plans. See if your bank or other financial institutions have any special plans or reduced charges for seniors and take advantage of these opportunities.

10. Patience is a virtue 

“Get-rich-quick” schemes are usually just that – schemes. If something sounds too good to be true it usually is! The power of compounding interest takes time to build, so invest early, invest often and accept that the road to riches is often long and slow.

Remember the sooner you get started, the better your chances of achieving your goals!

Money Management in Your Middle Years

If you are between the ages of 35 to 55 this means that you are officially in your middle years. Give thanks!

Now is the time for you to maximize your income generating potential.  At this time you should be taking deliberate steps toward managing your money. You have many competing interests for your money including managing from day to day, saving for tomorrow, providing for a child’s tertiary level expenses and your retirement.

Moreover, this is the time for you to focus on the issue of how to maximize your income during your remaining work years so that you are better positioned to retire, when and how you want. Here are some suggestions for minimizing stress and maximizing results.

Save as much as you can for your retirement

Look for savings that give you a tax advantage. When you reach the golden age 50, you can also make extra contributions to these retirement savings accounts. You should speak with a financial planner or personal advisor about a recommended investment strategy and mix for your age and stage of life. As time goes by you can always alter the mix of stocks, bonds, mutual funds to suit your risk/age profile.

Comparison shop for alternatives 

Look for savings plans or mutual funds accounts which offer a higher interest rate or other benefits for children/teenagers. Utilizing these products can help families and individuals save for higher education expenses. You should also see if you can qualify for a tax break on earnings from investments used for educational purposes.

Use any financial “windfall” you may receive

In the event you unexpectedly become the beneficiary of a large sum of money you should consider asking a financial or tax adviser about your best options, these may include starting or adding to a rainy-day fund for emergency expenses or putting money into your retirement accounts.

If you deposit a large amount of money in a bank account , make sure it is fully protected by the Deposit Insurance Corporation (DIC). You may also consider paying off high-interest debt, such as outstanding balances on your credit cards.

Plan a strategy for having a home and mortgage

If you don’t own a house, consider if it makes sense to buy one, especially if you don’t plan to move in for another two or three years. Home ownership can offer tax advantages and a stable place to live, but don’t take on more of a mortgage than you can afford to pay each month. If you do have a mortgage, periodically compare your interest rate to current market rates and, if rates have declined, calculate whether refinancing makes sense. Remember owning your own home makes you asset rich and you can use the value in your home (equity) from time to time to meet other financial needs.

Managing your money well in the middle years can make all the difference in how you retire, so start today so you can live better tomorrow!

The Young Adult’s Guide To Personal Finance

Managing your finances is not a subject that is taught in our nation’s secondary schools and may not necessarily be covered at the post-secondary or tertiary level either. However it is an area in which most young persons entering the job market for the first time, are fairly unaware. It is unfortunate that most persons believe that understanding personal finance is way above their heads and therefore create a mental block around the subject.

It’s easy to get started on the right path by looking at six of the most important things to understand about money if you want to live a comfortable and prosperous life.

1. Learn self-control

Our parents invariably taught us this when we were children. The sooner you learn to delay gratification, the sooner you’ll find it easy to keep your fiances in order. Although you can effortlessly purchase an item on credit the minute you want it, it’s better to wait until you’ve actually saved up the money. Do you really want to pay interest on a pair of jeans or a box of cereal? If you want to keep your credit cards for the convenience factor or the rewards they offer, make sure to always pay your balance in full when the bill arrives, and don’t carry more cards than you can maintain or monitor.

2. Take control of your financial future 

Instead of relying only on others for advice, take charge and read a few basic books on personal finance. Understanding how money works is the first step toward making your money work for you.

3. Know where your money goes

Once you see how your morning coffee or buying lunch every day adds up over the course of a month, you’ll realize that making small, manageable changes in your everyday expenses can have just as big of an impact on your financial situation as getting a raise. In addition, keeping your recurring monthly expenses as low as possible will also save you big bucks over time.

4. Start an emergency fund

Having money in savings to use for emergencies can really keep you out of trouble financially and help you sleep better at night. Also, if you get into the habit of saving money and treating it as a non-negotiable monthly “expense”, pretty soon you’ll have more than just emergency money saved up: You’ll have retirement money, vacation money and even money for a home down payment. However do not just put these savings into an ordinary savings account. Do research on savings or investment instruments that can provide you with a high interest rate. (Make sure though, that you understand the risk factor involved in all investments).

5. Start saving for retirement now 

Most young persons do not appreciate the need to prepare for retirement well in advance.  However, because of the way compound interest works, the sooner you start saving, the less principal you will have to invest to end up with the amount you need to retire. Therefore, the sooner you will be able to call working an “option” rather than a “necessity.” Company-sponsored retirement plans are a particularly great choice because you can match the company’s contribution with an equal one of your own, thereby ensuring an even higher contribution to your retirement fund.

6. Understand how taxes work 

It is important to understand how income taxes work even before you get your first salary. When a company offers you a starting salary, you need to calculate whether that salary will give you enough money after taxes to meet your financial goals and obligations. You have to take your gross pay, subtract your taxes and see how much you’ll be left with as your net, or take-home pay.  Only then can you make informed decisions regarding how to grow your wealth.

Stay tuned for our next post on  how to manage your finances in your middle years!

Financial Tips For Teens

This week in our series on investing for life stages, we’re putting the spotlight on those critical teenage years where future financial habits can be nurtured and developed.

As you enter your teenage years you will begin to make some “grown-up” decisions about how to save and spend your money.  That’s why learning the best ways to manage money, no matter how small is one of the most important lessons that you can learn in life.  The first thing that you have to do is set goals for yourself. Then you must make the right choice with your money to help you achieve those goals.

Here are some suggestions to consider:

Save some money before you’re tempted to spend it

When you get cash for your allowance, birthday, or from a job, automatically put a portion of it, at least 10 percent, (or possibly more)  into a savings or investment account. This strategy is called “paying yourself first.” It comes from an old saying, “What the eyes don’t see the heart doesn’t grieve for.” Basically the premise is that if you don’t have it easily accessible you learn to live without it.  Making this a habit can gradually turn small sums of money into big amounts that can help pay for really important purchases in the future.

You should consider putting the spare change that you find when you empty your pockets at the end of the day, into a jar or any other container, and then about once per quarter putting that money into a savings account at the bank to earn you interest.

Keep track of your spending 

A good way to take control of your money is to develop a budget or spending plan. This is when you decide on the maximum amounts you aim to spend each week or each month for certain expenses, such as entertainment and snack food. To help manage your money, you should make a list of your expenses for about three months, so that you have a better idea of where your dollars and cents are going. If you find you’re spending more than you intended, you may need to reduce your spending or increase your income depending on which is easiest for you to do at a particular point in time.

Consider A Part-Time Job 

Whether it’s  babysitting, washing the neighbour’s care or a job in a “established” business, working outside of your home can provide you with income, new skills and references that can be useful after secondary school. Before accepting any job, ask your parents for  their permission and advice. Once you start to collect your pay cheque you need to determine how to apportion your earnings.

Think before you buy 

Many teens make quick and costly decisions to buy the latest clothes or electronics without considering whether they are getting value for their money. Before you buy any item you should ask yourself if you really need or just want the item. Based on the response to that question you should conduct research on where the item is available and engage in some comparison i.e shopping to get the best value for money. Remember that life is about choices, so sometimes in order to purchase a particular item you may have cut back on spending for something else.

Be careful with cards 

For those of you using a debit card, which automatically deducts purchases from your back account, always remember that bank cards offer convenience, but they also come with costs and risks that must be taken seriously.

Be smart about college 

If you’re planning to go to college or to pursue any post-secondary education, take advantage of any available government assisted programmes. Remember however that there are costs to be borne by you.  Start doing research on the major expenses which may include tuition, books, fees and housing.

If you’re a past the teenage years, it’s definitely not to late to learn how to manage your money better! In our next post we’ll talk about how young adults can better understand personal finance for prosperity!

Understanding Your Investor Responsibilities

In our last post, we wrote about your rights as an investor. Remember, along with your rights, you also have responsibilities as an investor. Here are three key responsibilities you bear as investors which can help you protect your interests.

Check The Registration

The first thing to understand is that everyone in the securities marketplace  must register  and provide background information to the Commission. Therefore your first line of protection is ensuring that you are dealing with a registered issuer, security company, investment adviser or broker. They must meet specific criteria to register. Our website, http://www.ttsec.org.tt provides a comprehensive list of registrants.

Ask Questions 

Even though you may be dealing with registered persons yous hould still thoroughly evaluate the background of any financial professional and firm with whom  you intend to do business.s Not asking the relevant questions can result in huge losses for you in the securities marketplace.  Make sure your questions are answered to your satisfaction.

Know what you are investing in

It is in your best interest to compare information on similar products from different sources. You should also read documents thoroughly especially the fine print. Understand how the investment works as well as your risk.

How Does The Commission Protect Investors?

  • We ensure that market intermediaries who distribute securities or engage in securities transactions on behalf of others, are registered with the commission as indicated above.
  • We ensure that companies offering securities to the public provide or disclose certain information about their entities, the securities they are offering for sale and the risks of investing in those securities.
  • The Commission also conducts ongoing market surveillance  to ensure that registrants comply with the provisions of the law.
  • The Commission has enforcement powers under the Securities Industry Act, 1995 to deal with those who contravene the law.
  • We aim to ensure that investors are educated about capital markets, through outreach sessions, seminars and workshops, so that they can make informed investment choices.

Knowledge is power, know your rights and responsibilities!