Seriously Consider Stocks and Real Estate – Says Asset Manager

Hugh Miller, head of asset management at JN Fund Managers says in order to reap attractive returns on investments that are in line with or above inflation, investors need to seriously consider investing in stocks and real estate, given the current market conditions.

He said exposure to these asset classes is easily provided through mutual funds.

“In Jamaica and internationally, interest rates are at unprecedented lows and in some instances, interest rates are negative, for instance in Europe. Therefore, there are no ‘free lunches’ as even the average investor who is averse to risk will need to allocate some of his/her portfolio to stocks and/or real estate for their returns to grow above the inflation rate,” he pointed out.

Mr Miller gave the advice while addressing a panel discussion on ‘Building & Protecting Generational Wealth’. The virtual event was organised by JN Fund Managers in collaboration with JN General Insurance and JN Life, subsidiary companies of The Jamaica National Group.

“Any investment that you are making now, for it to make sense you want your returns to grow at least at the rate of inflation. So let us assume that inflation will be averaging five per cent for the next few years, then what it means [is that] the typical fixed income investment will struggle to grow at a rate that stays ahead of inflation,” he explained.

Mr Miller advised that stocks and real estates are now relatively more attractive investments. He said given the pandemic, the average investor will have to make some adjustments to their portfolio by lowering the weighting to fixed income investments.

Addressing the issue of the low personal saving rates in Jamaica, which he said averages about one per cent, investors will need to improve this to approximately seven per cent, in the first instance, in order to build generational wealth.

“As it relates to generating wealth, we have to resolve to become counter-cultural, because the culture in Jamaica is not one of saving. Persons might believe that this represents persons of the lower income strata, but the evidence suggests that it goes right across the board,” he pointed out.

He recommended that persons consider the 10-10-80 rule promoted by JN Foundation to manage monthly income.

“This is where you organise yourself in a way where you save 10 per cent of your income, you give away 10 per cent, perhaps to charity or tithing, and the rest of [the] 80 per cent takes care of all your other expenditure,” he explained.

The session was organised by JN Fund Managers to assist its clients and JN Group members with enhancing their financial security by building and preserving wealth. It also focused on how to transfer wealth across generations, and protect wealth held in real property or otherwise, as well as optimising the use of life insurance to complement wealth generation strategies.

Among the panellists were Chris Hind, general manager of JN General Insurance and Othneil Blagrove, senior manager, sales JN Life Insurance. The session can be viewed on YouTube at https://youtu.be/FnZFXi6WvaU