A Diversified Portfolio Can Help You Ride Out the Pandemic
The Jamaican dollar performance juxtaposed against the value of the United States currency can often be a worrying preoccupation for the financially minded. But according to Davie Martin, Asset Management expert, Victoria Mutual Wealth Management Ltd, the enterprising investor should be proactive in protecting his investment from this long-term decline of the local dollar value, which is currently exacerbated by the economic fallout from the pandemic.
He noted that while it has long been advised that investors increase their exposure to US dollar funds as part of an overall strategy to diversify their portfolio, the pandemic has further highlighted how critical it is to protect one’s investment from devaluation.
“Exposure to USD denominated investments has always been a great tool for Jamaican investors. This is set against the backdrop of the consistent long-term decline in the value of the JMD against the USD. The pandemic has further highlighted the need for investors to have USD exposure, with USD earning sectors, such as tourism, having been severely impacted, thus impacting USD supply,” he said, adding that the Jamaican dollar has lost almost eight per cent against the US dollar so far this year.
In addition to diversification through exposure to USD currency, the current economic climate also reinforces the importance of investors diversifying their portfolio by investments in a range of products, including stocks, bonds, real estate, commodities and more recently, digital currencies.
“Diversification, a key tenet of investing, can be described as the act of identifying, assessing and acquiring a variety of investments that seek to fulfill an individual’s financial goals,” Martin said, adding that the main goal is to lessen the risks associated with investing.
This is predicated on the understanding that while particular asset classes will have varying levels of performance, a well-diversified portfolio across varying asset classes can smooth out volatility.
He noted that despite financial markets being hard hit at the onset of the pandemic last year, some asset classes rebounded faster than others and returned positive performance to close out 2020.
“For example, the Jamaica Stock Exchange index declined by approximately 22 per cent last year, while Government of Jamaica USD Global bonds had a return of five per cent. When coupled with devaluation of 6.7 per cent, Global Bonds would have experienced a total return of almost 12 per cent. So, for 2020, an investor who was only invested in equities would have lost over 20 per cent of their portfolio value while one with both equity and bonds would have seen a smaller loss, depending on portfolio allocation to the various asset classes.”
Investment in Unit Trusts is one way to increase your exposure to diversified asset classes.
Martin explains that when you invest in a unit trust, your money is pooled with money from other investors and invested in a portfolio of assets according to the fund’s stated investment objective and investment approach. This allows investors to take advantage of investment opportunities in a wide variety of instruments which would not normally be available to them as individual investors.
VM Wealth Unit Trust portfolios have been among the best performing since inception.
A quick look at top performers, will include the VM Wealth Classic Property Portfolio, which returned 14.30 per cent in 2019; 7.42 per cent in 2020 and is already at 6.94 per cent for this year. The VM Wealth Global Income Portfolio, meanwhile is a USD denominated money market portfolio, which had returns of 8.23 per cent in 2019; 3.32 per cent in 2020.
Those interested in diversifying their portfolios across different asset classes and with USD investments, have the option with VM Wealth Management Ltd of choosing from the following Unit Trusts:
- VM Wealth Global Income Portfolio
This is a USD-denominated Portfolio comprising primarily sovereign and corporate bonds from the Caribbean, Central America, USA, Canada and Europe, maturing in the short term.
- VM Wealth Global Income Plus Portfolio
This is a USD-denominated Portfolio comprising primarily medium-term sovereign and corporate bonds from the Caribbean, Central America, USA, Canada and Europe.
- VM Wealth Global Income Max Portfolio
This is a long-term portfolio denominated in USD and comprising primarily sovereign and corporate bonds from the Caribbean, Central America, USA, Canada and Europe.
- VM Wealth Classic Income Portfolio
This is a JMD denominated Portfolio comprising primarily Government of Jamaica and Corporate Bonds and Preference Shares.
- VM Wealth Classic Equity Growth Portfolio
This Portfolio will invest primarily in equity securities of companies domiciled in Jamaica and internationally and traded on the Jamaica Stock Exchange.
- VM Wealth Classic Property Portfolio
This Portfolio will invest primarily in commercial real estate.
- VM Wealth Global Equity Growth Portfolio
This Portfolio will invest primarily in equity investments of developed markets.
- VM Wealth Classic Protector Portfolio
This Portfolio will invest primarily in short term money market securities.
- VM Wealth Goal Maximizer Portfolio
This Portfolio will invest in a range of growth securities across all asset classes.