Generational Wealth Creation For All -Part II "How Would I Allocate Cash?"

This is part II of the 3-part series on "Generational Wealth Creation For All". Head of Wealth Management, Sagicor Asset Management Inc, Michael Millar explains the most effective way to allocate your funds when you start investing.

How Would I Allocate Cash? -Part II

When investing to build generational wealth, we must consider the rate of erosion of our spending power and therefore, at a minimum, we must strive to achieve a return higher than the average rate of inflation.?

Domestic inflation is currently around the 5% level while interest earned across the fixed income instruments, such as deposits and bonds, ranges from 0.0% to upper range of 4.5%, respectively, in the case of the Barbados Optional Savings Scheme (BOSS) Bonds.?Therefore, an optimal medium to longer-term investment strategy must include exposure to equity investments with a significant component across global stocks.

To achieve this without the need to access foreign currency, the domestic mutual fund market provides an excellent avenue for investors to passively put their money to work through an already globally diversified investment portfolio, thereby pooling their funds with other investors seeking to achieve returns that outpace inflation and at worst, outperform key objective benchmarks.?Broad diversification means that risk is moderated and therefore expected returns should be as well.

The risk of losing all of your invested capital under this scenario is very low to impossible.?Mutual funds are suitable for persons who are relatively conservative to moderate along the risk spectrum and one of the best advantages is the fact that your investment can be redeemed anytime you need it.?This makes it suitable for various wealth accumulation objectives, such as saving towards buying your home, your child’s education fund, and also retirement.?

Below, I have outlined some of these options offered in the market:

For investors that seeking long-term growth, but who want to manage risk through an internationally diversified portfolio, the Sagicor Select Growth Fund is a viable option. The Fund’s significant exposure to the equity’s asset class contributed to its best-in-class year-to-date performance of 5.1% and a return over one year of 7.2%. ??

The Sagicor Global Balanced Fund: the first Barbados-based global fund, offering investors the opportunity to invest in international, regional, and local securities.?The Fund’s best-in-class performance has been buoyed by improving macroeconomic factors, such as moderating inflation and interest rates while the risk of financial system vulnerabilities has abated.?Fund diversification helped to mitigate much of the downside risks and allowed a 4.8% return year to date and a 6.6% one-year return.

The Sagicor Preferred Income Fund is suitable for investors with a low level of risk tolerance.?It seeks to achieve a high level of current income and preservation of capital through investments in a diversified portfolio of bonds, debt securities, asset-backed securities, high-income funds, and selected equities.?With there being a positive outlook for bonds in 2023, this Fund’s significant allocation to this asset class has achieved positive return of 1.6% year to date and 3.3% one-year return.

Therefore, if the time horizon is relatively short, I would suggest investment within the fixed income space, subject to full assessment of the credit quality of available options to be satisfied, with respect to the ability of the instrument to perform as outlined until maturity.?With medium to longer time horizons, I would recommend investment via one or a combination of domestic mutual funds.

Do you want to learn more about Sagicor Investment Options? Email Michael Millar at [email protected] or visit sagicor.com to learn more.