Guardian Asset Management head: Three tips for investing

WHEN people hear words such as investing, stock and asset management, many may imagine well-dressed stockbrokers making major, multi-million-dollar deals with wealthy customers and businesses.

But asset management, the practice of increasing wealth over time through the acquisition, maintenance, and trade of investments, can be done by people from all walks of life.

From official and well-known options such as company stock, mutual funds and government bonds to home and community-based investments such as the neighbourhood sou-sou, people can use their financial resources and invest them in a network that would allow them to receive dividends on their initial investment.

However, all investments are gambles, and in one way or another, each investment comes with its own risks and rewards.

Guardian Asset Management president Miguel Martinez, although at the helm of Guardian Asset Management for only four months, has made a financial journey that has spanned two decades, working in the banking and finance sectors in TT and Jamaica.

In a conversation with Business Day, he said there are three key things people need to do to properly balance the rewards of investing assets and all its associated risks.

Know the risks

When investing, it is important to be in the know. If you are thinking of investing, one of the first things you must do to protect yourself is to understand the risks involved in making those investments.

Asset managers such as those who work at Guardian Asset Management help people understand the risks that come with investing and make the right decisions, based on the level of risk they can take.

“It starts with a conversation,” Martinez said. “We have a team of investment advisers and wealth managers that interact and speak with clients daily to understand where our clients are at in their financial journey – what are their resources? do you have a goal or a timeline in mind for your finances? whether it's saving for a house or planning for your retirement.”

Depending on that conversation, asset managers can design a portfolio that would suit you. While historically there have been three main types of assets – equities (stocks), fixed income (bonds) and cash equivalent or money-market options – in recent years professionals have included commodities – real estate, futures and even cryptocurrency – on the list of assets.

Martinez said the traditional way to build a portfolio is with a 60:40 ratio. Sixty per cent of your capital would go into fixed-income assets and 40 per cent into equities.

“Typically, one is supposed to offset the other. If you invest in equities, you are taking a stake in the company. There is no guarantee that you will get any returns, but you are investing for the long run and working with that company as a shareholder.

“Bonds are fixed-income instruments so you know for certain that, if you are investing for a 20-year horizon, you are going to get a certain rate of interest, and you will expect these payments on a scheduled basis.”

The more conservative investor would usually go for fixed-income options, while risk-takers would try stocks. He added that because there is some guarantee of returns, a good entry point into asset management would be to start with fixed-income products.

More exotic assets also come with greater risk. Real estate, which on one hand can generate multiple streams of revenue from one investment, can run at a loss if hit with inflation, market fluctuations, economic conditions, or just plain bad luck.

Ask questions

This may sound obvious, but it is always good to know what you are paying for.

Martinez gave similar advice, saying knowing as much as you can about your investment can help mitigate risk.

“Always invest cautiously. Ask questions about any investment that you make. It's a discipline. It is a habit that you must get into.

“It is important to understand the track record (of the asset), the performance, and understand what they are going to use the funds for.”

Martinez said globally the asset-management industry has been in a state of change since covid19, which tested even the fundamental ratios of investment. During the pandemic, all assets depreciated in value.

The S&P 500 index – regarded as one of the benchmarks for the overall performance of the stock market – plummeted by 30 per cent in March 2020.

High-value commodities such as oil plummeted to as low as -US$3 as demand for fuel to meet energy needs went down to almost zero. Tech stock declined by between 22 and 66 per cent.

Even now, the market remains volatile, with global shocks such as wars and climate change having significant effects on the performance of business, and therefore the performance of its assets.

New technologies such as AI are also being used to develop portfolios for customers.

“But even that comes with its own set of risks,” Martinez said. “We are seeing increasing levels of cyber-security risks.”

Even with unregulated investments such as private equity (an investment in a business that is not yet ready to go onto the stock market) must be carefully assessed. These types of assets are usually not supported by regulators.

The point is, one should not even take a hand in a sou-sou without knowing as much as one can.

Guardian Asset Management is also practising what it preaches as it takes its own deep dive into cryptocurrency.

“It is an area that we are doing research on. We have seen several experiences, so we are trying to understand the space.

"I know the Central Bank is encouraging people to look at it carefully. So right now, it is not a space that we are in. We are focusing on the more traditional financial products.”

Work with reputable people

Martinez said when making investments it is important to work with people with a good reputation and who understand the markets.

Working with people who know what they are doing can also reduce risk.

“When you step out of that space and go into the unregulated areas, whether it is a sou-sou or otherwise, you have to realise that you will be taking on some kind of risk.”

Martinez said this is where Guardian Asset Management comes in.

It has been in the industry for over 20 years as a subsidiary of Guardian Holdings Ltd.

The company provides a range of products to suit any investor, from conservative fixed assets to more exotic securities.

“The mutual-fund industry is very active, and we have 15 mutual funds under our management. So you can invest TT dollars in our funds or, we have US-dollar funds where you can invest once you have US currency. We have funds that are focused on the European and Asian space as well.”

Martinez said given that the company also has a merchant-banking team, it is able to look for opportunities outside the stock market in the form of private equities.

“Essentially, if you have a well-established business and you don’t want to go the route of listing on the stock exchange, but still want to sell a stake in your business, that is something that we can have a conversation about,” he said. “We have an active merchant-banking team as part of Guardian Asset Management, and we can actually help find and co-ordinate potential transactions where you may want to divest a part of your business, but you are not ready to list on the stock exchange.”

He added that the businesses listed on local and regional stock exchanges are also reputable, as they have to meet several regulatory requirements, including disclosures of financial performance and compliance with the Securities Exchange Commission.

“These disclosures and regulations are intended to help manage risk.”

As both the Jamaican and the TT stock exchange continue to perform, they continue to provide returns for investors.

Martinez said the Jamaican stock exchange has a wider range of companies, but the TT stock exchange has greater depth with more well-established companies.

He noted that the government continues to provide incentives to join the junior stock exchange, and the asset-management industry in TT continues to grow.