Are you focused on your goal?

The sterling Report

By Ian Watson

Sunday, July 15, 2018

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O ver the past month, football fever has consumed the world, resulting in much happiness for some and great disappointment for others.

For those who prepared well, they are reaping their rewards simply because they have done the right things and had a clear understanding of their goal and what they needed to do to get there without the distractions.

This same principles apply when one is making an investment decision. There are many options available to investors on the market and the choice will be dependent on the objective/s that one needs to achieve over the short / medium / long term.

The key to your success will be heavily dependent on the information available on the various products, examining both the upside and downside of each and making the choice that meet your needs. This process, if properly carried out, will ensure that the chances of the unexpected occurring are greatly reduced.

It happens very frequently that investors go blindly into investments and, like an earthquake, when tremors occur they start to worry about whether they had insurance.

Bonds, for example, are a reliable and predictable source of income for investors and one can, with some degree of certainty, know the returns that they will receive. There are variables such as the bond price, which during the life of the investment may fluctuate above and below the levels at which the bond was purchased. However, these fluctuations can cause severe anxiety for those investors who didn't have defined goals at the start of the investment.

When an investor purchases a bond at a specific price they know upfront what the yield on the investment will be to the call date (if applicable) or to the maturity date. It is that yield that informs the investor's decision. It is imperative at this stage to define one's investment goals.

Is the investment being sought for income or speculative purposes?

If the former, then slight fluctuations in the market prices will not be of concern provided there is no drastic change in the credit rating of the particular bond so that it jeopardises future payments and recovery of the investment.

Fortunately, a downward change in the credit rating is not likely to occur overnight and the first occurrence should serve as a precautionary flag and an opportunity to re-evaluate the investment and exit if need be.

The speculator on the other hand is taking a short position in the investment and will be hoping that the price increases to the extent that it will allow them to sell at a high price and make a profit. Any fall in prices to that investor will no doubt create anxiety for him as he faces potential losses.

Using the example of the bond purchase mentioned previously, knowing what you want to achieve is extremely important and can help reduce the anxiety of price fluctuations. Many people panic at the slight fluctuations in prices, losing sight of their original goal of income generation.

Unless the fluctuation in market prices is extraordinary, there is no need to panic if your investment objective is income over the long haul. You cannot score goals without a plan and if your plan is to win the match you must stick to it!

Ian Watson is vice-president, sales & marketing at Sterling Asset Management Ltd. Sterling provides financial and advisory services to the corporate, individual and institutional investor. Feedback: If you wish to have Sterling address your investment questions in upcoming articles, please e-mail us at: or visit our website at

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