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How to invest on a small budget


Taking the initial plunge is always the hardest thing to do when it comes to investing. They call it “taking the plunge” for a reason. You’re all in. But you’ve got to learn how to overcome that initial fear, because it can easily consume your mind and have you believing the worst. Truth is most, if not all, great rewards in life come with sacrifice. Investing is no different.

In 2016, the World Bank found the average annual income for a Bahamian to be $23,124.39, so, let’s break this down: Based on the World Bank’s figure, the monthly income of the average Bahamian is $1,927.03. One may see this figure as a minimum salary, but to others, it could be considered quite sizable. I was always taught that it doesn’t matter how much money you make, but it’s what you do with it that makes the difference. So based on that very same logic and taking into consideration the cost of living as well as unplanned expenses, a person can still invest. Here’s how.

At the end of every month, you should save a minimum of $100. By the end of three months, you would have at least $300, which could be considered an investment budget. With this budget, one can make an initial investment in either an equity or debt Instrument.

Here’s a quick breakdown of the two:

A debt instrument is simply a loan you make to a company or the government on prearranged conditions and terms of the interest you will be paid and total repayment amount. These products are less risky and are considered long-term investments. The good thing about debt instruments is that they are among the first to be paid. They are paid before the owners receive any funds from a possible profit.

Examples of debt instruments include government bonds, Bahamas government registered stock, corporate bonds, preference shares and treasury bills.

The good thing about government bonds and Bahamas government registered stock is that they have a minimum investment amount of $100. So it doesn’t require a whole lot to begin, and they can be purchased directly at The Central Bank of The Bahamas.

The other investment option is the use of equity instruments. These represent ownership in a particular company and the investor is entitled to be a part of profit sharing. It also allows you the right to vote on certain decisions of the company at the annual general meetings. Equity instruments carry more risk, due to the fact that dividend payments are tied directly to the success of the company. If the company performs poorly, you can quite easily lose some or all of the money you’ve invested in the company. But don’t let this scare you away.

There are five approved broker-dealers in The Bahamas. These broker-dealers facilitate the trading of securities listed on BISX. The Bahamas International Stock Exchange (BISX) presently has 20 listed and traded securities. It also has 13 preference shares on the exchange. Each broker-dealer has qualified professionals who can assist you with purchasing a traded security or preferred share. Even though they can be very helpful it is always best to do your own research and have questions for the dealers before you purchase any security.
Don’t be pressured to make any investment you are not fully confident in, because this can leave a very sour taste in your mouth if the investment goes south.

Do your own analysis and see which type of investment best suits your need. Frankly, if you’re looking at making a long-term investment, your best option is a debt instrument, and if you are looking for a short-term investment that can possibly provide you with a quicker return, your best option will be an equity instrument. Remember. Don’t be afraid to take the plunge.

• Quinton C. Lightbourne is a certified financial planner with the Chartered Institute of Bankers in Scotland and presently works with the investment and financial services team of a local law firm.

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