Investment Strategy for the JSE Markets - 2018

Posted in: IDEAL Insights, Market Trends

It’s a New Year – One of many popular resolutions is the desire to achieve financial stability. This is the time of year when investors generally use the opportunity to review investment portfolio holdings, analyze current economic climate especially from a macroeconomic perspective, and realign/rebalance their investments by adapting new or similar strategies that will correlate with future outlooks.

The outlook for 2018 seems promising however; investors should remain diligent with their approach and seek financial guidance when making decisions or adjustments to their investment strategy to maximize portfolio performance.

As the Jamaican economy continues to show signs of improvements with increase in exports, reduction in interest and inflation rates that is expected to remain stable and in single digits, decline in unemployment of approximately 11.30% for the last fiscal year, along with the revaluation of the Jamaican Dollar (JMD) relative to the United States Dollar (USD). These key economic indicators have been much improved prior to the year 2013, and have contributed significantly towards investors’ confidence in the markets. Delivering results of 50% and 5.3% increases on the Jamaica Stock Exchange (JSE) in year 2017 on the main and junior market respectively analysts expect the markets to continue along this path which is supportive of the ongoing economic progress. The outlook for 2018 seems promising however; investors should remain diligent with their approach and seek financial guidance when making decisions or adjustments to their investment strategy to maximize portfolio performance. This is very sensitive as one need to ensure that the intended approach mirrors your personal financial objectives and maintain what is to be the suitable risk tolerance.

Reassessing your investment is important even if the strategy is similar to that of the previous year, it helps to provide a clear understanding of the way forward, and keeps the portfolio aligned with your long term investment plans. This places you in a position to better manage risks by making adjustments based changes in the economy.

For investors seeking income, growth or a mixture of both, an important strategy to always apply is diversification with the mindset of a medium to long term outlook. Income-oriented investors should invest in stocks that yield attractive dividends. These consist of the larger and more mature companies that are usually traded on the JSE main market for example; Carreras Limited (JSE: CAR) and Grace Kennedy (JSE: GK) that has an annual dividend of 6.60% and 2.63% respectively. As for investors who are seeking growth – moderate to aggressive, it is recommended that majority of your holdings should be surrounded among companies that are within their growth stage, or stable companies that are continuously expanding and making efforts to improve profits year-over-year in an effort increase shareholder value – NCB Financial Group Limited (JSE: NCBFGL) and PanJam Investment Limited (JSE: PJAM) are perfect examples. Rebalancing your portfolio when needed is a good thing, but don’t overdo it, especially if there is no need to. Though this is a general practice, it is indeed critical when conducting an annual portfolio assessment as it should be mainly dependent on factors such as; your current financial position, investment goals and tenure for each, along with the forecast for economic performance

Many investors have raised the question on whether the JSE markets will be able to maintain its performance with many stocks trading at high valuations. While this is true, I believe there is still a way to go; only time will tell. We will continue to see improvements in the markets judging from the current economic climate. In my opinion diversification must be maintained, weigh the bulk of your portfolio among the larger companies that continue to grow their revenue and earnings.

Additionally, the year 2018 seems we are in for another year of new market listings (IPOs) that will provide more equity investment options for investors. The local market is expected to have about quite a number of new issues for both the main and junior markets. Financial entities Mayberry West Indies and Sygnus Capital is said to be heading public by February. There are other expected listings such as; Elite Diagnostics Imaging Services a medical diagnostics company, University College of the Caribbean and educational institution, and NevEast Supplies Limited that provides office equipment and stationery supplies.

Last year was a good one for investors in local markets; take the time to reflect on targets achieved along with opportunities missed. Identify what could have been done better to maximize returns on your investments, and prepare for what is to come this year when opportunities surface. We all have different reasons to invest along with various financial goals. It is important to revisit these goals and remind yourself what you are trying to achieve just ensure that each goal is aligned among changes within the current investment landscape.

by Orick Angus   Senior Wealth Advisor

Ideal Portfolio Services Ltd.

Orick Angus holds a BSc. in Finance and Economics. He joined the Ideal team as Senior Wealth Advisor. As a Senior Wealth Advisor his key role is to analyze various markets, asset management, along with establishing and maintaining client relationships.

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