UTC Media Centre

Why investing at regular intervals works

Use the term “dollar cost averaging” in a conversation and chances are you would encounter puzzled looks.  Truth is, it’s an investment technique that many successful investors already practice  without even realizing it. Few investment strategies are more ingrained than dollar-cost averaging which simply means investing a fixed amount of money at fixed intervals of time over a long period, through thick and thin.

This type of systematic investment program is familiar to many UTC investors, as they practice it by investing in the array of mutual funds that are managed by the Corporation. The Children’s Investment Starter Plan and Student Investment and Protection Plan, which offer the opportunity to invest in shares of local companies trading on the stock exchange, government and government guaranteed bonds, short term securities and foreign equities, cater for dollar cost averaging by allowing the investor to invest a fixed sum over a period of time.

 The technique can also be applied to UTC’s Pension Plus, the Individual Retirement Unit Account (IRUA) and Universal Retirement Fund, whose funds are invested in stocks, bonds and money market instruments , and are avenues to build your retirement savings over the long term.

Instead of investing assets in a lump sum, the investor buys smaller amounts over a longer period of time. This spreads the cost out over several years, providing a measure of insulation against changes in market prices and in this way one is able to minimize risk to one’s investment.

For one thing, it’s the only way most people can invest—by putting away small sums out of every paycheck.   That’s a sensible approach, for example, if it means committing yourself to investing a fixed amount of your salary every month toward your retirement or children’s education. An investor that puts money into a UTC mutual fund in effect owns a fractional interest in every one of the stocks or bonds or other assets that make up that portfolio.

Participation by investors is represented by units which are the equivalent to the proportion of a fund’s portfolio comprising equity and fixed income securities.  When you open an account at the Unit Trust Corporation your money is used to purchase units in the fund.  In the Growth and Income Fund, for instance, when an investor buys units, that investor buys into shares of local companies trading on the stock exchange as well as government and government guaranteed bonds, short term securities and foreign equities.

 The opportunity exists for the value of the fund to increase, thereby increasing the value of each unit. What this means is that units can be worth a lot more than you paid for them when you are ready to sell or convert your units back to cash.

Investing a set amount of money each month ensures that you will buy more units when they are low and fewer when they are high.    When the markets are up, you buy fewer units per dollar invested to the higher cost per unit. When the markets are down, the situation is reversed and you purchase a greater of number of units per dollar invested. It’s a strategic way to invest because you buy more units when the cost is low, so you get an average cost per unit over time, meaning you don’t have to invest the time and effort to monitor market movements and strategically time your investments.

All this enables investors with tight budgets to invest small sums on a regular basis without worrying about their portfolio. While small contributions may not seem impressive at first glance, they enable investors to get into the habit of saving, and can really add up over the course of a lifetime.

Regardless of the amount of money that you have to invest, investors must remember that to benefit from dollar-cost averaging one should adopt a medium to long term investment horizon.. In order to begin a dollar cost averaging plan, you must do three things:

• Decide exactly how much money you can invest each month. Make certain that you are financially capable of keeping the amount consistent; otherwise the plan will not be as effective.
• Select an investment that you want to hold for the long term, preferably five to ten years or longer.
• At regular intervals (weekly, monthly or quarterly works best), invest that money into the security you’ve chosen.  To make it easier, set up an automatic withdrawal plan so the process becomes automated.

The reality is that many potential investors could save themselves a lot of time, effort and money by beginning an investment plan that caters for dollar cost averaging.

As a parent, you want to provide the very best for your children, which includes giving them a good tertiary education.  But the cost of a quality education can be hefty and usually cannot easily be absorbed into a monthly or yearly budget. For this reason, you’ll need to plan very carefully for your children’s education.

The growing concern for many parents is their financial readiness for giving their children a tertiary education can be prohibitive. By the time one factors in the costs for books, spending allowances, housing and food and inflation, the total bill can be astronomical.  It can even be substantially higher when tertiary education is pursued overseas.

Many parents are simply not ready for such a financially draining situation. Some parents aren’t even aware of its impact until it’s too late – when their children have only a few years left until graduation from secondary school.  To start saving for your child’s education, it’s a good idea to sit down with a financial advisor and map out your child’s complete tertiary educational needs. Consider the following points:   How old is your child? What year will your child begin his or her tertiary education? What about post-graduate studies?  Will your child live at home or in residence during university?

By taking into account your child’s age, and the years in which he or she will begin school and start tertiary education, a financial planner will help you to determine how much you need to put away each month.

You’re not alone if you think a financial goal like this seems intimidating or out of reach. But with careful planning and early saving, it doesn’t have to be. Starting early and investing consistently are two key factors in reaching your goal.  At the Unit Trust Corporation (UTC), we offer a range of investments and saving solutions aimed at helping you cover the cost of your child’s education – without putting huge strain on your finances.

The UTC has engineered the Children’s Investment Starter Plan (CISP) that gives parents a headstart to building an investment plan for their children, where the Unit Trust matches the first five units in each account with an additional five units – so for the price of five units you get 10. The proceeds of your CISP are invested in UTC’s Growth and Income Fund, so not only is this a long-term investment vehicle that offers increasing value through capital growth but income as well.

By investing in shares of local companies trading on the stock exchange, government and government guaranteed bonds, short term securities and foreign equities, parents through diversification can, also reduce the impact of volatility and risk on their investment.

Another education tool worth considering for your education arsenal is the Student Investment and Protection Plan (SIPP) where the minimum initial investment can be as low as $50, the minimum insurance premium is $25 per annum and the minimum investment is $25. An account can be opened for a child from as early as six months old. Once the period of insurance is determined by the parent or adult opening the account, the child is protected 24 hours a day, seven days a week, at home as well as at school once he/she is a full-time student.

By combining an investment plan with protection through accident and medical insurance, the proceeds of your SIPP, like the CISP, are invested in UTC’s Growth and Income Fund, so your SIPP investment continues to grow throughout your child’s school years and has a long term capital guarantee.  Like the CISP, this facility affords investors protection of capital, once the funds remain invested for a minimum of three years.

Both plans cater for an investment strategy tailored to meet your child’s education and allow you time to build your investment at a comfortable pace, investment products to help parents fulfill the dreams of their children.  The earlier you start saving, the more you can benefit from UTC’s investment vehicles that invest in a diversified mix of securities that offer an opportunity for capital appreciation as well as income.

Saving for your child’s education is a priority for many parents. Whether they have only just begun to take their first steps or just given their  first smile, the sooner you start planning for your child’s education, the less stress and anxiety you face in the future.

Retirement planning can be more intimidating than any other personal finance topic. And with good reason: picture yourself at the end of your working years with family in tow and you are able to keep the lifestyle you had enjoyed during that period. You are well equipped financially to handle all your expenses, treat yourself to some fine dining  and take Mrs. Retiree on that long transatlantic cruise you promised when you were  still working.

Now, imagine yourself in retirement with all your family commitments, bill payments, university fees for your teenaged children and home repair expenses. But in this scenario you are struggling financially and not able to enjoy the lifestyle you maintained in the early days. To make matters worse, you are not in the pink of health and confronted by mounting medical expenses. Which of these two scenarios do you find more appealing?  Of course, the one that brings comfort and peace of mind.   How do you achieve it then?

A common habit among employed persons is to place significant reliance on a company’s pension plan to provide for retirement. Similar reliance is often placed on NIS contributions and old age pension to meet their retirement obligations. However, this does not eradicate the need to build one’s own retirement investment portfolio.

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18 March 2013:  Team members of the Unit Trust Corporation (UTC) was a show of force when they came together recently to offer support to Presentation College, Chaguanas, in the promotion of a drug-free environment by participating in the central school’s 5K and Walk-A-Thon.

The Corporation has supported the event over the years and was thrilled to be a corporate partner in 2013.

UTC volunteers collaborated in a fun-filled team building exercise, which included participation in  game, as well as setting up water stations and the distributing of water to the participants of the 5K event.

In an effort to enhance the financial literacy of  the population, Gift of Units were also distributed to winners in the Under 14, 15, 17 and 20 categories, along with a UTC booth  offering financial advice to patrons attending the event.

Officials from Presentation College welcomed the support of the UTC, which has been participating in this event for the past five years. “UTC has become one of our faithful supporters and the students and teachers are thankful to the Corporation for its assistance and presence at this annual event,” said Gary Robiero, Presentation College Principal.  The funds from the event will be used to refurbish the school.

Audra Roy, who participated in the event and is based at the Chaguanas Investment Centre, stated that she had a wonderful time and felt pride and fulfillment in being able to make a difference in the community that the IC operates.  “We are able to make a difference, and that is what is important,” said Roy.

The UTC, through its commitment to community outreach activities, continues to enrich people’s lives and impact the communities they operate in a positive way.

Lisa Hitlal, Branch Manager of UTC Chaguanas Investment Center, presents a out Gift of Units to winning students of the 5K race.

UTC Team members at the water distribution stations.

Students of the Chaguanas North Secondary School created history when they walked away with the first, second and third place of the 22nd edition of the Trinidad and Tobago Unit Trust Corporation’s Schools’ Investment Game.

The announcement, made recently during the award ceremony at UTC’s Financial Centre in Port-of-Spain, was accompanied by shouts of jubilation and scenes of celebration from the students of the winning school.

The Chaguanas North Secondary School took home an accumulated prize of $18,000 and individual prizes in gift of units, earning them bragging rights among their peers.  Mrs. Rajkumarie Maharaj, the sole teacher to guide the three groups of students who played the game, was presented with $2,200 in gift of units.

“I feel extreme pride in my students, they exercised vigilance in checking their portfolio, did the necessary research and remained committed to ensuring that the right investments were made,”said an elated Maharaj, noting that the students from forms four to six, invested on the New York Stock Exchange and used Google Finance as a useful source of information.

“Their perseverance has paid off,” said a proud Mrs. Maharaj.

Speaking at the 2013 awards ceremony, UTC’s Executive Director, Ms. Eutrice Carrington emphasized the significance of the SIG as educational program. “The UTC has been committed to developing financial literacy and for the past 22 years and the Schools’ Investment Game has been an effective tool in meeting this goal.

She emphasized that an understanding of the key components of investing “will give our youth a strong arm in building a solid financial future,” and noted that the UTC intends to ensure they are equipped with the information and skills to avoid life’s financial challenges.

“It is my fervent hope that the Schools’ Investment Game continues to provide opportunities for our young citizens to arm themselves with the requisite tools for a solid financial future. By understanding the principles of investing they will have a better grasp of Wealth Management” said Ms. Carrington.

 Justin Silva, Portfolio Manager at the UTC, who delivered the feature address, gave the students an insight into financial management by relating his experience on how he raised “fighter” fishes in his younger days and imparted to the students what lessons he learnt.

The experience, Mr Silva said, taught him the value of risk and reward, managing money and ways to capitalize on opportunities as well as  changing one’s mindset and seeking financial advice from those more experienced that yourself.

The opportunity to expose secondary school students to the world of investing and finance was the premise under which the UTC’s Schools’ Investment Game was founded. Each team is given a notional sum of TT $100,000.00 to invest in stock, shares and/or UTC products. Teams are allowed to invest in the international companies such as New York Stock Exchange, (NYSE) and the National Association of Securities Dealers Automated Quotations, (NASDAQ) which were supported by an upgraded on-line system, allowing teams to interact with each other.

Winners of the 2010/2011 UTC Schools’ Investment Game are as follows:

Photo captions:

1. PROUD MOMENT: Executive Director, Eutrice Carrington (center) stands with Team Captains (L-R) Chantal Raghoonanan, Aliyah James, Esther George and Teacher Rajkumarie Maharaj of the Chaguanas North Secondary School.

1. WINNERS ROW: Feature Speaker Justin Silva, Portfolio Manager, UTC and Executive Director Eutrice Carrington (center) are surrounded by jubilant students of the Chaguanas North Secondary School.
2. FINANCIAL ADVICE: Justin Silva, Portfolio Manager, UTC, has the attention of a student from the Chaguanas North Secondary School as her colleagues look on.