RISK, cost and liquidity are three things every investor should consider before purchasing their own securities for their portfolio. As a young investor with a long investment life ahead of you, risk is something you are more able to accept rather than a retiree who is looking more for income rather than growth.

Cost however, as a young investor, would be a bit more to take into consideration than a retiree, as a retiree has had a lifetime of working and more than likely has a certain level of excess funds to invest.

Finally, no matter what stage you are in your life, accidents may happen. Therefore, liquidity is a factor that both types of investors would have to take into consideration.

When it comes to investing, no matter what you choose to invest in, there is always some degree of risk.

As a young investor you are able to endure a greater degree of risk, which is a good thing as an aggressive risk tolerance means more opportunity for potential growth.

Young investors are able to handle small, shortterm losses as you have a longer investment life ahead of you, therefore you have more time for the market to correct itself if it goes down.

As the market has a natural, upward-trending motion, in due time, with enough patience, your investment should appreciate to a level where you can make a substantial gain.

As a retiree, more often than not you would be more of a conservative investor and as a conservative investor you would be more focused on income rather than growth and may prefer not to see short-term losses.

Therefore, ordinary shares in a company may not be the best option for you. A better option for someone who is risk averse and focused on income would be to have your investments more heavily weighted in preferred shares or bonds.

Bonds provide more safety for investors and they almost guarantee coupon payments, however bonds aren’t always very liquid.

Therefore, it is important to firstly ensure that you have an emergency fund for life’s unpredictable moments but also to ensure a portion of your investments can be easily liquidated.

This is just another example of why diversification is important. Every investor should diversify their portfolio to include all the factors discussed above.

Preferred shares are great assets to mitigate risk and gain liquidity; ordinary shares for growth potential and liquidity; and bonds to mitigate risk and bring in high levels of income.

Bonds are generally a bit more expensive to invest in and so, the best option for investors just starting off with low capital would be to invest in preferred shares and ordinary shares.

With this you can still get the growth potential and income coupled with the mitigation of risk and, as these securities can cost just cents upwards, it will be easy for a new investor with low capital to gain access.

This proper diversification and planning of your investment portfolio can significantly decrease an investor’s worries as this will help to decrease the degree of risk in their investment portfolio.

However, one thing to always remember is that with investing, returns are NOT GUARANTEED.

Therefore, as an investor you would have to take the necessary precautions to steer away from too much risk in one portfolio, no matter how aggressive of an investor you are.

To do this, one of the best options is not only diversification, but to invest in bluechip companies or well-established companies — those that have strong financial backing and are almost always releasing positive earnings reports.

With these companies, your investments are generally much safer than with upcoming companies where the earnings aren’t always stable or positive, and with this uncertainty comes risk.

Finally, one must always remember the benefits of long-term investing.

As stated before, the market has a general, upward-trending motion, therefore, under SSL’s recommendation, investors should seek to hold their securities for about three years before taking out a significant portion of the capital, and to throw away the notion of ‘get rich quick’.

Investing should be seen as an accompanying growth instrument for your financials.

As economic conditions fluctuate, particularly for the Jamaican community where battling inflation and the devaluation of the dollar can be seen each day, it can be seen where an average “nine- to-five” job most times cannot suffice for a stable financial life.

Therefore, whether investing is a personal interest or not, it would always be worth it to educate oneself on becoming more financially literate and thus, have another means to make your money work for you in order to secure your financial freedom.

Talon Yong is a Service Supervisor at Stocks and Securities Limited.