“I’m always seeing articles in the newspapers that talk about investments, but it seems like investing is something that’s out of my reach, as I don’t have a lot of money. Is it possible for people with small incomes to invest?”

When we hear the word ‘investor’ many times we picture a wealthy person who has made a lot of money by trading in the stock market, or buying expensive real estate. The reality is that anyone can invest, if he or she learns and applies the basic concepts of investing.

So what exactly is investing? Investing is simply the act of putting money into an endeavour with the expectation of making some profit. An investment is any item that is bought with the intention for it to increase in value in the future, when it can be sold at a higher price, and/or provide an income stream.

Although we use the terms interchangeably, saving and investing aren’t really the same things. The main focus of saving is to place your money in safe keeping in an institution like a bank, to protect your assets and to ensure that funds are in place for emergency needs.

When you invest, on the other hand, you’re trying actively to increase your principal and provide an income now or in the future.

Some types of investments can be found in the Money Market, Bond Market, Stock Market, and Real Estate. Foreign currency trading, and trading of other commodities like gold, art and antiques, are other forms of investment that are practiced by wealthier individuals. Establishing your own business can be one of the most fulfilling types of investments that just about any one can attempt.

Let’s look at three common types of investments that available to the ordinary investor right here in Jamaica:

Money Market

This is a market where you can buy or sell short-term instruments of debt. You generally access these investments through a broker or investment house, and you can start with as little as J$1,000 in some places.

These brokers bring together institutions like the Bank of Jamaica and large corporations that wish to borrow money, with everyday individuals who would like to lend their money in order to earn a higher interest rate.

Money Market instruments offer a fixed interest rate for a fixed period of one year or less. When the debt is issued by the Government it’s usually called Government Paper; debt issued by deposit-taking institutions like banks are called Certificates of Deposit; and when issued by companies, it’s referred to as Commercial Paper.

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Bonds

Bonds are medium to long-term debt, and are similar to Money Market instruments except that they are longer in term, from eighteen months up to over thirty years. You can also access the bond market through a broker and you can buy into Government of Jamaica bonds with a little as J$5,000.

The issuer of bonds sets up a payment plan where they promise to pay interest on set dates at a fixed interest rate. The debt contract also states that the principal amount will be repaid at the maturity or end date of the bond.

Bonds are good investments for persons who wish to have fixed earnings over a longer period, for example retirees who need a definite, regular income.

Stocks

This is an investment where you buy ownership into a public company. You can either buy as little as 100 units of a company’s stock on the Jamaica Stock Exchange through a listed stock market broker, or you can buy newly issued stocks when the company first offers them to the public. One recent example of an initial public offering (IPO) was Supreme Ventures Limited’s share offer.

When you buy stocks you hope that their value will increase over time, and that you can have the opportunity to share in the company’s profits through dividend payments. Stocks do not give a guaranteed return or interest rate like Money Market investments or bonds, so they can be much riskier, and they should be used for long term investing.

Investing can help you to achieve your financial goals by allowing you to make more money than you normally would by just having your funds in a regular savings account. You can also match the time frame of your goals, such as buying a house, your children’s education or your retirement, to the appropriate type of investment to meet your needs.

Seek expert advice from a financial planner at your bank, credit union or broker to find out more how investing can work for you.