In September 1963, Hurricane Flora hit Tobago. That led to
the virtual death of the national cash cropthe agricultural
economyand gave birth to what is now called a tourism
economy. Birth and death, in almost everything, follow each
other, just like loss and gain.
It is the time interval, between loss and gain, in matters
of financial planning, that makes the big difference between
overall success and failure. So there is a need for constant
vigilance and action.
Innovative products come on stream, so consumers jump on
the band wagon and dare to adventure, with the hope of higher
Some bank savings accounts provide quarterly statements
so you can see a written report of how your savings and spending
either leads to net growth, or nothing. In practice many bank
account statements are never scrutinised or reconciled by
the consumer who tends to rely on the accuracy of the bankers.
Mutual funds typically furnish a quarterly statement. Many
people do not read their mutual fund statements, and some
find it confusing. Sometimes even after years of participation,
they still do not understand the concept of units in mutual
Individuals may take a cue from the word mutual itself.
Mutual means that there is something common between two parties,
something shared, between the investor and the company. This
thing that is shared is in the unit.
The mutual fund management company uses the money you have
invested to purchase, on your behalf, a number of units. The
unit is an imaginary thing, which has a price tag, and carries
some risk. That too is shared.
Commonly a unit may be priced at $20. When you invest $100,000
with the mutual fund company, they will deem that you have
purchased units at a cost of $20 per unit.
The price of each unit, fluctuates with the gains and losses
of the total investment portfolio under management by the
mutual fund company, over time.
From your $100,000 invested, three will de deductions of
As the months and quarters go by, there may be consistent
portfolio gains, which outweigh the charges and fees.
This gives rise to the concept of income and growth funds.
When there is an increase in the cost or price of the single
unit, that is referred to as growth. So if the cost is now
$25 per unit, that represents growth of 25 per cent.
Income is an allocation of earnings based on the total investment.
So in addition to growth you may get additional earnings on
your portfolio, called income.
Growth in unit prices tends to follow growth in the stock
market. This is because a significant portion of money is
invested by the fund managers in stocks. But the fund managers
try to balance the risk by also investing in less risky bonds
or other assets.
But it is possible that the total mutual fund portfolio
shows no growth, and instead reflects a net declinein
which case you loose.
But to loose is not to surrender. By nature, the human being
loves wealth. So after the storm, if there is one, you have
to think fast to come up with a new idea, or different route
for financial success. The faster the better!