Sunday 23rd December, 2007

 

Timing when to save

 
 
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She said she wanted to visit the Pyramids of Egypt, climb Mount Sinai and sail on the river Nile like Cleopatra, so she took off. I spoke to her as she sat on the aeroplane awaiting taxi, and she was rattling at 300 words per minute.

Who wouldn’t be excited? All it takes is about US$3,000, a few maps and a heart ready for adventure. In my mind I knew these might be the best days of her life, when the spirit is free and the bills are so few.

She had set a goal to save the US$3,000 in four months, and she walked long distances, took the bus and only bought food, although she often feasted her eyes in the malls. When she wanted new jeans, she sent a subtle message that she’ll take her birthday and her Christmas presents upfront. The message carried across the miles.

She had traded the opportunity cost of coming home for Christmas, against an exotic experience in the hunting grounds of the Pharaohs.

So is not all about saving for the long term in your pension plans and buying up real estate. It’s also about living life to the fullest, and taking time out to rest and rejuvenate—and that costs! It’s really about timing and structure: when to save and how to save.

People who timed the foreign exchange market this year and dabbled in foreign currency earned some 20 per cent on the Canadian dollar (CAD), in the trade. If you bought Canadian dollars in January you would have traded TT$5.5 for CAD$1. By mid December you would need TT$6.23 for the same transaction.

One Euro was trading at TT$7.7 in January; the trade value is now TT$9.2. The British pound was priced at TT$11.6 in January, that value is now TT$12.7. The US dollar, in January was trading at TT$6.3 and that’s about the same.

Closer home, the Barbados dollar started the year at TT$2.98, and now trades at TT$3.17.

Currency is a commodity and represents a high-risk asset in the portfolio mix. The return is also higher than average returns anywhere.

The percentage of any portfolio that is exposed to high risk will depend on the amount of time you have. The longer the time horizon the greater that percentage can be.

The irony is that it is only when you are older, you have the extra money to actually afford to try out the foreign exchange market. Younger people tend to live from pay cheque to pay cheque, just to pay for food, transport, school and housing. They have little to spare.

Obviously the cruise ship’s Internet was exorbitant and she didn’t think expenditure on a SIM card for her phone was within her budget. So I haven’t heard from her yet.

Money is worth what it can buy at any one point in time. You go girl!