DIY investing growing, but experts offer caution
Some investment analysts are reporting that own account or do-it-yourself, DIY, investing is on the upswing in Jamaica. DIY investing is where individual investors choose to build and manage their own portfolios. Financial analyst Marc Gayle says there has been a spike in these investment accounts over the past few years, in both the number of retail investors actively investing, and in the amount of money they invest. He is of the view that the increase is evidence that more people have been taking the improvement of their own financial health into their own hands.
“There are many avenues for people to learn on their own: From Twitter, a variety of YouTube shows created for our local context, to joining communities via Telegram, to attending gatherings where like-minded individuals come together to talk about all things finance,” Gayle told the Financial Gleaner in an interview.
He notes that retail investors have been neglected for too long, even as the investment market has grown.
At the same time, Gayle is cautioning that before jumping in head first, DIY investors need to be informed about areas and products they are venturing into.
“I recommend that you invest in your own education. As that old adage goes ‘invest in what you know’. So before you invest, make sure you know what you are investing in,” Gayle cautioned.
Many DIY investors are believed to be numbered among the new entrants to stock ownership. Information from the Jamaica Central Securities Depository, JCSD, the subsidiary of the Jamaica Stock Exchange, JSE, that provides depository and settlement services for investors in securities such as stocks traded electronically, indicates that there has been a consistent year-on-year growth in the number of investor accounts on its system. At the end of 2014, the number of accounts was 117,237, with 3,412 accounts added in 2015; and that figure more than doubling by 2016. There were 48,167 accounts added in 2019, and a total 46,483 new accounts in 2020 and 2021, putting the total number of accounts at the end of last year at 254,644.
JSE Group Business Development Manager Andr? Gooden shared with the Financial Gleaner that the upswing witnessed in 2019 was spurred by several large initial public offerings, which attracted new investors. Notable among these were state assets Wigton Windfarm Limited, with 31,200 shareholders, and 12, 000 investors who bought into TransJamaican Highway Limited.
The vibrancy in the market has led to many technological advancements, which encourage DIY investing. For example, investors can trade using online platforms to buy and sell securities such as stocks, bonds and mutual funds. Stockbrokerage firms, however, offer professional services for anyone who want to buy and sell stocks on their own.
Toni-Ann Neita-Elliott, vice-president of sales and marketing at Sterling Asset Management, is among the industry experts urging caution.
“Buying stocks, bonds, mutual funds, and any other financial instruments without expert advice is risky. It requires a lot of research, watching the local and international market for trends; and if you’re a busy person, you simply won’t have the time to adequately evaluate options and execute a decision,” she told the Financial Gleaner, adding that DIY investing might be cheaper in terms of transaction costs or trading fees, but could result in costly mistakes.
According to Neita-Elliot, financial planning is more than just playing on the financial markets. She is suggesting a long-term investment approach to building wealth and cushioning falls, such as in the case of a recession or personal crisis.
Recently, the Jamaica National Foundation hosted its BeWi$e summer camp for young people between 12 and 17 years old, as a way to tap into their growing interest in investments and digital currencies. The company says it wants to cultivate a good habit of investment among those are the earners and investors of the future.