Investing Mistakes 2019 Disproved

Investing mistakes

Jan 31, 2020

2019 dispelled three huge misconceptions about investing 

  • The Jamaican Stock Market is more attractive than the U.S. stock market 
  • Bonds can’t deliver growth
  • You can’t lose with Real estate 

In 2019, the S&P 500 delivered a higher return to investors for less risk than the Jamaica Stock Exchange. During 2019, the S&P 500 index returned 28.9% in USD terms. The JSE returned 34.3% in JMD terms. However, inflation was roughly 6.2% and devaluation was 3.8%. Of course, that excludes the 6% of broker fees you pay on the way in and out as well as a liquidity discount. The local stock exchange has appreciated by over 46% per annum over the last 5 years. There is no doubt that it is an excellent tool for wealth creation over this period. Interestingly, if we look at the last 17 years, the cumulative average growth rate of the Jamaica Stock Exchange is closer to 15.3%. The inflation rate over that period is 8.7%. Investors want to know where to look for growth. The IMF projects that the global economy grew at a rate of 3.3% in 2019. It also estimates that the Jamaican economy grew at a rate of 1.7% in 2019. If we use data to make investment decisions, investors looking for growth – also need to look outside of Jamaica. 

US dollar Bonds delivered double digit returns in 2019 thanks to price appreciation. In 2019, the 10 year US Treasury returned 9.64% and 10 year Baa rated corporate bonds returned 15.33%. (During 2019, bond mutual funds rose as much as 17.8% in USD on the year. There is a widespread misconception that bonds cannot deliver growth. It is a mantra repeated by the most sophisticated investment managers and investors. The data clearly states the opposite. In fact, many large local pension funds scoffed at the opportunity to enter the global bond market during the softening in late 2018 and early 2019. Bonds are not mutually exclusive to equities. Rather they provide a lower (relative to equity) risk tool of wealth creation.

Real estate prices have started to rise above their historical average. According to the BOJ’s index of real estate prices, real estate prices in Jamaica rose by 10.28% between June 2018 and June 2019. This is great for existing holders but not so great for new buyers. This is also 128% higher than the 6-year average increase of 4.5%. Let’s take an anecdotal example (we’ve shared before). During 2019, a local newspaper reported the real estate holdings of a politician. The newspaper stated that the politician's family purchased a property (land and home) for J$3.6 million in 1991. As at December 31, 2018 the property value was J$58 million. Fantastic return? Think again. In 1991, J$3.6 million was worth US$352,250.49. In December 2018, J$58 million was worth US$454,132.03. That is a return of 0.95% per year for 27 years. That is LESS than the rate of inflation in the US over the period (roughly 2%). If you had invested US$352,250.49 at 2% per annum in 1991, you would have US$601,251.59 in December 2018 (or 70% more than the initial investment). Whether we look at the data (an average increase of 4.5% since 2013) or at anecdotal examples and discount them for inflation, real estate is not a fool proof way to make money.

Important Resources

Stay Updated On Our Exclusive Blogs

Get Access Now

Understanding Bonds

Read More

Biggest Investing Mistakes Right Now

Read More

How Mutual Funds Work

Read More

Contact Us

3rd Floor
40 Knutsford Blvd
Kingston 5
Jamaica W.I.

Tel: (876) 754-2225
Fax: (876) 754-8103

Business Hours


Monday - Friday: 8:00AM - 4:00PM