In an article in the Times of Malta (September 13), Mark Vella writes on the reinvestment risks of bond/fixed-income investments. He goes on to say that reinvestment risk is often disregarded, or rather not given its due importance by investors and asset managers alike.
The Malta Association of Small Shareholders (MASS) strongly agrees on the need for the retail investor to make wise decisions before investing, not only in bonds but in every kind of financial product.
MASS is a non-profit, non-governmental organisation registered with the Malta Commissioner for Voluntary Services.
It was originally set up by a few shareholders who felt that they were getting a raw deal from their investments in the local market. In a short span of time, the association grew in membership. A great number of shareholders, besides investing in shares, had other investment like bonds, funds and ‘financial products’.
Quite logically and inevitably, the association widened its mission to include all ‘retail’ investors, irrespective of their type of investments.
It was soon established that the scope of the association should be greatly focused on countering the great lack of ‘financial literacy’ among the shareholders. This was evidenced from the kind of questions raised at annual general meetings of public liability companies registered with the Malta Stock Exchange. Many investors could not distinguish between shares and bonds, let alone other much more complex investment products.
The various laws and regulations alone are not enough to protect an investor who has made bad investment decisions
The lack of knowledge of what is the financial investment market and how it works was seen as a major contributing factor that made investors take some very wrong decisions. The association saw that it had to redress this ‘financial illiteracy’ and eventually it took up the challenge with great enthusiasm.
Having sound knowledge on financial services available is the very first and important step for an investor, in order to be able to make a more judicious choice before investing money. MASS is today doing its utmost to instill a mentality in investors: that they must choose their investments carefully.
The bad news regarding financial losses made by investment firms, banks and companies are frequent.
Some investments go down in value and might even default. Because of this, many people have lost their life-long savings and went bankrupt.
In many cases, however, this occurred because of a lack of good financial planning and because of lack of information on the high inherent risks of some investment products.
The various laws and regulations alone are not enough to protect the investor who has made bad investment decisions.
Such a bad experience, and adding the present situation of seeing lower profits from even relatively low-risk investments, is making potential investors think twice before parting with their money. Many are ‘parking’ their money in bank deposits, or in cash, while hoping for better times.
This is incorrect reasoning that comes from fear of further losses. Over-confidence has now almost turned into diffidence in the financial market. A good way to increase confidence in a financial market that is showing negative signs is to get more knowledge of how this market works.
MASS transmits useful information through its monthly publication Shareholder’s News, as well as on its website and Facebook page. MASS also organises public information meetings open to all for free.
Experts explain various topics related to the financial services, the risks, as well as the profit opportunities that may come from careful investment. These meetings are a very good opportunity for investors to listen and ask questions.
However, the association is barred from giving individual and personal advice on where and how to invest. This basic knowledge helps investors who are lost in a sea of financial news to digest some basic information.
The next conference, in Maltese, will be held on Tuesday at the Radisson Blu Resort, St Julian’s.
The speaker is Robert Suban, lecturer in the Banking and Finance Faculty of Economics, Management and Accountancy, University of Malta. He will deliver a talk on: ‘Statement of comprehensive income: how to predict share price movements.’ There will be time for questions.
Entrance is free. Coffee is served at 6pm and the talk ends at 8pm. Enquiries can be made by e-mail: info@mass.org.mt or by phoning mobile 7984 2964.
Lawrence Mifsud is secretary of the Association of Small Shareholders (MASS).