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Maltese investors and interest payments

It is often bewildering how often investors refuse to accept good advice, and a particularly persistent stumbling block is investor’s reluctance to invest in anything that does not pay interest. I cannot pretend to have researched the subject, but from what I gather, profit on investment is only part of the investment rationale. Other important factors influence the Maltese investor.

Maltese investors seem to get a dopamine surge following each interest payment. Yes, investors smile when they realise that they will receive interest. I mean, I am being truthful when I say that investors really turn sour when told that there is no interest, and really smile when they are informed of interest payments.

In the past there was also the cheque. What always closed the deal was a cheque with interest sent by post. Tell an investor that he would periodically receive a cheque at home and credit rating and yield become secondary. It is a pity that cheques are becoming a thing of the past. I can even imagine old ladies still waiting behind the door hoping to get their interest fix.

Two figure percentage price gains pale when compared to a two percent interest once a while. Another point I notice is that five per cent seems to be the magic number for Maltese investors. Issue anything above five percent and you get thirty-seven times over-subscription. Anything below that and it’s a hard time. I honestly don’t understand why local corporates bother doing the math when 5.025 sells all.

The tongue in cheek attitude becomes less humorous if the lost investment opportunities are considered. At a time when making a decent return is becoming more and more difficult, investors need to be more conscious of the investment opportunities that exist. And at a basic level investors need to understand what constitutes a good return and what does not, what is liquid and what is not, what is risky and what is less risky. And interest payments are not meant to replace recommendations.

No one invests in property for its interest payments; I assume investors in property look at the capital gains potential. Most investors ‘are’ willing to invest in property, without interest payments and without liquidity.

But the same investors are unwilling to purchase shares in one of the best companies in Europe, which has yearly income that dwarfs Malta’s GDP, has survived the test of time including multiple market crashes and has returned an average of over 10% yearly in the past five years, just because a yearly interest cannot be guaranteed.

Recent demand for investment assets is a clear indication that Malta is a nation of savers. The implication is that we have been extremely successful in making money. Now we need to get wiser in investing it.

Disclaimer: This article was issued by Antoine Briffa, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

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