Case Study: Strategic Reinvestment Plan in a Changing Economy

Client profile:

Jamie Bond, a 50-year-old investor, will soon receive principal on the maturing NROCC bonds that have been his cornerstone investment for the past decade. Looking to the future, Jamie consults with his investment advisor to create a forward-thinking strategy that will preserve his capital, generate stable income and maintain flexibility for future opportunities. Given his moderate risk tolerance, he is particularly alert to currency fluctuations and broader economic shifts caused by rising inflation and interest rates.

Through careful planning with his advisor, Jamie outlined a diversified reinvestment strategy that balances security, income and growth potential in three key areas.

Planned reinvestment strategy:

1. Global Dollar Bonds (50% allocation):

Recognizing the benefits of diversifying outside the local market to protect against currency volatility, Jamie decides to allocate half of his expected earnings to a portfolio of high-quality global dollar bonds. This mix will include corporate, municipal and sovereign bonds from stable issuers with high credit ratings that provide a reliable income stream.

• Expected Outcome: This US dollar bond fund is designed to provide Jamie with a stable income and additional protection against local currency depreciation. The stable income stream from the bonds should help protect his portfolio from local economic uncertainty while providing moderate upside potential in international markets.

2. Short-term instruments (30% allocation):

For additional liquidity, Jamie plans to invest in short-term instruments such as repos and notes. His advisor suggests a “ladder” structure for these investments, staggering their maturities so that some of his funds are available at regular intervals. This setup ensures that Jamie can quickly respond to new investment opportunities or adapt his portfolio based on market conditions.

• Expected Outcome: This short-term strategy will provide Jamie with peace of mind and flexibility. Because the funds mature periodically, he can reinvest or reallocate them as needed, providing a low-risk income stream that can stabilize his portfolio against potential market changes.

3. Mutual fund diversification (20% allocation):

To generate additional potential income, Jamie intends to allocate 20 percent of his capital to a high-yield mutual fund focused on international bond markets. This fund will give him access to a diversified range of global bonds, reducing the risk of concentration in his portfolio and providing him with greater market growth opportunities. Fund management also adds convenience by reducing the need for Jamie to monitor individual bond investments.

• Expected Outcome: With this investment, James will benefit from international exposure, attractive returns and professional management, as well as diversification. The fund’s bond mix should support long-term growth without requiring significant oversight.

The result Jamie hopes to achieve:

Through this structured approach, Jamie expects to achieve his main goals: stable income, capital preservation and liquidity. Each type of investment serves a specific purpose: global dollar bonds add stability and growth potential, short-term instruments provide flexibility, and a mutual fund provides diversified income and growth. By aligning her strategy with her financial goals, Jamie strives to not only preserve her wealth, but also remain well positioned for future financial opportunities.

Having prepared a reinvestment plan, Jamie is confident that this balanced portfolio will allow him to navigate Jamaica’s evolving market landscape. This case illustrates how a tailored strategy can help investors like Jamie achieve sustainability and long-term success through thoughtful diversification and adaptive planning.

Tenan Thompson is a personal financial planning manager at Sterling Asset Management. Sterling provides financial advice and instruments in US dollars and other hard currencies to corporate, individual and institutional investors. Visit our website www.sterling.com.jm.

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