Last week’s com­men­tary in this space, which was head­lined, 'How should re­tirees in­vest their life sav­ings?' start­ed off with a chance en­counter with a re­tired pub­lic ser­vant at the Pi­geon Point Her­itage Park, ad­dressed some de­mo­graph­ic is­sues re­lat­ed to the pay­ment of Na­tion­al In­sur­ance pen­sions, and then looked at a com­men­tary writ­ten by Bourse Se­cu­ri­ties, head­lined ‘Is con­ser­v­a­tive in­vest­ing right for you?’and pub­lished in the T&T Guardian on Ju­ly 28, 2025.

For those who may have missed the Bourse piece last Thurs­day, the in­vest­ment com­pa­ny’s com­men­tary made some in­ter­est­ing and use­ful points that bear re­peat­ing, in­clud­ing that con­ser­v­a­tive in­vestors tend to dis­play the fol­low­ing traits:

• Risk aver­sion. Con­ser­v­a­tive in­vestors seek lit­tle to no volatil­i­ty (low risk) in their in­vest­ments: con­tent to ac­cept low­er re­turns in ex­change for greater in­vest­ment cer­tain­ty;

• In­come-ori­ent­ed. Gen­er­al­ly, these in­vestors pre­fer fi­nan­cial in­stru­ments that pro­vide a steady in­come stream in the form of coupons, in­ter­est and even re­li­able div­i­dends;

• Cap­i­tal preser­va­tion/loss aver­sion. Pro­tect­ing their ini­tial prin­ci­pal/in­vest­ment is a pri­ma­ry con­cern for risk-averse in­vestors, with em­pha­sis on avoid­ing loss­es;

• Liq­uid­i­ty. This in­vestor val­ues rel­a­tive­ly quick ac­cess to funds, opt­ing for in­vest­ments with de­gree of con­vert­ibil­i­ty to cash in a short time with lit­tle to no loss in val­ue; and

• Time Hori­zon. Due to this liq­uid­i­ty pref­er­ence, the con­ser­v­a­tive in­vestor tends to have a short­er in­vest­ment time hori­zon. In­vest­ments are most­ly with­in 1-3 year tenors, with some de­ployed in medi­um term (five to sev­en years) in­stru­ments.

Bourse al­so ad­vanced a sam­ple con­ser­v­a­tive in­vestor port­fo­lio, com­pris­ing 80 per­cent fixed-in­come in­stru­ments and 20 per cent div­i­dend-pay­ing stocks. The 80 per cent of the sam­ple port­fo­lio in fixed in­come in­stru­ments com­pris­es 35 per cent in Gov­ern­ment bonds, 35 per cent in re­pos and fixed de­posits and 10 per cent in in­come funds.

“Based on pre­vail­ing re­turns across these as­set class­es, the ex­pect­ed weight­ed re­turn on such a port­fo­lio would typ­i­cal­ly range be­tween 3.5 per cent and 4.0 an­nu­al­ly,” ac­cord­ing to the Bourse analy­sis in Ju­ly 2025.

My fun­da­men­tal cri­tique of the Bourse com­men­tary is whether a re­turn of 4.0 per cent is enough to sat­is­fy the in­vest­ment needs of a con­ser­v­a­tive T&T re­tiree in 2026.

Would a re­turn of 4.0 per cent on an in­vest­ment port­fo­lio pro­vide enough in­come for some­one who is in re­tire­ment or is about re­tire?

Use­ful ex­am­ple

For the sake of this ar­gu­ment, let us use as an ex­am­ple a per­ma­nent sec­re­tary in the T&T pub­lic ser­vice, who earns a to­tal of $38,000 a month and is due to re­tire this year.

My cal­cu­la­tion, based on in­for­ma­tion on the Pub­lic Ser­vices As­so­ci­a­tion and var­i­ous pub­lic ser­vice web­sites, is that that pub­lic ser­vant may be en­ti­tled to a gra­tu­ity of $950,000 and a re­duced pen­sion of $19,000.

If that pub­lic ser­vant took the Bourse ad­vice and in­vest­ed their en­tire gra­tu­ity in a port­fo­lio, com­pris­ing 80 per cent fixed in­come in­stru­ments and 20 per cent div­i­dend-pay­ing stocks, she would re­ceive about $3,500 from her port­fo­lio.

Again, would $3,500 be enough in­come from her in­vest­ment port­fo­lio to sat­is­fy her re­tire­ment needs (added to the $19,000 Gov­ern­ment pen­sion and the pen­sion from the NIB)?

My sug­ges­tion, in last week’s col­umn, was that most T&T na­tion­als who are about to re­tire in T&T, or who are in re­tire­ment, would be bet­ter served with a mod­el port­fo­lio com­pris­ing 80 per cent US-dol­lar bonds yield­ing be­tween 7.5 per cent and 9.0 per cent. The 20 per cent of the port­fo­lio could be eq­ui­ties pay­ing a 5.0 per cent div­i­dend in US dol­lars.

Is a port­fo­lio com­pris­ing most­ly high-yield­ing bonds that pay an­nu­al in­ter­est in US dol­lars of be­tween 7.5 per cent and 9 per cent, more use­ful for a T&T re­tiree than a port­fo­lio earn­ing 4.0 per cent?

The an­swer for con­ser­v­a­tive lo­cal in­vestors, quite ob­vi­ous­ly, is that a port­fo­lio gen­er­at­ing an av­er­age of 8.0 per cent in­come in US dol­lars is, at least, twice as good as a port­fo­lio in TT dol­lars gen­er­at­ing 4.0 per cent in­come. And the US-dol­lar bond pro­vides a use­ful hedge against any slip­page in the val­ue of the TT dol­lar.

But there are, of course, sev­er­al is­sues with a port­fo­lio that is dom­i­nat­ed by high-yield­ing, US-dol­lar bonds:

* Most of the peo­ple who are think­ing about re­tire­ment, or are in re­tire­ment, may not have ac­cess to enough US dol­lars to build a port­fo­lio. This is es­pe­cial­ly true now, as no lo­cal com­mer­cial bank (that I know of) would be pre­pared to sell a cus­tomer US dol­lars for in­vest­ment pur­pos­es. And pur­chas­ing US dol­lars on the ‘black’ mar­ket is ob­vi­ous­ly more ex­pen­sive than buy­ing from an au­tho­rised for­eign ex­change deal­er. Buy­ing for­eign ex­change on the ‘black’ mar­ket is al­so il­le­gal;

* Bonds are an in­vest­ment and like all in­vest­ments they come with risks.

The main risks of hold­ing bonds in a re­tire­ment port­fo­lio in­clude:

—The pos­si­bil­i­ty that an in­crease in the rate of in­fla­tion could re­duce the re­al re­turn on the bond. In oth­er words, if you are hold­ing a bond that pays 9.0 per per an­num in an en­vi­ron­ment in which the cost of liv­ing is ris­ing by less than 2.0 per cent, you are do­ing fine. If the cost of liv­ing ris­es to 5.0 per cent over a short pe­ri­od, not so much. But, it seems to me, if you are re­ceiv­ing a re­turn of 9.0 per cent a year, you are still good in a high­er in­fla­tion en­vi­ron­ment;

—If the pre­vail­ing in­fla­tion rate in a coun­try goes up, the mon­e­tary au­thor­i­ties may in­crease in­ter­est rates. High­er in­ter­est rates cause the prices of bonds to de­cline be­cause their in­ter­est pay­ments be­come less at­trac­tive com­pared to new bonds of­fer­ing high­er yields. That is on­ly an is­sue for in­vestors who are not will­ing to hold the bond to ma­tu­ri­ty;

—Bond is­suers some­times de­fault on their oblig­a­tions to pay the prin­ci­pal or in­ter­est on bonds; and

—Bonds can be “called,” that is, the is­suer may de­cide to re­deem the bond ear­ly.

* A port­fo­lio that is dom­i­nat­ed by bonds does not pro­vide the growth that a more bal­anced port­fo­lio, that in­cludes a high­er per­cent­age of eq­ui­ties, might. But there are some in­vestors who are much less in­ter­est­ed in growth than they are in the steady flow of US-dol­lar in­come pro­vid­ed by the high-yield­ing bonds.

Thor­ough read­er

One of the read­ers of last Thurs­day’s col­umn, a pro­fes­sion­al in­vest­ment ad­vi­sor, made the fol­low­ing in­ter­est­ing point in a LinkedIn post:

“To­day, US dol­lar bonds yield­ing 7.75 per cent to 9 per cent are wide­ly avail­able. How­ev­er, that seg­ment of the mar­ket is large­ly non-in­vest­ment grade cred­it, which can ex­pe­ri­ence sig­nif­i­cant draw­downs dur­ing pe­ri­ods of mar­ket stress. These are not nec­es­sar­i­ly suit­able as the core of a re­tire­ment port­fo­lio with­out prop­er di­ver­si­fi­ca­tion and pro­fes­sion­al guid­ance.”

Point tak­en. But have T&T bond in­vestors re­act­ed in the same way as Amer­i­can bond in­vestors dur­ing pe­ri­ods of “mar­ket stress?”

Dis­clo­sure: I am NOT an in­vest­ment ad­vis­er; I am a jour­nal­ist. I would ad­vise any­one who wants more per­spec­tives on their re­tire­ment port­fo­lios to seek the ad­vice of an in­vest­ment pro­fes­sion­al.