SIA Bill 2011
Preparing To Invest

Our Vision

A vibrant, competitive financial services sector that has sound regulatory practices and policies that promote confidence.

Our Purpose

To contribute to the growth and development of a financial services sector that is vibrant and competitive.

When it comes to financial investing, you may feel like it’s a wise course to take, but you may be worried that you don’t know enough to start investing. You may feel like you don’t make enough money to be an investor. Maybe you feel shy about asking for professional advice, or you may be unsure about who you should ask. There are thousands of Bahamians just like you who have the same fears.

There are also many Bahamians who are investing and earning returns on those investments. Like you, they were not born knowing what to do. They learned by reading, listening and taking it one step at a time.

Whether your dream is to ensure that your family is financially secure, upgrade your skills, build your dream home or prepare for golden retirement years, the steps outlined below will help you. As you begin, bear in mind that results don’t happen overnight, but once you make the commitment you will be on your way to making your money work for you.



The first step in your investing journey is to set clear goals for your future. Do you want to save for a child's college education? To buy a home? Or are you looking long-term for a comfortable and secure retirement?

Regardless of how ambitious the goal may seem, write it down. Attaching a date by which you aim to accomplish each of your goals , and prioritizing them, will help you establish priorities and set realistic timelines.

  • Create a Budget
    Most people have responsibilities like bills that they have to pay, but nobody has an unlimited source of income. A budget is a powerful tool that can help you manage your money so that your needs are taken care of, you can live a comfortable lifestyle, and you have savings set aside for emergencies and for specific goals you have set. It is also key to determining if, or how much, you can invest so your money can get to work building wealth for you.

    A budget is at the core of any financial plan. Simply put, a budget is an estimation of money you expect to receive and money you expect to spend over a period of time in the future. For budgets to work, you need to be clear about what your goals and priorities are. You also need to follow your budget consistently, and review it frequently to ensure it still serves its purpose as your circumstances change.

  • Tips when creating your budget:

    1)Determine your goals. Be sure to have an ‘emergency fund’ as a part of your goals, if you don’t already have one. Many investment advisors recommend that everyone set aside three to six months of income for an emergency, such as job loss.

    2) Prioritise. Separate the things you need from those you want. It seems obvious, but be sure to take care of your needs first. What good is a new television if the electricity bill is unpaid? If you find that you are spending everything you make, you will have to find a way to cut back on your expenses or to earn additional income. See tip 6 about watching for the ‘little things’ that eat away at your income and wealth.

    Remember, you or your family will need money in the future, so make sure saving is a high priority for you. A strategy of many successful savers is to always ‘pay yourself/your family first’ by setting aside savings before addressing any other needs. To help them succeed, some people ensure that when they get paid, some of their pay check is sent directly to a savings account.

    3) Pay off credit card debt as quickly as possible. Aim to never spend more on your credit card than you can pay off in a month. When prioritising your goals, if you have balances on your credit cards, paying them off should be a top objective. Very few investments, if any, will ever generate sufficient returns to offset what a credit card will take out of your wealth through interest charges.

    4) Remember irregular expenses. For many people and families budgeting is easiest to do on a monthly basis, as many bills come due on a monthly cycle. Be mindful of expenses that are not due during your regular budgeting cycle. For example, in your birthday month you may have to pay to insure and license a vehicle. Plan to have money set aside for events like these.

    5) Track your expenses. Keep a record of what you are actually spending. This will help you to understand your spending habits and provide excellent information should you need to adjust your budget to be able to save or invest more. Keep a notepad and pen handy, or download a mobile phone app that will help you to record your actual spending right away. Don’t wait too long to record expenses either, or you may forget them.

    6) Don’t overlook the small expenses. You might be surprised at how much you spend on the little things, like “spinning” for a lucky number every day, or those extra data charges for the movies and music you download on your mobile phone. Cutting back on a cup of brand-name coffee every day could save you thousands of dollars in the long run. Now that you’re tracking your expenses, look at where you can cut back so you can have more money to achieve your dreams.

    7) Get into a routine. Review your budget regularly and make managing your finances a matter of habit! For budgeting to help you accomplish your goals, you have to choose to make it a part of your life.

  • Sample budget
    To get started, you can use the sample budget template below to help achieve your savings, investment and other financial goals. Simple Monthly Budget

Saving is an essential step to achieving your financial goals. Saving is not spending all your money now, but instead, setting some of it aside for a future point in your life. Saving is all about having something for later, when you may really need it.

  • Why Save

    Emergencies

    The primary reason to save is to be prepared for emergencies. Having savings can provide peace of mind, knowing you have a cushion against the unexpected shocks that are always lurking around the corner in our lives. Having savings may be the difference between being able to cope with a financial emergency or not. It may mean not having to borrow money in an emergency and avoiding all the extra expenses involved with paying off a loan, and the restrictions on your budget that follow.


    Flexibility

    Having savings may open up possibilities that just would not be available to you otherwise. For example, a person may find himself in a job that he/she really needs to leave, for whatever reason. Having a few months of salary set aside as savings may allow you to leave and live comfortably while you search for a new job. You probably can think of examples from your own life where you thought, if only I had some cash saved to be able to take advantage of that opportunity.


    Be the Boss (of your money)

    One of the opportunities that people without savings miss out on is the opportunity to be the boss of their money. Instead of working for your money, when you accumulate savings, you can start investing excess funds, and send your money out to work for you.

  • I want to save, but …

    Most people know what saving is and why it’s important. Still, people often struggle with saving—especially people who never got into the habit of it. There are many reasons why saving may be a challenge. Many people, for example, simply don’t believe they make enough money to save anything. For many, the challenge is resisting the need to spend everything they earn right away. Despite these and other setbacks, there are people from all sorts of backgrounds and in all sorts of different financial situations who commit to saving to make their lives better, and who find a way to do it, no matter what! If you think you’re not earning enough to save anything, go back to your budget and the budgeting tips in this booklet to see where you can change your spending habits, cut expenses, or earn more income to start saving. Remember when preparing your budget to always pay yourself first (set aside your savings first). And remember, if you stick with it, you’ll get better at it, and be better off because of it.


  • How much should I save?

    Many experts suggest setting aside at least three to six months of your current salary aside for your emergency fund. Most agree you should aim to have save enough money to cover your monthly expenses for three months.


  • Where can I save?

    Some of the more common savings options are listed below.


    Savings accounts/deposit accounts

    These accounts allow deposits and withdrawals at any time, but do not allow the account holder to write cheques on them. They pay interest on deposits, though this is usually a small amount.

    Checking Account

    This type of account allows deposits and for account holders to write cheques instructing the bank to pay another person from the funds deposited to the account. Some of these accounts pay interest while others do not.

    Fixed Deposits/Time Deposits

    Also known as certificates of deposit, these deposits pay interest for a specified period of time. The interest is usually paid at the end of the deposit’s life (at maturity). The interest the deposit will pay may be fixed at a particular rate at the outset, or may vary over the life of the deposit.

    Remember fees

    Regardless of the tool you used to help you save (savings account, checking account or fixed deposit), watch out for fees. Although financial institutions may offer interest on certain types of deposits, fees can quickly eat-up all the interest you earn, and then some. Banks may charge for transactions like withdrawals, or even for not meeting a required deposit level.

    Commercial Banks and Co-operative Credit Unions

    Many of the savings options above are available at both commercial banks and co-operative credit unions. Both types of financial institution are supervised by the Central Bank of The Bahamas.


  • Are my deposits insured?

    Banks who are members of the Deposit Insurance Corporation (DIC) offer some additional safety for your deposits. The DIC insures savings accounts with member banks for up to B$50,000 per depositor, in case the bank is unable to pay you back your deposit. Once a bank is licensed to accept Bahamian Dollar deposits, membership in the DIC is compulsory.

    For more information, or to see if the financial institution you want to deposit funds to is a part of the DIC, visit the DIC’s website at www.dic.bs


  • How does inflation impact my savings?

    It is likely that everyone has heard a story from a parent or grandparent about how inexpensive things ‘used to be’. They are right. In your lifetime you may have noticed an increase in the cost of everyday expenses, like bus transportation for example. In 1986, the cost of a typical bus ride was 50 cents. In 2016, that same bus ride would cost you $1.25. Typically, money loses value over time because the price of goods and services generally increases over time.

    This rise in price is known as inflation. To put it simply, inflation means that a dollar won’t buy you as much in the future as it does in the present.

    As a result of inflation, even when money earns interest, it still may not be able to buy the same amount of goods or services it did before. Put another way, it loses its purchasing power. If your savings account is paying 1 percent interest every year, but the inflation rate is 2 percent every year, your savings are actually going to be able to do less and less over time.

    So, while savings are essential to financial planning and well-being, savings are not the ideal means for building wealth. Investments, while not generally as safe as savings, can offer a path to beat inflation and build your wealth.


When you commit money to something with the expectation of receiving income, profit or some other gain, you are investing. Many Bahamians are familiar with investing in real estate, but there are many Bahamians who invest in securities like shares and bonds as well. Whenever you invest, there is a chance that your investment will not make money or worse – loses money or becomes worthless. This potential for your investment to lose value is a concept known as risk, and how much of it you as an investor are willing to cope with is very important to the investment decisions you will make.

As an investor, if you expect a greater reward, then you need to be prepared to take on greater risk. The saying in investment circles is, “The higher the risk, the higher the potential return”. Let’s look at an example of this. Investing in a company generally carries a higher amount of risk than saving money in a bank account. After all, if the company does not do well, your shares may lose value or even become worthless, whereas your savings in a bank may be insured, so even if the bank runs into trouble, you expect to get all of your deposit back. If both the shares and the savings account were offering the same reward, why would you choose the riskier option where you might also lose everything? Investors may be willing to take on the extra risk involved with the shares, but only when they expect a better reward for doing so.

  • Risk Tolerance

    It is important for you as an investor to understand how much risk is appropriate for you. If you hire someone who is registered with the Commission to offer investment advice or to manage your securities, then understanding your risk tolerance becomes their responsibility too. How else could they recommend securities that are suitable for you? There are a few things to consider when determining how much risk is right for you, including how you cope with risk emotionally, and what kind of financial condition you are in to handle potential losses. Some investment professionals refer to these as risk appetite (emotional) and risk capacity (financial). An investor’s risk tolerance may change as circumstances change over his or her life. There are a number of factors influencing this, including his or her age, income level, current wealth and health. For example, younger investors generally have a longer time to recover from investment losses and, as a result, generally can tolerate more risk than older investors. The table below compares the risk tolerance that many investment advisors would say is appropriate for various age ranges and the types of investments generally recommended based on the risk tolerance

    Age Range Usual Risk Tolerance Typical Suitable Investments
    Under 35 Higher Common shares, aggressive growth strategy investment funds
    36-55 Medium Balanced investment funds, preference shares
    Above 56 Lower Fixed income products and Treasury Bills

  • Diversification

    One approach that investors use to decrease their risk is to avoid placing “all their eggs in one basket”, or put another way, to “diversify” their investments. This strategy involves spreading your money among various investments in the hope that if one investment loses money or fails, the other investments will make up for those losses.


Once you are ready to invest, there are many investment products for you to choose from. Some people may choose to invest in real estate while others may choose to invest in securities, like shares and bonds. Securities differ in type, benefits, risk and the potential for reward, among other things. In investment circles when people talk about securities, they are not talking about those guards in uniform who protect business places. Rather, in investment terms, a security is an asset that can be traded. The security has value because it represents:

• Ownership in a company (shares/stock),
• A loan made to a government body or public corporation (bonds), or
• Rights to ownership (options).

For an asset to be considered a security, it must also be interchangeable with the same amount of the same security, regardless as to who owns it. This simply means that if John owns 100 common shares of ABC Company, it will be worth the same as Jill’s 100 common shares of ABC Company. We’ll discuss what a common share is.


  • Common Shares/Stock

    When you buy common shares or stocks, you purchase partial ownership of a company. As a result, you are entitled to specific rights as a part owner, such as voting rights. Your voting rights are directly linked to the amount of the company you own. Voting rights allow shareholders/stockholders to vote on several important matters, such as the corporate directors who will lead the company. As owners of the business, however, they are the last to get back any of their investment if the business fails. Sometimes, especially in years where profits are realised, companies will make a decision to reward their shareholders with a payment, usually on an annual basis, out of the company’s profits or retained earnings. This is known as a dividend. If the company declares that it will give a dividend to its common shareholders, the shareholders will receive the dividend declared for each share he or she owns. However, stocks and shares are not typically used for generating a consistent income stream. Generally, people invest in stocks or shares because they expect that the business they become part-owners of will grow in value over time. As a result, the value of their ‘share’ of the company will also increase.


  • Preference Shares/Preference Stock

    Preference stocks or shares are a type of security that pays a dividend, so long as the company makes enough profit to pay the dividend. The dividend may be fixed, meaning that it does not change, or variable, meaning that it will move up and down. Owners of preference shares (sometimes called preferred stock or preferred shares) receive dividends before common shareholders. They also have a higher priority than common shareholders do to get back some or all of their investment should the company fail. However, preference shareholders do not usually have voting rights. Because preference stocks offer constant dividend payments, people often invest in them to receive a regular stream of income.


  • Bonds

    A bond is a security which represents a loan from the investor to the company or government who is issuing it. The bond will have a fixed life, representing the length of time the money has been lent to the company or government for, and will earn a rate of interest, known as a coupon, over its life. Usually, the company or government issuing the bond will make coupon payments annually or semi-annually. When the loan period ends, generally the bondholder will receive the ‘face value’ of the bond, plus the final coupon payment. Typically, the face value of a bond is $1,000. A simple illustration follows:

    On 1 January 2011, XYZ Co. issued a bond to raise some money for a new product it wants to produce. The bond will earn a 5% coupon, which will be paid annually, and has a 5-year maturity. A simple table showing investor Jane’s investment and what she expected to receive from it appears below.

    Date Activity Investment Jane makes Reward/Expectation
    1 Jan. 2011 Jane Buys XYZ 5% bond, maturing 31 Dec. 2014 $1,000  
    31 Dec. 2011 XYX pays a coupon (5 percent of $1,000)   $50
    31 Dec. 2012 XYX pays a coupon (5 percent of $1,000)   $50
    31 Dec. 2013 XYX pays a coupon (5 percent of $1,000)   $50
    31 Dec. 2014 XYX pays a coupon (5 percent of $1,000)   $50
    31 Dec. 2015 XYX makes final coupon payment and repays the bond’s face value at maturity   $1,000 + $50

    Sometimes the coupon will be fixed, meaning that the rate of interest it earns will not change over the life of the bond. Other bonds may carry a variable coupon which may change over the life of the bond. There are other features which may vary as well. As an investment, bonds are often selected for a constant stream of income. They do not generally increase in value as the company or government that issued them grows, so investors in bonds are not usually looking to make the kind of profits selling them later as an investor in common stock are looking to make. An investor should understand all the aspects of how the bond he or she is considering will work, in addition to understanding how the company intends to generate the money to make all of the coupon payments and pay the face value of the bond on maturity.


  • Bahamas Government Registered Stock (BGRS)

    Although this security has the word “stock” in its name, it has the characteristics of a bond. BGRS is issued by the Government of The Bahamas. BGRS can have a maturity date of up to 30 years. They have a minimum investment of $100, and carry interest rates which, if not fixed, are usually tied to the Bahamian Prime Rate. The investor then receives interest income, which is normally paid semiannually, and the principal investment at maturity. This type of security is not regulated by the Securities Commission of The Bahamas. The Central Bank of The Bahamas functions as the Official Registrar for securities of the Government. You can get more information about BGRS from the Banking Department of the Central Bank of The Bahamas.


  • Investment Funds

    Investment funds combine money from a number of investors. They invest this money to make a profit. When someone invests in an investment fund, he/she is buying into the many assets that the fund is invested in. In fact, one of the goals of investment funds is to ensure that investors get the benefit of a number of different investments, in case some of them do not perform well. Put another way, investment funds can be used to ‘spread investment risk’. Investments funds are usually professionally managed. A fund manager is responsible for researching and selecting the fund’s holdings and monitoring the activities and trends of all the businesses and assets the fund is invested in (its ‘portfolio’). Often, investment funds are priced so their units are affordable for investors who do not have a lot of money to invest. There are certain things an investor will want to look out for when considering investing in an investment fund. First, make sure the investment fund is registered with the Securities Commission of The Bahamas. To do this, you can visit the Commission’s website at http://www.scb.gov.bs or call (242)397-4100. You should also be sure you understand the fund’s investment strategy—how it intends to invest the money it accumulates from investors to generate profits. You should understand all of the costs involved with investing in the fund, such as annual fees, sales fees, management fees and redemption fees. These will vary from fund to fund and can significantly impact the returns you can make as an investor. This information should be contained within the investment fund’s prospectus, so be sure to read it prior to investing. With an understanding of the funds’ investment strategy and the associated risk, you can decide if the investment is a good fit for you



  • All securities carry some amount of risk. Staying on top of your investments by yourself will require a strong desire to research and select investments, and to keep up with the markets, industries and businesses you are invested in. This usually involves a lot of time and some degree of expertise. Selecting the right professional to help you may be one of the most important investment decisions you can make.


  • Who can help me?

    You may be wondering who you can turn to in The Bahamas to assist with making investment decisions. Firms, which are approved by the Commission to provide such services, use several terms when describing themselves and their activities, including investment advisor, investment manager, wealth manager or broker. What you need to know is that in order to offer investment advice as a business in The Bahamas, a firm must be registered with the Commission to do so. Such a business would be approved to “advise on securities”. The firm’s employee who actually provides the investment advice must also be registered as an “advising representative” by the Commission. The Commission reviews the applications of these persons to ensure they have the appropriate academic qualifications, experience and skills, and do not have a bad reputation. Based on its findings, the Commission will either approve or decline applications, so be sure to check that the individual and the firm he or she is employed with are in fact registered to do business with you. You can also ask the Commission if it has ever taken any disciplinary action against the individual or firm. All firms registered to conduct securities business along with the type(s) of securities business they are approved for appear on the Commission’s website. Employees and other individuals who are registered with the Commission are also listed. You can find these firms and individuals in the table named “Licensees under the Securities Industry Act, 2011” at: www.scb.gov.bs. Also, you may call the Commission to find out if a firm or individual is licensed to advise on securities. When you look at the tables, you may notice that firms can be registered for various securities business, including managing securities or advising on securities. These activities are different. A firm that is registered to manage securities will be able have clients who give the firm authority to make investment decisions on their behalf, whereas a firm licensed to advise on securities can provide their clients with suggestions it feels are best for their circumstances, but ultimately must let their clients make the investment decisions. As you launch your relationship with your new investment advisor, bear in mind that you are ultimately responsible for your money. It is your responsibility to protect it and make it work for you. In addition to researching the advisor, be sure to find out if any investment funds they may offer you are registered with the Commission. Be sure that you fully understand all products you are considering before investing in them. Sometimes, a simple phone call to the Commission or a visit to our website can help you to avoid becoming the victim of an investment fraud.


  • Selecting an Advisor

    The obligation of an investment advisor is to offer the best financial advice for his or her particular client. To do this, it is the financial professional’s job to thoroughly understand his or her client’s goals, financial circumstances and risk appetite, as well as to investigate industries and companies and provide that information to the client. Before you select your advisor, be sure to ask certain questions. Don’t be afraid to ask every question you seek an answer to. You have a right to know you are in careful, capable and licensed hands. Among the questions you should ask are:

    • What education and professional experience do you have? How long have you been in business?

    • Describe your typical client. Can you provide me with the names of at least two references, preferably clients who can speak to your service?

    • How do you get paid? By the number of transactions or a commission or salary?

    • How would you describe your investment philosophy?

    • How often will you monitor my investments (my portfolio)?

    • How much will it cost me in total to do business with you?

    • Are you on the board of directors of any of the publicly-traded companies I am considering investing in?

    • How often will you be in touch with me? Every transaction? Every month, quarter?


    Now that you have a list of questions to ask your investment advisor about himself or herself, here are a few questions to ask to help you ensure you understand the product he or she is advising you on:

    • How will the investment make money?

    • What must happen for the investment to increase in value?

    • What are the risks involved?

    • How does the product work?

    • Where can I get more information?


  • Monitor your investments

    How frequently you decide to monitor your investments should be based on your goals and investments. Remember, expect trading prices to go up and down, and investing is not a ‘get-rich-quick’ scheme –the true rewards usually come over time. It’s not enough to simply check an investment’s performance. You should compare the performance against a group of similar investments over the same period of time. If you have chosen a financial advisor to assist you with your investment decisions, you should also compare the fees and commissions that you’re paying to what other investment professionals charge. It is in your best interest to check your investments regularly to ensure that there are no irregularities with your account. Every time you buy or sell an investment, you should receive a confirmation slip from your broker, who is the person that buys and sells securities for you. Make sure each trade was completed in accordance with your instructions. Make sure the buying or selling price was what your broker quoted. And make sure the commissions or fees are what your broker said they would be. Watch out for unauthorised trades in your account. If you get a confirmation slip for a transaction that you didn’t approve beforehand, call your broker. It may have been a mistake. If you have any concerns, call the Securities Commission.


  • We Are Here for You

    In The Bahamas, the Securities Commission oversees the capital markets where people buy and sell debt securities with a maturity of a year or longer (such as bonds) and equities (such as common and preference shares). The Securities Commission also oversees persons conducting securities business, like brokers and investment advisors. We are here to protect investors in the capital markets from unfair, improper and fraudulent practices and to ensure the capital markets are fair and efficient. We protect investors by reviewing and approving/not approving applications from persons wishing to conduct securities business, monitoring the conduct of persons doing securities business, launching investigations and enforcement activity against persons suspected of breaking securities laws, and by providing information and education about investing. It’s important to remember that investing, by its very nature, always involves risk. The Commission cannot protect you or your investments from that. Investors should know how much risk they are comfortable with and make investment decisions accordingly. Investor complaints are very important to the Securities Commission. You may think you are the only one experiencing a problem, but you may not be alone. Sometimes it takes only one investor’s complaint to trigger an investigation that results in shutting down something that may have resulted in unfortunate consequences for you and many others.



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