Overview to the New Bermuda Investment Primer Series — Part 1

With the ongoing upheaval of the UK political scene, the still unknown final effects (devastating or euphoric depending upon the viewpoints of who voted Bremain or Brexit) on the home economy as well as the ripple layers outward to the European Union crowd and the rest of the globe, it may seem somewhat crazy to even consider a series on investing.

In my opinion, it is the best of time to take full learning advantage of these astonishing scenarios swirling around us: the rapid drop in value and volatility of one of the world’s five reserve currencies, the English pound; the surrounding implications on the country’s security markets; the implied price depreciation in real estate assets; the business forward planning contingencies; the eventual ramifications to the European trading partners community, and the uncertain future for employment, retirement, immigration with freedom of movement, and economic security for the UK resident population.

These are just some of the impending issues that will need to be sorted out on the long road to EU withdrawal. We will also get to witness vicariously the amazing viciousness and its alternative, kindness, of the impending political fight for the leadership of the nation. English history all over again.

Many of us have never experienced what may ultimately be the total revamping of a major world economy. And to be sure, there will be knock-on effects. We need to understand carefully what these issues may mean — the more we know about global economics, the better we can assess our own personal financial profile.

So, we start. In January of this year, I reintroduced the one and only famous MamaZina (Mzee) and her Pizzarina business plan. We will tie in her financial planning with textbook investments concepts because as we know from much experience, the more we can personalise difficult topics, the easier they become to understand.

As we progress through the investing primer section, there will be further parallel articles loaded with information that look at starting a business in Bermuda, operating for a profit for the present, investing for the future, continuing our New Bermuda Retirement Primer Series, risk management and estate planning and related items.

These financial topics are all intertwined in everyone’s lifestyle, whether we realise it or not. It is in our very DNA to work, become successful, enjoy our lives, love our families, and build relationships with our community. You may not think so, but dear readers, it is ordained in the stars. So read along, send me your thoughts and questions. I will respond.

We introduce MZee here again.

MamaZina is ambitious, even possessed. She is shrewd, calculating and instinctively very good at marketing, visibility and selling product — any product.

She has had a serious long-term plan for a long time, waiting, and the opportunity is now!

Start up a business by investing in herself first.

1. Make it profitable.

2. Grow it to an enviable production level.

3. When business viability reaches maximum saturation, take it public or sell it off.

4. Celebrate all the way to the bank.

5. Use the profits along the way to:

6. Take out the competition.

7. Set up retirement plans for herself and her children.

8. Learn about other companies, invest in them and develop a portfolio.

9. Fund the family’s life insurance.

10. Pay off the family home mortgage.

11. Acquire other immobile Bermuda assets.

12. Become a business mentor and guiding light for younger family members and other interested upwardly mobile employees.

13. Protect it and all her assets for her grandchildren

14. Retire on her dividends, rents, investments, and savings. You know, the familiar Bermudian financial story.

The family narrative

MZee and her husband have three children: Sonny, Juliana and Desmond who all work in the pizza business.

Dad is gone — quietly. He passed a few years ago from immune deficiency cancer-related illness. Scuttlebutt was that he just got plumb worn out from MZee’s relentless quest to reach her goals, her insatiable demands and dominating personality. His constant refrain was that he just wanted to work a normal day then relax in a normal life. May he rest in peace.

Mzee has a completely different take on what a normal work day should be, because she wanted more. Coming from an impoverished family where you were lucky to have one pair of shoes for “best”.

Trouble is, the feet kept growing so best never lasted very long. Mzee knew the value of a dollar and the discipline it takes to stick to a budget. She was not so certain that she wanted to be rich, but she sure wanted to buy any pair of shoes she wanted without thinking about the cost.

The Illustrative MamaZina Pizzarina Business Venture

MamaZina and her family are fabulous cooks. Heeding the advice provided in the Bermuda 14-week Financial Review Plan, they have decided to start up a takeout and home-delivery pizza business, working at night after their day jobs. The five family members pool their cash, $5,000 each, to own a piece of MamaZina’s Pizzarina.

Their $25,000 contributed capital is insufficient to start up production, purchase second-hand equipment, and float cash. Another $25,000 is borrowed from a local bank where they are personally liable for repayment, plus MamaZina signs on an equity line on their family home. A cousin also loans them $20,000. The business launches from the stand-alone garage on MamaZina’s and Pop’s homestead, conveniently located on a main road.

What do the five family members own, and owe?

What is a stock? Where does it come from? What is equity? How do you acquire it? Why do you need it? What will it do for you?

Those who want to jump-start the investment learning process, great! Get or borrow, Learn to Earn by Peter Lynch* — his book is old, but basic investing principles are still the same.

Investing can be short or long-tailed and involves continual learning as you will discover in future articles. We will cover all aspects of the financial world that can impact personal finances: currency, investments, a touch of economics, liabilities, all combined into real world financial planning.

Yes, there will be some taxation — unavoidable with the melting pot community resident in the premier international finance centre — Bermuda! I hope you will enjoy reading these articles. Financial education for Bermuda is my personal mission these years.

Stay tuned for Part 2 in a couple of weeks.

*Learn to Earn by Peter Lynch — borrow free from the Open Library https://openlibrary.org/books/OL1004732M/Learn_to_Earn

or buy used for less than $2 at Amazon https://www.amazon.com/Learn-Earn-Beginners-Investing-Business/dp/0684811634.

Martha Harris Myron CPA CFP JSM: Masters of Law — International Tax and Financial Services. Pondstraddler Life™ Financial Perspectives for Bermuda islanders with multinational families and international connections on the Great Atlantic Pond. Contact: martha@pondstraddler.com