Do Your Community Association’s Investments Meet Olympic Gold Standards?
Gautam Gauba, Founder, Gallopify
“A COMMON PIECE OF ADVICE WITH REGARD TO FINANCIAL PLANNING IS ‘DON’T PUT ALL YOUR EGGS IN ONE BASKET’.”
After watching multiple replays of the Paris Olympics’ 100-meter race, I couldn’t help thinking, how being faster by 0.005 seconds than the next competitor completely changed sprinter Noah Lyles’ life. Such small differences can have a massive impact not just in the sports arena but in other areas as well.
As an example, there are many seemingly small things that we can do to have vastly better outcomes for the investments of our community association’s funds.
Have a Plan
Like an athlete’s training regimen, an association would benefit from having a playbook for investments, which covers topics like the process to identify the investment amounts, the duration to invest for and the products to invest in (based on the regulatory environment and the association’s risk appetite).
Some associations invest their excess cash for shorter periods (six months to one year) and choose to roll over investments when they mature. In this scenario, while the association benefits from having greater liquidity and not having to do long-term cash flow projections, which can be complicated and time consuming, they lose out on the potentially higher interest rates. While no one knows with certainty what tomorrow holds,
the Federal Reserve is predicting much lower interest rates in the months and years ahead (see Figure 1). An association would do well to have a plan that takes into consideration future interest rate projections as well as the association’s liquidity needs over various time frames.
Assign Accountability
It takes a village to get an athlete ready for the big day. Whether it is the coach(es) overseeing the physical training, nutritionist, physiotherapist etc.; every person has their responsibilities cut out. Similarly, it is critical that there is no ambiguity on who amongst the various players (board, management company, banker, broker) is responsible for the various tasks required for successful investment management.
Increase frequency of reviews: All other things being equal, investing funds monthly will earn more money than investing on an ad-hoc schedule or once a year. Many associations make investment decisions at the time of renewal of their existing certificate of deposits or during their periodic review of the association’s financial statements. This means that they are losing out on the monthly compounding effect as the member contributions are generally transferred to the association’s accounts monthly.
continued on page 24 23
www.caioc.org
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32
