It's been three months since the historic meeting of Bank of Bermuda shareholders and the vote to accept the amalgamation offer from HSBC.

Under the terms and conditions of the sale, every shareholder of record, both living (and passed to glory), was notified of the impending share proceeds. It has been a quandary for many as they have been faced with trying to understand yet another facet of the ever changing, ever challenging international investment world.

Common statements made to me have ranged from, “what do I do now, should I reinvest it all? “I never planned on selling these shares, I have no investment plan.” “Should I pay off my mortgage?” to “I know I should do something, but I just can't decide on what, so I haven't done anything?”

Some observations and findings about the receipt of sudden money that clients have made over the years are below. Many local recipients may find themselves with similar feelings:

Emotional paralysis. Some may still have those cheques sitting around at home, unable even to deposit the proceeds because the decisions surrounding the eventual allocation are just too overwhelming.

Guilt - do I really deserve this? Many worked so hard to save, investing little bits at a time. They feel that they can only give themselves permission to spend little bits here and there. Unfortunately, without a real game plan, the little bits disappear.

Lack of investment knowledge. Because local stocks have always been here, they are really more like old friends. Everyone knows the companies, many residents also work for them, and thousands of local residents invested in them. Many are quite vocal in expressing their opinions about company management styles; after all they know those people too. Because of this comfort factor, most people here never really thought of local stocks as real true capital market investments, even though they were (and are) in every sense of the word. So how do you compare a local stock to some global company? Carefully.

Those moved to action (and owing some debt) wonder if they should pay off their mortgage? Technical analytical types would say, the answer is clear. If your mortgage interest rate is higher than your savings rate, pay off the mortgage. However, such a decision is never that easy, especially with large sums of money. Let's look at reasons for (and against) the mortgage payoff decision.

Liquidity. What amount of money do you need that is can be accessed quickly & easily and that will allow you to sleep at night? Keep it within reach, it will make you happy.

Contingencies. Is your job on shaky ground? If you paid off your entire mortgage, then needed ready cash because of a redundancy, could you qualify for the same mortgage you have now on only one income?

The cost of refinancing. Do you have plans for future expansion on your property? Are you thinking of a major renovation? It may be less expensive to add to your existing mortgage than to reduce it to zero today, only to have to apply for another mortgage in the future.

Changes in adjustable rate mortgages Will future increases in interest rates, increase your mortgage rate? If so, you may be better off paying down a good portion of your mortgage now.

Total return in capital markets versus cost of debt carry Conversely, since mortgage rates are so low, some investors will use that opportunity to increase the appreciation in their capital market investments while maintaining their current mortgage payment schedule. Prudent planners' advise, however, dictates that you should never/ever increase your mortgage debt and use the extra money to play the stock markets.

I saw this happen during the bull year boom times where children pressured their elderly parents into leveraging their only asset, their home into tech stock purchases. The market crashed. There were reports of very sad people, left with negative investment accounts, huge new mortgage payments, and little in the way of retirement assets.

US tax deduction While this may be a consideration for a much smaller group, reduction of a mortgage eliminates deductible mortgage interest on a US itemised tax return.

Estate planning Under current Bermuda law, foreign currency is exempt from Bermuda stamp duty. Do you wish to avoid asset concentration?

Diversification. Keeping different types of investments in different currencies for different goals is the healthy way to manager your finances, while avoiding concentration of risk.

It all really boils down to mental stability - for some, having that lump sum tucked away safe and sound earning a steady return, waiting for that rainy day, or the promised retirement in the future is great security. For others, not ever having to think about another mortgage payment outweighs all other considerations. Only you can decide but the sensible choice seems to be, park some for a rainy day, invest some and pay down some. Remember financial decisions should never be made in isolation.

Those without a mortgage just want to know what to invest in. The best thing to do is to draw up a plan based upon the impact of the criteria 4-11, then take your time researching and interviewing financial salespeople to get a broad overview of investment alternatives that will meet your financial needs. Remember - when working with a financial salesperson, the first words out of your mouth should not be, “ I/we don't know anything about investments!”

Next week - suitable investments - Looking at your overall financial picture in context of your lump sum cash infusion using two composite case examples.

@EDITRULE:

Martha Harris Myron CPA CFPb is a Bermudian, and VP, Investment Centre , Bank of Bermuda. She previously owned a United States financial services practice. She can be reached confidentially at 299-5578 or marthamyron@northrock.bm

The article expresses the opinion of the author alone, and not necessarily that of Bank of Bermuda.

Under no circumstances is this advice to be taken as a recommendation to buy or sell investment products or as a promotion for financial plans. The Editor of the Royal Gazette has final right of approval over headlines, content, and length/brevity of article.