Investments provide an avenue to grow your savings. To ensure that you invest the appropriate amount of money to the right asset, you must first take the key step of looking at your unique situation to identify your objectives (click here to learn how). It is possible to invest in financial assets and non-financial assets. Financial assets are instrument such as listed stocks on the Ghana Stock Exchange, Government Treasuries and Bonds, Corporate Bonds, Fixed Deposits, REITS, Gold and Cash (yes, cash is also a financial asset). There are also non-financial investments e.g. house for rent, operating a barber shop, car wash, farming, block factory, operating a school, Uber cars, taxis, the list is endless. You will need to commit time on a daily basis to personally manage non-financial assets if you desire to see meaningful returns. If run well, the rewards can be significant.
The proportions of your money invested in a combination of each of the above assets is referred to as Asset Allocation. Approximately 85% of your returns and losses will be determined by the asset allocation policy you choose. Stretching the logic, 85% of your investment success will be determined by who you are as a person, the other 15% are due to other factors and so let’s call those other factors ‘luck’. Man, know thyself i.e. your personality. Are you fearful or greedy, do you seek information and advice or rush in making important decisions, can you stick to your promises, can you sacrifice now and enjoy in future etc. All of these personal traits have a way of translating into your investment objectives and asset allocation, which then determine your outcome.
Next time you make a wrong investment decision (lose money), look carefully at your personality and learn what you can do better. Do not decide to quit investment altogether. Proverbs 4: 23 says, keep your heart (character, personality), for out of your heart springs the outcomes of your life. My dad, Daniel Kpapu Mani, once told someone, that “when you fall, stop looking at the spot where you fell but look back at what and where you stumbled”.
Some investments promise high returns but low liquidity, either due to the nature of the underlying economic activity or there is a default investment period (locked up funds). Some also promise access to your money at anytime (T-bills, bank FDs come to mind) and for that promise, the returns are relatively lower.
Get Professional Advice or Do it yourself?
Many people believe they can manage their money better than professional money managers. Some of those people have read widely on investment management, others even studied finance at universities. A wise man once remarked “if you think you can and if you think you cannot, you are probably right”. My advice is that unless you have a very large portfolio and or access to quality investment research at your disposal, then you should let regulated professionals help you. There are enormous costs involved in researching many companies and their investment propositions. To properly analyze even the Government of Ghana bonds, you will need access to Bloomberg terminal license at a cost (in dollars). How much less the cost of researching over 30 companies listed on the stock exchange?
You should heed the advice of the legendary Warren Buffet and join an investment like Axis Pension Plan or any of the SEC licensed mutual funds unless you have a whole research department at your disposal to help you understand what you are doing.