Just like anything else in life, at the core of any individual investor are very personal dreams and goals. People may have similar ambitions but they have different driving forces. There are general guidelines that govern investment choices but one needs to recast them to their own situation. To reap the best from investment as Warren Buffet says you do not need to be a genius "If you have more than 120 or 130 I.Q. points, you can afford to give the rest away. You don't need extraordinary intelligence to succeed as an investor."
All you need is a disciplined approach to it and it starts by looking at your individual circumstances.
If you do not know about something it definitely does not exist in your world. One has to start by understanding the available options for investments. If it is starting a business more often than not people will start businesses in line with what they have seen others do successfully. No wonder if you went to any village in the rural areas the types of businesses will be no more than five and any new business shall be in competition with the existing ones. The starting point is to gain as much information as one can get on the various available options. An investment in knowledge pays the best interest.” Benjamin Franklin
We all invest for different reasons and to achieve different goals. The goals in our lives are very time-bound and we should segment them accordingly. The risks that a 30-year-old can take are very different from what a 50-year-old can take. There are occasional outliers like the KFC owner who started a business at over 60 years of age and it ended up being very successful but the norm is that most young people have started more successful businesses since they can afford to take the risk. If you are saving for your kids' education and they are already in school, the investment options are very different from the person saving for a kid’s education who has just been born. It is therefore important for one to understand where they are and what they are investing for.
We are all wired differently. There are some of us who cannot stand losing any of our money and there are people who are natural risk-takers. Understanding where you stand helps you determine what choices you have e.g. if you cannot stand seeing your investment portfolio lose something like 20% it then means that you should not invest in the stock market as that is inevitable at some point.
We all invest to get good returns. One of the key things that we all need to be aware of is that return varies from one asset class to another but also for one to actualize any meaningful return they need to be patient. Some investment returns are known and easily predictable than others so it is always good to know how the underlying investment is to generate the return and how sustainable the returns are.
You cannot invest that which you do not have but in most cases, we have resources that we are not investing to generate more. The starting point is calculating and understanding your available resources, listing down what resources you have access to and writing down what they can be used for e.g. if you have an idle piece of land in a developing place what economic activity can be done there, if you have a garden why not plant vegetables instead of buying.
When investing especially when starting a business one of the biggest assets that one has is the available relationships that they can harness. looking at the people who have done what you want to do or even someone you can bounce off your idea to is a key ingredient. While looking at the right networks get someone who shall tell you the truth no matter what but ensure they don't have lots of negative energy.
If you are looking for a passive way to invest, then one is restricted to the available options. Most of the formal investment products are regulated by one of the many regulatory institutions. It is good to understand the basic regulations and the market operations of the various products. Depending on the investors’ risk-return tolerance they should be able to make the right investment decision.
There are some products that have a minimum amount that an investor can invest in. If the minimums are above your reach then in most cases one can not take advantage of the good returns eg to investments in Real Estate Trust, the Minimum amounts are Kenya Shillings Five Million
Understanding your taxation status determines what investments make sense. For example, if you have decided to invest in a government bond it is better to invest in an infrastructure bond as it is tax-exempt as opposed to the normal bonds whose interest is taxed at 15%.
Investments and making investment choices is one iterative process whereby we have to go through it time and again to check if our circumstances have changed and if they have we need to change tact and if not to check what we have achieved versus our goals. Getting to speak to the right person to help with the process is also very important as we can always get a different perspective. There are also a couple of available investor profiling tools that we can use to make sure we get to answer all the right questions. Understanding oneself is the starting point in the journey of financial freedom.
Creating sustainable solutions for wealth creation.
If you’ve made it this far… thank you. Shoot me a message me here if you have questions, I’d love to hear from you.
