- Botswana News
- Press Centre
- Hotwire’s How To
- Reference Material
The outbreak of COVID-19 has dominated news headlines in recent months. The number of confirmed cases continues to rise across the globe raising concerns that the global economic impact could be profound.
Although the year 2020 has been a volatile year, if we look close enough, we will find a silver lining. In the midst of the pandemic, we have an opportunity to look for returns. Now, might be the best time to take a bold step and consider investing.
Investing during this time can be intimidating to many and while experience plays an important role in investment success, it is not the only element. Being prepared is the best option. It is therefore important that when making the decision to invest, you have knowledge and understanding of all the investment opportunities available to you, their pros and cons, and also what to look out for.
Let us start by understanding what investment is. Investment is the purchasing of assets such as securities that are not consumed today but are used in the future to create wealth. Investments help you meet your financial goals in life such as your child’s higher education, your retirement and to build your wealth.
Furthermore, investments are a form of savings and are the perfect example of saving in the right way. Investing also serves to grow your money fast and generally with higher returns compared to a bank savings account. In today’s markets, you are exposed to numerous investment opportunities, allowing you to invest in a number of ways. This includes but is not limited to: shares, bonds, unit trusts, property market, vintage cars, farms, wine and even art, to name but a few.
Our team’s extensive experience in the global investment space has been a journey of continued education in many ways. Over the years, we have come to learn that good investment advice is timeless, allowing one to sidestep some of the common traps that damage returns and jeopardise financial goals.
Below are 5 essential tips for investing to get you started.
Pay yourself first: One of the key principles of personal finance, this refers to how to save money. This simply means it is important to spend what is left after saving rather than save what is left after spending. How can this be achieved? One way is to set up automatic transfers from your bank account to a savings account or investment account.
Beware of behavioural biases in investment decision making: Irrational investor behaviours that can affect or unconsciously influence investment decision making. When making an investment, it is important to be aware of such behaviours and biases, such as:
Confirmation bias - when investors focus on information that confirms their previous beliefs. In this regard, the investor may become overconfident and make bad investment decisions.
Loss-aversion bias - where investors act to avoid realising a loss. This is also called “good money following bad money”. You don’t want to admit the loss on your initial investment and instead you hold on in hopes that you will, one day, make it back to break-even or make a profit.
Understand investment costs: All investors, whether talking about
stocks and bonds, unit trusts, insurance products or retirement funds involve costs that investors should research, understand and be
aware of. It is important to look for investment products and solutions
that have transparent fee structures so as to make a sound investment decision. One way to practice this is to always ask the service provider about the total in all costs and or implicit costs for early termination / cancellation and also look for products and solutions that have transparent fee structures. This will help you decide whether to invest or not.
Invest in what you know… and nothing more: When investing in industries or markets you are familiar with, you are more likely to make informed choices. If an investor cannot make a reasonable
understanding of how a company makes money and the main drivers
that impact its industry, it is advisable to invest with caution. As
Warren Buffet’s personal investing rules say, “If you don’t understand a
business, don’t buy it.”
Most news is noise, not news: Every day, we are exposed to a number of financial news and headlines aimed at generating buzz and to trigger our emotions to do something. According to the 99-1 rule, 99% of investment actions we take should be attributed to just 1% of the headlines we are exposed to. This means that investors should be very selective of the news they hear and eventually act upon.
If you are an investor or thinking about finding ways to capitalise on these changing times, with these tips, we hope that we have inspired you to take the first step toward investing in your future. It is our hope at Kgori Capital that you are now in a better position to make good investment choices and strategic moves to invest wisely and plan for your future financial wellbeing.