It’s beginning to look like you
are making progress, the long wait for a job is over. Finally a company dims
you fit enough for employment and you can’t just wait for the month to come to
an end so you can receive your first salary. As soon as your account goes
green, you go shop for clothes, pay up your friend who borrowed you money for
transportation for your first month of work, put aside money for the new month’s
transportation etc.
The second salary isn’t as
pressured as the first, you were able to find some balance with the second/third
salary and then you start thinking of savings & investment. If you’re like
most folks, you start saving a certain amount in your bank account but soon
enough you realize your easy accessibility to it makes it unsustainable. You complain
to your colleague who then introduces you to the office esusu. Eagerly, you
join but that also doesn’t work either as most of your other colleagues are not
committed to it, so you end up losing some money. It looks to you like you’re
back where you started.
Everyone keeps talking about the essence of investment but
you’re totally in the dark as to how to go about this investment thing. Here’s
what to do:
Assess your Current Income and Expenditure
Your income and expenditure plays a big role in determining the
amount you will be able to invest and what you can invest in. It is important
you are not spending more than you are earning when planning to invest. If you
plan on making periodic payments (i.e. monthly/quarterly/annual payments) into
a mutual fund for example, ensure the payment is convenient. Don't bite more
than you can chew. Intending investors should look to invest at least 5% of
their monthly income.
Define your Reason for Investing.
This is very important and will basically
define your investment plan. People invest for different reasons;
some invest to earn passive income, some to save towards a project, some for
retirement, others for their kids etc. The mistake most people make is to
invest for investing sake they just want to make/save money. Please don't
invest for investing sake, have a definite reason for investing
Define Your Time Horizon
Your time horizon is the length of time you plan on
investing. Are you investing for a long term or short term. Those that invest
for investing sake just buy an investment instrument and keep it. No don't do
that, have an entry and exit plan. Read on the instrument you are investing in
and follow its trend in the market. If you don't have the time, then employ the
services of an investment manager/ consultant. Don't just buy and keep, it's
not a fancy jewelry.
Understand Your Risk Preference
I've discovered that a lot of people want to take very little
risk and earn high interest, it doesn't and will never work that
way. Your return on investment is determined by the amount of risk
you are willing to take. Don't invest in secured instruments and expect to earn
high returns it will not happen. Besides, the amount you are investing determines
how much risk you can take. No matter how much of a risk loving person you are,
if your capital for investment is low, your risk and return
will be low.
Diversify
This was the mistake a lot of people made back in 2007/2008.
Someone invested N800,000 in Bank PHB stocks (now Keystone Bank), he lost every
Naira. Spread your investment don't invest in one asset class. The
more diversified your investment, the less risky it is.
Seek Advice
This is the part we are not yet conversant with in Nigeria. It
is important you consult investment experts before you take investment
decisions, they are better informed so, they give good guidance. Don't just
assume because someone works in a stockbroking firm/investment bank he/she
should know about investment, NO!!! ask investment experts. If you
cannot afford an investment consultant then do your own research, read
materials on investment and gain knowledge before you invest.
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