What to consider when setting out an investment

If there is one thing you can never get enough of; it’s investment advice. There are many factors that you need to think in-depth and consider before making that investment decision.

Truth be told, investment opportunities can go two ways: you either end up fulfilled or devastated. Think about the get-rich-quick schemes that you have heard of or experienced in your lifetime. Have you ever fallen victim to such scams? If yes, when you look back, did you sense that gut feeling not to proceed or do due diligence but you still went ahead and invested your hard-earned money? Sorry for your loss. We have all lost money in one way or another, if you haven’t yet, take the pointers we will talk about here.

Investment strategy

One principle question you should always ask yourself whenever you have an investment decision to make is; what is my motivation? Establish a motive, create a sensible investment plan and follow through with it.

Some of the reasons could be to:

Start or expand your business
Create funds to build a dream home
Build generational wealth
Create funds for retirement
Create a pool of accessible emergency funds or savings
Make charitable donations

Research and due diligence

Let logic as opposed to emotions guide you in making that decision, and, confirm the accuracy of the information and investment value before committing. Research into regulations surrounding a product including taxation, charges, past performance, management of a company, and future strategy. Keep yourself updated with current affairs to ensure that you do not miss out on opportunities to leverage on an investment.

Risk appetite.

What is your risk appetite? Are you risk-tolerant (willing to take high risk for high returns?) or risk-averse (reluctant to take high risks/ prefer average returns with low risks)?

We are living in changing times where the financial markets are ever-changing and controlled among other things by governments, speculation, demand vs supply, inflation, international transactions, and even recently global pandemics as we have witnessed.

Ensure to weigh the risks relative to the costs, duration, and returns on the investment.

Opportunity cost.

Let me shed some light on this. Imagine your friends have been talking about taking an exquisite vacation to Lamu. Are you willing to give it up because you heard about this lucrative piece of land that has just been offered at a discounted price and the amount could go into buying the land? Now, the opportunity cost of buying the piece of land instead of taking the vacation is the cost of the vacation.

This brings us to the question; could you be missing out on alternative investment options while sticking to the current ones that may not be as progressive?

Time and time value of money

Time is always of the essence when it comes to investment. How long are you willing to lock up your investment to make your target or desired goal in the short or long-term? Investments should also be able to mimic your ideal portfolio and timeline.

The value of money erodes with the passing of time, ensure that your investment is earning a return and of course within reasonable limits and risk. Also, the earlier you start investing, the more you reap and the better it is for you to be able to compound your earnings.

Investment capital.

There is no gainsaying that this determines your choice of investment. However, this does not mean that you should limit yourself e.g. those with low investment capital may look at collective investment schemes e.g. Unit Trusts, Chamas (investment groups), etc to invest in securities where the minimum investment amount might be limiting to individuals.

Nowadays you can also take advantage of financial help and offerings such as loans, letters of credit, trade finance, asset finance, and many more options. Take your time to understand the terms, conditions, and risks involved as well. Always make informed decisions.

You can always seek professional assistance where necessitated. Remember, “An investment in knowledge pays the best interest.” ~Benjamin Franklin.

You can now confidently walk into February ready to make an informed decision to invest in that business or opportunity. All the best!

We are on your side!