Stick to investment basics
With each New Year comes new challenges, and when it comes to investments, it is no different. Namibian investors today face quite a number of hardships, and it remains a daunting task to keep an investment portfolio afloat.
There are, however, a few investment principles that have truly stood the proverbial test of time that will assist local investors to dodge a couple of arrows aiming to reduce their wealth. In the next edition, I can elaborate more on the current relevant obstacles and how to approach them this year.
For now, the first notion, and this may sound trivial to most, is to invest in something. Odd as it may seem, the majority of people fail to make provision for their future, albeit for a rainy day or retirement. Now, I will be the first one to advocate that the concept of retirement in the form of moving to Swakopmund and watching the waves crash is hogwash. However, simple biology avows that, should one be blessed with a long life, we will reach a phase in our lives where we frankly do not possess the energy to remain as economically active as we were in our exuberant youth. For most of us, there comes a time when the income streams generated from physical activity will end, and we become reliant on a passive income. To be well prepared for this inevitability, it remains good advice to invest in something now that will take over the income baton when the time comes.
Once this belief about investments is entrenched, the next hurdle is to invest in proper instruments or securities that are worthwhile. Investment opportunities differ substantially, and only those that have the ability to at least provide growth that exceeds inflation is meaningful. It is all about protecting and growing the purchasing power of your money over time. Be wary of investing in options that are too conservative. This route is best suited for short-term savings than for longer-term investments. If you do have a longer-term horizon, which is typical for investments, then take the more adventurous route and shy away from investments that do not have the ability to provide real growth.
Any discussion about investment principles that does not touch on the concept of diversification is pitiable. Diversification, in its simplest form, means to spread your risk. It does not mean optimisation or even maximising your investment returns. In fact, in most cases, it results in diminishing the return of investment portfolios. However, in historically bad times, the well-diversified portfolios were often the ones left standing. Be sure to diversify between the various asset classes, geographical areas, economies and perhaps most importantly, currencies.
Another aspect worthy of attention is fees. Extravagant fees have the potential to substantially reduce your investment returns, especially over the longer term. Make sure you are abreast of the total fee structure of your investment portfolio and that you are getting value for your buck. Total transparency is critical here.
Lastly, but perhaps most importantly, is your investment partner or service provider. A poor choice here can mean the end of the road and has been the case for many unfortunate investors in years gone by. Capricorn Group is well structured to offer expert investment services with a global reach to local investors at a very economical manner. Follow these breadcrumbs and your investment portfolio should reach home safely. Enjoy the 2020 journey!