As ambitious people looking to have a secured future, one of the most important things we need to do is to invest. Investing today will ensure that we have enough resources to sustain our standard of living today and tomorrow.
Investing makes our money work for us. It builds an additional stream of income that cushions us and gives us enough funding to achieve our dreams of building businesses, houses, buying cars etc.
It is worth noting that, investments also have the potential to enable us hedge against currency depreciation, because the value or interest on your invested sum increases even in the face of inflation and currency depreciation.
Compared with simple savings, investing in instruments with different tenors earns higher interest rates. From all these benefits, it is clear that anybody who wants to become financially stable should consider investing now.
Here are five things to do to begin;
1 Define your investment objective
Before you start any investment, it is important to have an objective. Knowing your objective or goal will help you decide how much you need to set aside each month, and how long to invest.
A quick way to know your goal is to ask yourself; why do I need this investment, when will I need it, how much will I need?
For example, you may be saving towards further education, 2017 may be your target year, and GHC 50,000 may be the amount you want to raise. That makes it clear to you that your goal is to generate GHc 50,000 by 2017 towards school.
Naturally, when we have a goal stated like that, we are driven to achieve it. It is just human nature.
2 Understand your investment options.
After knowing your investment goal, the next step is to know the type of investment and the associated interest rate that will help you achieve your goal. Every investment instrument has its own terms.
Picking the right one will bring you the return that meets your target amount needed in the time needed. It will also help you to know the amount of money you need to set aside to invest towards your goal, the risks involved and whether you can mitigate the risks.
Broadly speaking, there are two common ways to invest; either by earning money on your money through the purchase of fixed deposits, treasury bills, stocks, bonds, shares or by buying something today to sell at higher price tomorrow, for example lands, houses, companies etc.
Be very careful of signing up to things you don’t fully understand. People have lost millions that way. Whenever you are unsure or you do not fully understand the investment package offered you, insist on talking to your bankers or investment advisors and demand an explanation. That is why it is important to know your investment goal, in other words, be clear on exactly why you are investing.
3 Decide your income share
After defining your goal and selecting an investment package, the next thing you want to do is to ensure that you have sufficient income. With sufficient income, you will be able to set aside a percentage of your income for the investment package.
One easy way to do this is to ask; how much am I earning, what percentage of my earnings can I invest and still not leave my pockets empty so I can respond to emergency situations?
Remember you need to use your earnings for investment, savings and spending. If you put every single cedi you have into an investment, you will bring unnecessary hardship on yourself, and that defeats the purpose.
4 Become financially disciplined
If you have taken the above steps, you now need to add some discipline before you can achieve your investment goal. Just like we make sacrifices and change habits to achieve various goals in life, we need to do same on our investment journey.
Start by checking if you can cut spending without bringing untold hardship on yourself. Look out for cheaper alternatives in the areas of transport, entertainment etc. If you find some extra cash, you can invest it too.
Please be consistent. If your money for investment is needed for each month, make sure it is available. Missed payments on deadlines often attract heavy penalties. You can stay safe by setting up a standing order that makes your payments automatically on a set date. This way, your payments go on time, and you are not tempted to use the cash for other things. Also, be ready to make adjustments.
5 Learn the language of finance.
It is not enough to invest your money and just wait for the maturity period.
Just like we learn a country’s language when we are relocating to that country in order to survive and thrive, so do we need to learn the investment language to understand and make key decisions.
Get a working understanding of terms like tenure, interest rates, performance, yield, and return. Read investment reports and follow the news as it applies to investing. Check any jargon you do not understand from a website likeInvestopedia.
Remember, no amount of money is too small, so there is no need to wait till you have a huge amount of money before you start investing. There is a proverb that says if you wait for the right time, you will wait forever.
Happy investing. Do you have any more tips on investing? Comment below;
Josephine Ofei Darko Asare-Bediako & Irene Danquah.