The most common misconception people have about investments is that they still have time. They tend to push back their decisions saying they have time. These people just want to enjoy what they have now and console themselves by saying they will eventually get there when the time comes. The truth though is that the earlier you begin investing, the faster you will get there with such little effort. If you wait till you are 40 to start then you will lose out on a lot of opportunities which can compound your growth.
A lot of people give excuses such as I do not earn enough to invest or I need a lot of money to start to invest. They feel unless they have sh.100,000 or sh. 1 million they can’t beginning investing. Yet there are investment options available that one can start with sh.5,000 or even sh.1,000.
Another misconception that people have is that they are not cut for it. They think that somebody else who has been to school, an accountant, investment banker, stockbroker or a financial analyst is the best person to handle their investments.
There’s also the challenge of wanting to jump into all investment opportunities that you hear about. The truth is that you don’t need to invest in everything. 2 or 3 investments are enough. The best place to start so that you are not running about and trying to get everything that comes your way is to begin by thinking about what kind of life do you want to live. What are your goals that are aligned to the kind of life that you want? What are your basic needs? Which kind of lifestyle do you have now that you want to maintain into the foreseeable future? What are you dreaming of achieving? It could be supporting a certain course or traveling every year.
Once you have figured that out for yourself, then you will be able to start thinking through the investment options that you can consider. You will be able to know the amount of money and time horizon you have. A lot of people look at others and say that is the kind of life they want to live. They do not accept the kind of circumstances they are in. They do not know that the type of investments they make will be dependent on their life situations and circumstances.
The amount of money they have, their responsibilities and dependants. All those things are factors that one needs to consider. You then have to think about how to begin. First, you will need to know if you have your basic needs sorted out and where can you begin to save to ensure that your basic needs are sorted. What are the safe places you can invest your money? Examples of safety nets are the money market fund and fixed deposit or a savings account.
You can say you need a safety net of a certain amount of money. Maybe you need to save your 3 months expenses in an emergency fund to ensure peace of mind. Should something unforeseeable happen, you will have your expenses for the next 3 months sorted.
Once the basics are covered, then you can start going into higher-risk opportunities. This can include things like cryptocurrency. Anyone who put money into bitcoin at the beginning of 2020 has now made over 260% of the money that they invested. You can also put your money in private equity. There may be startups that are disruptive in a certain industry but do not have money to scale up their business. You can consider putting your money into this type of investment. It is a high-risk venture though it has the potential to do really well.
Investing in the future of your kids’ education is a life-enhancing goal. These are the goals where you want to maintain your standard of living for the foreseeable future. Examples of investment options could be things like stocks, treasury bonds and corporate bonds. Stocks do not necessarily have to be Kenyan, they can be global. Real estate is also a great opportunity. Just take your time and find a real estate opportunity that will give you rental income. That rental income can go towards paying tuition fees or maintenance fees for the kids.
A lot of people decide to put money into an education policy. There’s nothing wrong with putting money in an insurance policy. It should be noted though that insurance has a cost so then it drains the potential return. Therefore it should be used as a risk management tool.
It is important to note that you can not invest in everything. You also have to talk to people in that area that you want to invest in so networking is important. Investments do not happen overnight. You have to put in some time and have the knowledge to back you up.