There’s no such thing as a dumb question—and that’s especially true when it comes to investing. After all, putting your hard-earned money into an investment account isn’t the same as simply putting it away in a checking or savings account. There are decisions to be made: What will I invest in? How do I manage my investments? What do I do if the financial news gives me cold feet and most importantly, what if all the financial jargon (e.g. NASI, NSE 20 and NSE 25 gaining by 1.0%, 0.6% and 0.5%, respectively, taking their YTD performances to (5.2%), (19.3%) and (13.2%), respectively. Since the February 2015 peak, the market has lost 22.2% and 40.7% for NASI and NSE 20, respectively), Scares you away because all you see is talk on equities and the only equity you are aware of is the Equity bank across the street because ‘wewe ni member’ (you are a member)?
A good way to learn about your finances is to fearlessly ask all of the things that make you scratch your head when you’re just learning to build a portfolio (ignore the semantics).
The first step is to determine what you want to achieve with your investing, whether it’s in the short-term or long-term Next, you should think about how hands-on you want to be with your investing. Should you want to be more hands-on, then you’d probably have to do more research on the types of investments that make sense for your timeline and risk tolerance, and consider rebalancing your portfolio (this word again) as time goes by. The longer you have before needing the money, the more risk you may be able take on.
Beyond stocks and bonds, there are alternative investments, such as real estate or commodities. Previously, if you wanted to invest in real estate, you’d probably have to buy property—but you can now consider investing in real estate investment trusts, also known as REITs
One of the main reasons to consider investing in commodities is that they serve as inflation hedges. During times when there’s higher-than-normal inflation, these investments tend to do pretty well.
Risk tolerance comes down to how much risk you are willing and able to handle, it’s important to know because it can impact how you shape your portfolio
The key is not to move your investments on a whim just because you see a drop in the stock market. Consider rebalancing once a year to help ensure that your asset allocation (the percentage of your money dedicated to various types of assets) has not strayed too far from what you’re comfortable with, and if it is then think about making some adjustments.
But at the end of the day, it is about you, your financial fluency and your heard earned money. You could always listen to the financial gurus, myself not included, or you could go ahead and spend all your money on shoes, clothes and gadgets. After all, what do I know, I am just an intern.