Many Kenyans would like to invest and watch their money grow. An investment, however, can never succeed unless you have a game strategy and follow the rules. A typical investment rule is to set aside 30% of your overall earnings regularly to build a strong investment portfolio.
Still, that doesn't mean you jump at every Narok Wheat millionaire investment story. Be careful not to fall for the flashy TV ads, thinking you will be the next big thing without effort and resources. Remember that that massively successful bitcoin/cryptocurrency investment may have required practice, subtlety, insight, and patience.
As with any other endeavor, thorough study, strategy, and profitability are essential factors for completing your investment and improving your financial health.
Here are some of the most common investing mistakes to avoid;
Assume that you go to great lengths to investigate and select the ideal investment but you lack the required cash flow to get this investment off the ground. Maybe you also lack the resources to keep it going till it becomes profitable. Can you toss caution to the wind and get on with it? Some would go ahead, attempting to quench and smother the raging flames. However, in practice, it is a major mistake.
The lifeblood of any investment is money, without which you can't meet its accompanying expenses and ultimate growth. An investment comprises everyday operation needs necessary to generate future income.
Think of routine activities such as paying for supplies, employee salaries, overhead utility costs, etc. All of these require an investor to start with adequate financial muscle.
For things to go well, you should strike the proper financial balance. It shouldn't be too much or too little. If you put too much money into an investment, you might miss out on other possibilities to invest. On the other hand, financially starving your investment may also force you to borrow at exorbitant interest rates to keep it going.
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Consider the internet boom of the 1990s, when many investors were rushing to buy internet-related stocks. Almost every investor was rushing to buy shares, bidding on each share at exceedingly high prices. However, the speculation did not last long. Fearful investors began selling off identical stocks at the lowest possible prices. Of course, the losses were enormous.
While it's just an example, in this age and era, many investors speculate and jump to any outlet that promises considerable returns in the shortest time possible. Yet a good investment requires planning both in the long and short term. A long-term investment strategy enables you to study your portfolio, outsmart any adversities, and reinvest until you see stability and growth.
Why is diversification important for your investments? Because it helps reduce risks, such that if one portfolio fails, another one could perform and bail you out. The trick is to spread your investment in different categories or asset classes so that you do not wobble on an industry's volatility at any time.
Here is an example: If you invest in real estate, you can also invest in stocks. Or in the education sector or agriculture. Anywhere you have passion. If land prices fall, your stocks could be on an upward surge. If the real estate goes bust, you might find solace in the education and motor industry segment.
Spreading your risks ensures you do not succumb to financial ruin when an investment doesn't perform well.
What if you insist on only one form of a portfolio? Then repeat the process across multiple asset types inside it. Invest in other companies, for example, so that the competing company can still be strong if one falters.
Any investment, however small, needs checking up routinely. There are two primary investment categories. Investments such as savings accounts and fixed deposit funds fall under defensive assets. These require monitoring to ascertain payment of income such as interest. Tracking also ensures there isn't a massive change in the value of your capital. You can report any anomalies should there be.
Growth assets include land, real estate, treasury bonds, and mutual funds. Why should you monitor this investment portfolio? They are highly volatile and subject to market forces.
Without tracking them, you can sell when the market is at its least favorite, making losses. Beware of over-tracking, though. Experts say overdoing it can lead to fear and overtrading, especially in bonds and stocks. It then means you do not stick to your initial investment plan, which will grow your assets gradually.
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Patience is one of the most underutilised skills among investors. However, because most investments are long-term, they require stable and moderate growth. After several years of the initial groundbreaker, the advantages may begin to seep in.
Being patient in investing entails perseverance in the face of adversity. An investor should bear the current hardship in the hope that things will improve.
Even if your portfolio isn't performing well, you need to continue to give the essential components for its growth.
When the market is unpredictable and turbulent, many people may hurry to sell. However, sticking to a long-term strategic goal sometimes requires patience.
Investment pros will keep saving or growing their assets even when things look bleak in the market. The expectation and optimism are that the market will stabilise and begin an upward surge, even if it takes years.
Following the crowd is one of the most typical and costly investing mistakes. People will hurry to finance an asset, not because of the research they have done regarding it but because they have heard of what other investors are doing and the profits they are raking in.
Have you been following social media news recently? Many savers fell victim to bogus online merry-go-rounds because they thought it was a convenient investment avenue.
The herd mentality couldn't permit them to do due diligence and take precautions by finding out if the online Chama was legit. Instead, they began saving because other group members were also doing so and claiming to generate huge benefits.
An intelligent investment journey necessitates new ways of thinking and responding. It also demands research and the development of expertise in your industry by creating and sticking to goals.
The key point is to make any investment work for you rather than listening to or following what others are doing. It's because everyone's goals are different, and only you know what you need from your investment.
Are you among investors who listen and act solely on social media advice regarding investments?
While some may be useful, taking it with a pinch of salt is vital. Serious investment requires that you do broad research about it and from authoritative sources.
Official sources such as government sites or offices are excellent places to gather information regarding your investment.
Non-governmental sites also possess tons of information. So, read, ask questions and resist the temptation to use any advice that could do more harm to your portfolio.
Sometimes it doesn't take much money to spend on professional advice, which can help you choose the suitable investment and use the proper mechanisms to drive it to success.
Working with an expert has other benefits, including avoiding investment mistakes and ultimate peace of mind. You can follow the proper steps to create a long-term plan that will eventually provide excellent returns.
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The focus of many investors is on returns. However, a typical investment calls for extensive research, the proper and sufficient resources, including expert support. Invest in risk-reducing investment methods as well. Finally, keep in mind that development takes time. Even the greatest investment strategies may take months or even years to produce a return on investment (ROI).