By Mihr Thakar
Knowledge breeds decision making skills and infuses a person with the confidence to take risks. Reading books, articles and even audiovisual learning is the key to attaining an edge over others. New ways of doing business and innovation comes to those seeking facts from the vastness. If you bought Bitcoin in March 2017, when it was hovering above $1,000, then you would have made a 1000% return if you sold in November 2017, when the price hit $10,000. $1,000 is not much money to risk on an avant-garde project that literally screamed “pioneer”. However, many of us were calling it a scam, Ponzi scheme and fraud. If you knew more about blockchain technology, cryptocurrency utility and how to buy and store it then perhaps you would have changed your mind about the concept and made an investment that could have made you a fortune. However, Kenyans can sniff money from miles away and many were probably not left out.
The gold standard is stashing away 50% of your income. However, most of us like driving expensive cars and eating out so starting with something, even 10%, is a good step forward. Savings targets should be set for each year. For e.g. You could have had a savings target of Kshs. 20 million in 2017. However, the Lord God in heaven smiled at you (sorry atheists) and you managed to save Kshs. 40 million. Your savings target for 2018 should therefore be increased to Kshs. 80 million. Moreover, savings should not be left to rot in the bank. They should be carefully invested in a diverse manner at each major step, such as at every hundred-thousand-shilling milestone, every million shilling etc. Some form of bank deposit retention is also a good component of a diversified investment portfolio. Availability of cash when opportunity shows itself is paramount.
3. Put all your eggs in one basket
Some say marriage is putting all your EGGS in one BASKET. Sometimes the happiest days come from treading one road to one destination and not meandering through the jungle on a number of different paths and trails. A well-researched conviction trade can yield the mother of all returns. Risk takers borrow money, remortgage houses and take loans on family plots to catch rain in a bucket (as opposed to a teacup), when the nimbostratus rain clouds have gathered. Some things need to be sensed like wily and astute fund managers sensed that 2018 would be the year of banking stocks, while others were busy telling their family to buy Bitcoin after the rally wore out during Christmas dinner. It is also arguably senseless to be a Jack of all trades and master of none.
4. Never fear taking profits
It’s better to fill a cup of tea three quarter of the way when needing to walk down the hallway with it then to fill it fully, burning yourself in the process of locomoting to your relaxing armchair and also dropping and breaking the cup and spilling the tea from the shock of the burn. Satisfaction is important. Let the buyer of a security also profit after you sell. Some assets are very volatile and a reasonable return should be the basis of an orderly exit. Never buy back an asset you have profited from without due reason, neither should you short it without sheer conviction. Speculation is healthy but not in a haphazard way.
5. Donate to charity
All is not well in the investment world and all investors sometimes have to take losses. An even mind is necessary when you lose money. Don’t try to regain it too fast, nor should you give up. Learn from your mistakes and write them down for future reference. Donating to charity teaches a person how to take losses without breaking down. The ideal charitable donation is that which slightly squeezes you. I still proudly and fondly remember the Kshs. 50 tip I gave to our apartment block’s security guard last year.
6. Put in the hours
Analysts’ advice is always good to pay heed to. Kenyan born investment analyst Aly-Khan Satchu has preferred a tactically short bitcoin position this year (in contrast to last year’s parabola exploitation). Sure enough the cryptocurrency has been beaten with a metal rod, down over 50% this year. However, all expert advice should be taken with a grain of salt and you must do your own research. Five hours a day researching (reading, analyzing etc.) is the gold standard. Positions should be picked with care and conviction; gambling in risky terrain like the stock market is not advisable.
7. Spend time with financial and intellectual superiors
Those who have ‘been there done that’ can offer tons of insights on how wealth is created. Many high achievers have penned literature or are fairly active on twitter. Take some time to invite your employer to coffee and ask for some tips and tricks. Most people are fairly obliging to share advice; it is inherent in the human spirit to share and commune. Particularly interesting are tales of the financial crisis’ that have swept the world in the past. Seasoned investors have lived through these dark days and tales of war and destruction are always music to the ears. Dark, somber music. Remain humble, able and nimble for the profits of an entire year can be burned away with just one major price dislodgement event.
8. Prioritize land acquisition
One should save money to eventually buy land. Land is not made anymore and is the safest bet when economic cycles can eat into one’s profits in a sudden and dramatic way. Several important issues must be paid heed to when making a land purchase:
- Always involve a good lawyer in the transaction
- Always buy liquid land (haha dumb folk will think I’m talking about rural land with a lake on it)
- Never buy land without a title
- Never buy land which you cannot visit every weekend
- Never buy land which you cannot secure (with a perimeter fence or wall)
- Never buy land in a partnership with another individual or group as that denies it the position of a fallback store of value (you may be running a partnership with a friend and a dispute can destroy it but you will still be having good ol’ mother earth)
9. Austerity measures
Stop spending unnecessary money. Everyone will have different ways of categorizing necessary and unnecessary expenditure. Asking yourself whether a purchase adds value or not is important; other people cannot tell you what is important in your life. For e.g. unnecessary purchases may include:
- An expensive car
- A hefty home loan to buy a penthouse
- An expensive foreign education
- Eating out every weekend
- Going out for a movie every weekend
- Breast enlargement surgery
While necessary purchases may include:
- A good house on an eighth of an acre, once you can afford it
- Reasonable monthly rent to live in a good and safe area
- A budget car for mobility
- Books (fiction and non-fiction)
- A reasonably priced local (and rarely) foreign education
- A personal music teacher
- Moderately high school fees for children
- An occasional vacation to freshen the mind
- Anything you need after savings targets have been met
A good investment is like a child. It should be nurtured. Sometimes it may cry and vomit on you. Sometimes it may make you proud. Buying a falling share at the bottom is often impossible and it can fall below your cost immediately and drastically. One must reflect and meditate on their reasons for the purchase. Set a good target price and wait patiently while the ship sails in stormy seas. Be active and vigilant to also ensure that the situation doesn’t change from favorable to adverse. Sometimes long-term value investing is superior to short-term trend play. Former CEO of Safaricom and current Chairman of Kenya Airways Michael Joseph once told the current CEO of Safaricom Bob Collymore, “Just make decisions. Even if you make wrong decisions.”
By: Mihr Thakar