General principles of investing still apply even during these pandemic times. In this article, we shall explore important considerations for investors looking to reap the highest gain.
First and foremost you have to develop or relook at your investment strategy as opposed to reacting to various opportunities. An investment strategy is a plan that has your long, medium and short term ‘SMART’ goals. This is very important as it acts as a road map in your investment journey.
The more specific the goal, the more likely it is to be accomplished. It should be measurable or mutually agreed upon for accountability, the goals should be achievable meaning there should be a step by step process clearly mapped out, the goals should be realistic or relevant so that they do not discourage you if they are too ambitious and finally, they should be time bound meaning you have a set duration within which to achieve it.
Once you have your goals set, it is important to carry out an evaluation of the various investment options available to you. This is especially important around these pandemic times where a lot of uncertainty has caused many of the counters to take different tangents.
In the stock market, the sector and the positioning of the company during these times is very important as different sectors have been affected differently; some companies are thriving such as Zoom which has really done well and is recorded to out perform several American airlines put together. Locally, the transport, tourism and hospitality sectors have taken some hit as an industry, but as the economy opens up, some of the counters are likely to pick up. Nonetheless, it is important to do your due diligence on the specific counter before you buy shares, specifically interrogating the plans they have around this time as well as the market sentiments and information on their leadership. The financial & telecommunications services companies are also experiencing mixed fortunes depending on their strategies around Covid 19.
When there is uncertainty in the equities market, investors often move to hard assets such as Bonds, Derivatives, Real Estate Investment Trusts and Exchange Traded Funds which help investors hedge their risk
There has been a lot of demand on bonds in the long term and treasury bills in the short term market. It would be worthwhile to consider the effective or actual return on any bond prior to investing e.g. the M-Akiba Bond that is currently open in the secondary Market which offers tax free 10% return. The minimum initial investment amount is Kshs. 3,000 with no Upper limit but one can top up with as little as Kshs. 10 or Kshs.100 via mobile money.
There is the Real Estate Investment Trusts (REITS) where someone can purchase REITS which are traded in the same way as shares hence improving liquidity i.e. the ability of getting in or out when you want to buy or sell unlike when dealing with physical land.
Last but not least, one can purchase Exchange Traded Funds (ETFs) which is also a very stable asset class during this time.
Finally, if you think education is expensive, try ignorance. Equip yourself with as much knowledge as you can to enable you make the right investment decisions.
HEAD OF BUSINESS DEVELOPMENT NAIROBI SECURITIES EXCHANGE