Investment is defined as the purchase of an asset in expectation of
generating returns in the future. The primary purpose of acquiring an
investment is usually appreciation in value to create future wealth.
Appreciation refers to the increase in the value of an asset over a period of
time. The journey to investing might seem challenging, however with the right
knowledge it can be a more exciting process.
Before you venture into investing, it is expedient to take note of the following:
1. Financial Goals: The first step is to determine your investment objective.
What is your ‘why’? Your ‘why’ will be your major drive on the journey of
investing. What do you intend to achieve with investing? What are you
investing towards? A saying goes’ It takes setting a goal to score one’. So, the
starting point is to clearly state your investment objective.
2. Get Knowledge: investing entails a level of risk, as such it is important to
undertake some research and understand what you\’re investing in, and get at the
minimum basic knowledge about the asset you intend to purchase. Knowledge is empowering and it gives light. Your investible funds are your treasure, the aim of investing is to multiply and not lose your hard-earned money. Get insights on various types of investments before committing your financial resources.
3. Start with the basics: You can get started with investing in traditional assets that are easy to understand such as fixed deposits, bonds, mutual funds, stocks et al and as time progresses, transition into more complex assets such as derivatives, cryptocurrency et al.
4. Diversify your investments: Diversification is a risk management strategy
that helps spread your risk across various assets/investments which are negatively correlated to each other. In Warren Buffet’s words’ Do not test the depth of a river with both feet. Diversifying is simply not putting all your eggs in one basket.
5. Stay informed: Financial success is a function of financial information. It is important to stay abreast of information regarding the various assets you have invested in. This helps with decision making on whether you should buy more, hold or sell off the investment. You can catch up with business updates aired by major television stations and financial websites such as Nairametrics, Bloomberg, investing.com et al