Investing. . . .

Many young people think about investing I have met a few who ask my views and what it takes to be an investor. Like many of them, when I started out a year ago, I made a couple of wrong decisions and I would like to share some of the things that I have learnt the hard way.

1. Time is the most powerful asset when it comes to investing
Like many young people, I believed that I would invest and break even after 3 months. Wrong. Investment is not gambling or winning a lottery. Investment takes time and you need to compound your profits before you start reaping big.  You need to be prepared to invest for at least three solid years without getting a penny from the business venture that you have invested in. Even if you are doing forex – you need to build your capital base for at least 6 months.

 2. Never use a loan to start your investment
We all believe in the theory of get a loan, start an investment; it picks up and pays back the loan. Wrong. That’s recipe for failure. The investment can never pick if you are ever removing the little profits it makes to pay rent, pay salaries, pay power bills and also pay your loan and its monthly interest. It will suffocate and die. If you are starting an investment, better save up enough money, or provide time so that you offer the service. Never get a loan to start a business or borrow money to start a business that you intend to pay back. I am sharing this from experience and I hope none makes the same mistake.

3.  Avoid being tied to one business venture the way a shirt button goes in one hole! –Diversify
Look around all the investors that you know. It is just clear that they never invest in one business venture. They invest in many different ventures and spread their risk. Those of us that are in the stock market know how volatile it is. Who does not recall the recession of 2008?? So what happens if the same happens today?? Diversify. I am not saying that diversifying will stop the recession if it was to come. No. It’s just like having an umbrella when the rain pours. Even though the umbrella does not stop the rain, it enables one to walk in the rain with confidence. Likewise, diversifying will not stop the bad times, but it allows the investor to walk with confidence when the hard times hit – and they sure hit quite often.

4.  Pay off your debts. Pay off your debts.
Yes, you have read it twice. Pay off your debts. I know many of us were told when growing up that everyone has debts. True. Everyone has debts. But investing has both sides – profit and loss. An investor not willing to suffer and accept loss is no investor at all. By investing, one accepts to make profit or a loss. What happens if the loss comes and you have debts to pay too??  Now you get it. Pay off your debts before investing.

5.   Make sure you are insured
I am not really a fan of insurance but I believe in it. Any wise investor must be insured. It is like a boda boda (motor cycle) helmet, you may not need it most of the time, but when the need comes, you will be happy you had it on. Otherwise, you lose your life or get a permanent damage to your skull. Likewise, in investing, you need insurance just in case anything happens.