This question, where do I invest, has been on the lips of many Ghanaians (and in the ears of investment professionals). The inquiry has been prolific especially on the back of the recent banking collapse and loss of investments. Some one-time very adored investment brands have tanked leaving people in despair. The next most probable response heard is to keep your money under your bed.
Keeping money under your bed is only a good option if the currency of your money is gold. Not even Great British Pound (£) can hold its mettle against that investment choice. The purchasing power of the money, that is, the actual strength of the money measured in what it can purchase whittles down with time.
THE INFLATION EFFECT
Inflation as it happens (outside of your room) would be rendering the money less valuable. The Ghana Cedi (GHS) of course would do worse. Keeping money under bed is a bad option period! Only keep it in a vault if it is gold. If not, then the investor needs to look for another option. But first your investment objective.
WHERE DO I INVEST – SOME IMPORTANT QUESTIONS
The individual’s objective for the investment is what directs where the money should end up. The investment objective could be the quest to grow your capital (or simply money), in which case the rate of return is a major consideration. Is the objective to save for some obligation later or just preserve the capital? Another question is how long the investor is ready to leave the money for. Is investor thinking of accumulating wealth through regular deposits or just doing one bullet placement? There may still be other questions not mentioned here because of the generality of this piece.
THE RISK QUESTION
However, one most important is the level of risk investor is ready to take. How to assess your own risk is how much of the money you can afford to lose, while nursing the hope of getting more (tough eh?). This is one question people haven’t answered well before placing their money into investments. However, the recent winds have forced people to answer the risk question anyhow. Gradually Ghanaians are learning that risk is important and rate of return is not everything.
The individual may not get clean-cut answers to all these questions, but this is where an advisor (paid or unpaid) could be of help. At least the investor could be a little bit more informed before leaping. A company that has proven well in the advisory space is Ecocapital Investment Managers . You would agree that the time for just jumping into the market without any kind of advice is over.
A number of options could play up here. One can invest in property, in a business and also in financial instruments. Property has over time proven to be a good choice due to the ever upward appreciation of the value of landed properties in Ghana. However, one has to guard against land-related vigilantism and administrative fraud which rob people of their investment. An indirect investment into property would be to invest in the real estate investment trusts (REITS).
REAL ESTATE INVESTMENT TRUST (REIT)
This is funds collected from a group of investors. Professional investment or money managers like Ecocapital Investment Managers could invest into the various aspects of real estate businesses. Profits are then shared among the ‘contributors’ or investors. The risk here is that if the economy tightens and there is no money in circulation the sector suffers and that can affect returns. In Ghana’s case where the property market is primarily driven by the US Dollar, Cedi depreciation affects the performance. More on REITS would be discussed in coming articles.