Expanding Your Investment Horizon: Navigating Risk, Returns, and harsh Economic Conditions for a Secured Future

In the ever-evolving landscape of personal finance, one thing remains constant: the pursuit of sound and a secured future. The quest for financial security requires a strategic and forward-thinking approach. The journey toward financial well-being demands an understanding of key principles such as risk, returns, time and economic challenges that shape our financial landscapes. Economic challenges, now seem to be the dominating force driving all investment decisions and activities. The individual want to see a stable and forward-looking approach from the government before investing, the portfolio manager want to be sure of government direction before buying investment on behave of their client. As investors are seeking good investment opportunities coupled with minimum risk, there is also the fear of government jumping on their investments to save the country.

A typical case study is the government of Ghana.

According to World Bank, Ghana, a country that once was described as Africa’s shining star is now battling its worst financial crisis with inflation hovering around 40.1% (according to bank of Ghana). As inflation keeps surging, rising prices keeps the cost of living accelerating for Ghanaians. The President at a point addressed the nation of its economic crisis and blamed it on the covid-19 pandemic and Russia-Ukraine war.

Large part of this mess we are in as a country is because of government launching its expensive “free education programme in public high schools” and the scrapping of major taxes that were giving revenue to the country. A Ghanaian professor at Andrews University in Michigan Said, this brought a massive reduction in government revenue. To make up for this reduction, the government adopted borrowing, increasing Ghana’s bond market activities domestically and externally thereby leading to high debt-to-GDP exposure causing the current debt unsustainability levels. The government was spending more than they were receiving.

Investors began losing confidence in the economy as government could not meet liquidity challenges. In December 2022, the government reached an agreement with IMF for a $3 bn loan. However, the country needed to undertake a debt restructuring to receive the funds. This means Ghana will have to renegotiate terms of its debt with creditors, including extending repayment period and lowering interest rates.

With regards to these economic challenges, numerous opportunities still lies within investment landscape. Most investment industries have conceded the adoption and creation of sub accounts under their money market fund to cater for the special needs of their clients while maintaining low risk, flexibility, and easy access to investment funds.

The COVID-19 pandemic cast a shadow over progress in various continents during the past three years. However, when it comes to financial inclusion, it acted as a catalyst, fueling a substantial surge in digital payments amid the worldwide expansion of formal financial services. This expansion has opened fresh economic prospects, reducing the gender gap in account ownership, and enhancing households' ability to withstand financial shocks. These developments are highlighted in the Global Findex 2021 database.

In this article, we explore the concept of expanding your investment horizon to navigate these factors and pave way for a secure future:

The Intersection of Risk and Returns: Balancing Act

At the core of every investment decision lies the fundamental interplay between risk and returns. While it's natural to be drawn to the appeal of high returns, it's essential to recognize that these often- come hand in hand with higher levels of risk. Conversely, safer investments tend to yield lower returns. Striking the right balance between risk tolerance and desired returns is a pivotal step in crafting a well-rounded investment strategy. For example, economic climate where there is so many

uncertainties with regards to government decisions on investment, rates and liquidity position, investors are advised especially where they invest and the investment instrument to engage. Previously, one could close his or her eyes and opt for a government investment, but you can’t do that today, due to the rise in government debts, forcing the governments to seek bail out from International Organizations, hence a shortfall on investors funds due to the introduction of new valuation methodologies to protect or safeguard the investment industry from collapsing.

Reevaluating Retirement Benefits
The landscape of retirement benefits has shifted, with many individuals finding that traditional pension plans are no longer sufficient to sustain a comfortable retirement. In some cases, pension funds are underfunded, leading to uncertainties regarding the stability of future payouts. To address this challenge, individuals should explore supplementary retirement savings avenues, such as contributing to individual retirement accounts, employer- sponsored plans, or even considering annuities. The power of compounding and disciplined contributions towards retirement can significantly enhance retirement prospects. Long term investments must be seen and treated as such.

Don’t allow short-term challenges derail you as these are bound to happen. It will surely pass!

Economic Challenges: Weathering the Storms

Economic challenges, ranging from recessions to global pandemics, have a profound impact on our financial landscapes. While these challenges are inevitable, their effects can be mitigated through well informed investment analysis and diversification. Diversifying your investment portfolio across various asset classes, geographies, and industries acts as a shield against volatilities. By minimizing your exposure to any single risk, you enhance your ability to weather economic storms.

Having long term vision
Successful investing requires patience to ride out short-term market fluctuations. We can’t be panicking at every storm that hits our investments. I believe if most clients had what we call an emergency fund, it would have prevented several clients from relying solely on one investment and been hit with losses

because of urgency in needing their funds. My article Creating an Emergency Fund: A Necessity for Your Liquidity Needs (modernghana.com), can assist anyone to build and grow their own source of last resort.

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