Stay Invested, Stay Informed: Investing despite the macroeconomic dynamics

Staying invested has proven to be the best option for all investors seeking long-term gains in their portfolios. Financial institutions and investment houses often overlook the fact that every investment carries a certain level of risk. Whether minimal or substantial, it's crucial for clients to be informed about these risks. Governments control most economic activities by either injecting or reducing money in the economy, and they establish the laws within which these financial institutions operate. Therefore, one must not lose sight of the government's influence on wealth building and development, especially in developing countries where politics sometimes is all about heavy gains from public funds.

Investors are typically profit-driven. The first question an investor asks is often, "How much interest will I make?" While interest rates are important during the initial product knowledge stage, questions like "Where will my money be invested?", "Why are you investing in item A or B?", "Does economic activities impact investment?", and inquiries about the company's owners must also be asked. We need to be clear about what we seek to gain from an investment. Don't invest simply because you have excess funds—invest with a purpose.

When investment becomes purely profit-oriented, one must also be prepared for a certain potential

level of loss. The higher the risk, the higher the rate, the lower the risk, the lower the rate. Greed can drive productive activities down. It's essential to understand the times and seasons before investing, when to invest, when to take a position, when to reduce risk, when to sell, when to buy, and when to remain calm. It becomes challenging when fund managers are forced to rediscount their investments because a client suddenly changed their mind because of hearsay. Rediscounting, in my view, is one of the quickest ways investments can be turned liquid (cash). Who doesn’t want to buy

when prices go down. I say this with the understanding that once you decide to rediscount, you must be prepared to accept negative values as well. It is only when you reduce your value that you can get a quick sell depending on the availability of a buyer.

Globally, investments do go wrong. Some conditions are inevitable, especially when it has to do with economic or market activities. Just like our normal market where we exchange cash for goods and services, there are periods where a seller may have goods but no buyer. Simply because the item is not in demand or needed. Do we then say that the market is a bad market like we say of financial institutions that can’t readily sell investment? No, it’s simply a behavioral action from consumers and investors must understand. Investments that act like collective investment schemes operate under the same approach. You may want to sell an investment, but buyers are either few or the price being offered is not good or there is no buyer at all, or potential investors are not demanding it.

I think investment has gone beyond just profit driven to benefit driven. The investment must serve a purpose. It must seek to meet an objective. Example, investing for children school fees, rent, buying or owning your home, vacation etc

I humbly appeal to anyone reading to be deliberate about any decision you take towards investing. There should be an objective, and that objective will inform you of the kind of investment package you signed on. If the client does not have an objective, it is important that through the conversation with the investment advisor, one is derived for the client. It’s not about meeting targets and is not also about just having money to invest. The financial institution must be ready to help clients on the journey and the client must also be open to objective views from the investment advisor. It is important for the client to clearly understand from the beginning whether an active or passive investment strategy will be used, as this will determine how the investment will be managed and measured. The client must also understand he or she has a role to play in the process. You are the one working hard and saving money. It must be accounted for. Investors can either give power of attorney to the institution to run the investment on their behavior or run the investment themselves.

Economic activities are not constant, it changes depending on what the country is going through at that specific time. Some of these changes take time and even implementing solutions may also take time and that is because it involves an economy. It must be sent to parliament; other bodies of interest must be involved and this whole process can be lengthy. For instance, the recent action on government of Ghana domestic bonds. The process took a lot of interventions from concerned stakeholders hoping their views can be considered but it happened government was at a level where the only option they had was to touch the domestic bonds for approval of support from International Monetary Fund.

Thank you for reading, I would love to hear from you.

Name: Eric Domie
Email: [email protected]

Tel num: 020 256 2670