As investment advisers, we often hear a lot of reservations about investing. Unfortunately, many of these ‘reasons’ are based on myths that have been passed down from people who don’t have a good understanding of how ‘investment’ works. We decided to address some of these myths and show you how to make the most out of investing.
Myth 1: Investing is too complicated.
In every discipline, there are terminologies that are confusing to the layman. However, there are always ways to simplify these terms to the point that it makes sense to just about anyone. So, when you hear that investing is complicated, this really isn’t the case. It’s more than likely that you have received information that you cannot easily relate with, and as such, the concept seems incomprehensible.
Picture this: someone walks up to you and says, “Have you invested in Treasury Bills?” You tell them, “No” and they go on to tell you that Treasury Bills are fixed income instruments like bonds from the Federal Government with different tenors and an indicative interest rate or yield depending on whether you take your interest upfront or not.
If you are not familiar with the concept, you would have been lost from: “fixed income.” Now, let’s say the person said this to you instead: “Treasury Bills are instruments you can invest in for any time from 90 to 364 days at a fixed interest rate. If you invest N100,000 in a Treasury Bill for 364 days at an interest rate of 12%, you will get approximately N112,000 — please note that these are just guidance figures — at the end of the investment. Alternatively, you can invest N88,000 now and get N100,000 at the end.”
The difference: the first time, the person told you some investment jargon while the second time, they gave you the information you could process.
Myth 2: Investing is too risky, especially stocks.
Have you heard the phrase: greater risk, greater reward? Many people want you to believe that this is the case with investing but that’s not always correct. With investment comes risk, yes; but this risk can easily be managed when you know what you’re doing, and you work with a partner you can trust.
Many people shy away from stocks because they have gotten hurt in the past. Perhaps they followed the bandwagon and bought several stocks because everyone was buying it. Of course, this drove the price of the stock up until investors got wind of some foreboding news and suddenly started selling. The price crashed and investors who didn’t move quick enough were left with bad deals.
How do you keep yourself from falling into such traps? Pay attention to the market, ensure that you have all the information you need to make wise decisions and be patient. Furthermore, with the guidance of a good investment adviser, you can make strong plays in the stock market whilst also holding investments in money market funds or bonds that are designed to keep your money safe.
Myth 3: Investing is only for the rich.
We bet many of you don’t know that there are investments you can make with as little as N5,000. Well, now you do. Before you convince yourself that N5,000 is too little to yield any significant again, remember that the power of investment lies in compound interest. Here, we’ll show you.
If you invest N5,000 every month for the next 5 years in an investment that delivers about 12% interest per annum, at the end of the period, you would have over N400,000 (Use this calculator to check). If you had kept this money in the bank for 5 years, you would only have N300,000, and that’s if you had the discipline to not dip into the funds.
In case this still doesn’t motivate you, consider the fact that over the course of these 5 years, your salary will increase, you will receive cash gifts, and you will get other sources of income — can we get an Amen — that will allow you to increase your investment sum. Essentially, you are better off when you invest and there are products EVERYONE can invest in.
So, you’re probably wondering: where do I start? It all begins with having a partner you can trust. At Afrinvest, we are dedicated to simplifying investments and creating wealth for you. We want you to know what is available out there for you and help you take advantage of it in the most seamless way possible. Call us on 01 270 1680 to get some financial advice today.