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What kind of investor are you?

By Vision Reporter

Added 15th November 2014 02:30 PM

The dilemma of how to grow one’s money is an issue that every novice investor has to grapple with on a daily basis.

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The dilemma of how to grow one’s money is an issue that every novice investor has to grapple with on a daily basis.

By Sylvia Jjuko

The dilemma of how to grow one’s money is an issue that every novice investor has to grapple with on a daily basis.

Recent feedback from readers who were inquiring about tips on how to get ‘hot investment deals,’ brought to the fore why some people fall for get-rich-quick schemes all the time.

While seeking information on where to invest is commendable, it is the approach or motive that can turn you into either a gambler or speculator and not an investor. Investment opportunities abound in areas of real estate, business ventures, equities, fixed income (treasury bills and bonds), among others.

However, if your approach to investment is targeting the quick return you can derive overnight without any effort, you will fall prey to unscrupulous people pretending to have opportunities for investment.

From the onset, you have to bear in mind that investing takes a considerable amount of hard work. Nobody is going to do the homework for you. It does not matter how much you earn or how accomplished you are in your career; you need to do your homework.

If you decide to turn your hobby or a skill into a money making venture, consider the networks you have and the competition that you are up against.

Determine the extra thing needed to maximise returns. This information can only be accessed once you do your homework.

Most people get tempted to copy what everybody is doing, which is simply perpetuating the herd mentality. What you should recognise is that your competitors have a head start. Therefore, doing ground work will allow you to make an assessment of whether the opportunity is worth pursuing or not.

Research may involve talking to mentors/ entrepreneurs patronising your area of interest. These will give insight into their choice of investment and the processes associated with it. Where applicable, you may need to spend time at their premises to get a hands-on experience. This can be buttressed by reading about investment or enrolling onto short courses on entrepreneurship. This kind of approach is actively pursuing your desire to multiplying your money.

A passive approach to investment tends to thrive on searching for the so called ‘hot areas’ to invest your money with a view of making quick returns. Typically, such an investor will be impatient with the learning processes or the need to do research.

Any empowered investor will choose where to invest based on knowledge and not speculation, and this will be in line with their financial goals.

They will be in a position to ask the right questions whenever an opportunity presents itself. In addition to that, they will take responsibility for the investment choices made, be able to assess risks and project the returns.

Even in instances where you make some blunders that are inevitable during the learning curve, you will be able to learn from those mistakes. However, a passive approach will imply that once you make losses, you will blame the person you handed your money to for your woes. If you simply asked somebody where to put your money for quick return, you are not in control of your investment choices.

Most entrepreneurs tell you that making the first step will set off the process of building confidence and experience. Irrespective of whether your initial investment goes bust or thrives, no one can take away that experience.

The more you venture into different projects, the more this experience is cultivated over time, until you perfect the art of investment. You can never gain this experience through being told about hot investment tips.

Do not get me wrong, any novice investor will benefit from business advisory services. But this doesn’t mean you don’t need to understand your business. You can speak to advisors who have technical competence but at the end of the day, the choice of deploying your money should be yours.

Astute investors usually don’t get swayed by the purported urgency to get into an investment. You may have encountered sales people marketing investment opportunities and giving the impression of urgency.

Most of them make you feel like you are late to the party, urging you to jump on the bandwagon so that you can catch up. Such sales pitches should be treated with suspicion. This urgency is a ruse to prevent you from doing due diligence. Unfortunately, many people fall for such phoneys due to greed.

The writer works with Bank of Uganda

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