How to adopt an investment mind-set

PERSONAL FINANCE

By Sylvia Juuko

For professionals or blue-collar workers, earning income is usually straight forward endeavour. You only trade your time and labour for remuneration.

When it comes to professionals, once you have garnered a wealth of experience, plus some innovations under your belt, you are in a better position to negotiate for higher pay.

However, the challenge arises when you want to multiply your primary income.

This can be done by opting to invest in different asset classes, to generate passive income.

The art of spotting investment opportunities, matching them with your goals and being able to assess risk and earn the desired return over a long-term horizon is a stage that gets complicated for most earners.

Nonetheless, figuring out how to multiply your primary income through acquiring assets that can generate a steady cash-flow currently and during retirement, should be your other full-time job.

This inevitably requires a mindset shift that's not a child's play for most of us. Having an investment mindset means you prioritise the future when it comes to financial decision making as opposed to day-to-day thinking.

Not being able to shift from employee to investment mindset

has been the setback for many earners trying to make money work for them.

We have developed an ‘instant' mentality, where we want results instantly including multiplying our income.

This blinds us to the need to do due diligence for the choice of investment.

Unfortunately for the impressionable lot, this has not been helped by the media hype of wannabe billionaires whose flashy lifestyle (that they equate to wealth), doesn't reflect the genuine process of acquiring wealth.

Therefore, instead of expending energy to learn how to grow your money, people spend their time looking for ‘connections' that will help them ‘strike deals' that they hope will set them for life.

This explains why despite the numerous warnings by the Central Bank of Uganda regarding pyramid schemes and bogus investments, people continue to get duped and robbed of their money.

The quest for overnight success overrides any rationality when it comes to investment decisions.

This mentality is best explained by a frantic call I got recently from a friend who was excited about an investment opportunity.

I will give them credit for cross-checking the information by the promoter to ascertain its authenticity.

It turned out that the ‘investment opportunity' had the hallmark of a pyramid scheme.

Typically, the promoters promised above the market returns within a period of a month. The investors weren't clear about what product/service they were trading in, nor did they have regulatory oversight.

This means that if an aggrieved customer sought recourse, they would have no protection. As it is, promoters of such schemes are still confident of conning unsuspecting customers despite the population being cautioned to be vigilant, as well as the various media reports that have documented victims' stories of losses.

Promoters of pyramid schemes are confident that due to mostly greed, they can still lure unsuspecting victims.

Therefore, unless you train your mind to think like an investor, you will always think that multiplying money is equivalent to playing the lottery.

An income earner with an investment mindset seeks opportunities in solid investments with a reasonable returns over a long-term horizon.

They are not lured by bogus investments that promise above the market returns that usually never materialise.

Instead, an astute investor has to train their mind to get preoccupied with figuring out what it takes to double or triple their current income in the most effective way.

You would actively seek ways to figure out the risk and returns that would allow you to achieve the foregoing within a reasonable period of time.

Furthermore, earners with an investment mindset shift their energy towards undertaking research on what gaps exist in the market and what needs to be done to fill them and earn a return in the process.

This means you have to invest in financial knowledge, as well as find the company of mentors that have trodden this path.

Armed with knowledge, you can then determine whether you should offer goods or services to fill the perceived gap, depending on your current level of business acumen and financial situation.

This means that all the decisions you make are driven by saving and investment objectives, as well as the rate of return. This means that your investment decisions have to make sense and not rely on emotions.

Ultimately, to have a substantial improvement in the way you manage your money, you have to move away from limiting your thinking from the income you currently earn to what more you can do to triple or quadruple it.

This mind-set shift must be applied to the decisions about money that you make daily, as well as those made over the long term.

The writer works with Bank of Uganda.

Personalfinance222@ gmail.com