2018 is here, investor community!
To those of you who are confident about forecasting financial markets, who are you placing your bets on this year? With the unpredictable political situation in South Africa and meagre growth prospects for the economy, how can you possibly achieve a decent return?
One step at a time
First things first: what are your expectations and what is your risk preference? These are two of the most important investment questions. While some investors are high risk-takers and not satisfied with single-digit returns, others simply hope to beat inflation. You also need to decide how much money you are able and willing to invest, as this could greatly influence your choice of investment.
At home or across borders?
If you do not have much of an appetite for exchange rate risk, and you are not sure where the Rand is headed, the safest bet would be to invest locally – if you are confident that the country will resolve some of its challenges!
Playing the right instrument
What financial instrument do you trust in most? Are you ready to invest in a private company or would you feel more comfortable investing in a public entity, like the government? There are other financial instruments to consider as well, such as property and derivatives. It is imperative to understand how they function and how they can be combined to reduce overall risk.
The industry that’s right for you
Let us assume you have decided to invest in a company. Is there an industry with which you are already familiar? Write down the pros and cons related to the industry with regard to its future prospects. You should also compare the projections for other industries, bearing in mind the economic situation in the country.
A company you admire
Given your choice of industry, what companies do you admire most? How much do you know about their management, their strategies and their financial situation? It is crucial to evaluate publicly available information and study other investors’ opinions of the company.
Is it the right time?
Great, you have made a decision! But what about the timing? Are other investors seeing what you are seeing? Is the company valued ‘fairly’? Timing is one of the most difficult factors to get right.
If you want to be in a position to answer all of the questions posed above, contact us for information on qualifications, short courses and other continuous education in the investment field. Our academic team is eager to further engage with you!
Interested in a BCom or PGD with Major in Investment Management? Or our Investment Analysis Short Course, which has CPD points from the FPI attached to it? Contact Milpark Education now on 0869990001.
01 Feb 2018