The year 2020 has been bad for investors, very bad for long term and capital market investors
The Ghanaian economy for the past two years has had lots of financial issues due to the recent developments in the financial market. Though the financial market has been “bleeding” for a while now, it fair to say that the wounds are healing. The pandemic came in to disrupt the normal flow of activities hence its impact on the financial market. Economist are predicting a good year for the economy in 2021 with growth ranging up to about 5%. The Governor of the bank on Ghana in an address made mention of the fact that the economy is rebounding. This is a good indication that the economy is taking steps to climb the ladder after its sharp fall due to the pandemic and developments in the financial market.
Now the past is past, lets focus on the future and see what is in for us as investors. Aside the fact that investors have lost trust in Fund management companies to rather prefer putting their money in bank accounts, investors also have an appetite for less risky investments. The only problem is with our young people who are so desperate to make money. Looking and putting their money into schemes that look like investment but has not met an investment grade asset.
The capital market across the world had been hit by the pandemic leading to a general decline in asset prices of which Ghana is no exception. Investors who have a chunk of their funds in the stock market have experienced some loses on paper which is normal for every long-term investment.
The market has started making some gain in the last quarter of the year which is a good thing. And it is believed that the market will pick up gradually.
Apart from the other factors mentioned, investors in 2021 will have to start the year with an open mind. Looking at issues regarding the outcome of the elections which is now in court awaiting the judgement of who will run the economy. This I hope will take approximately 2 months to settle the dust, but incase things do not go as expected, we might have to consider our investment decisions going forward.
The pandemic is also another consideration. But God being so good, we have a vaccine on the market now which we believe will help us stop the spread and impact of the virus on our economy and our personal finances.
The best investment you can make this year (2021) is in stocks, that is if you have a long-term investment horizon. But the market has been busy to the extant that retail investors will have to keep their orders on the market for a long time to wait for their buy orders to be executed. I have in November 23, 2020 placed an order through my broker to buy more shares but unfortunately, the order has not been executed. A month later, my broker explained that there has been orders before mine hence the delay in executing the trade. Time is an important dimension when it comes to investing. Keeping your money in your brokers account waiting for orders to be executed means you are not putting your money to work since when it is refunded, you get no interest on those funds.
Aside trying T-bills and other investments available in the traditional banks, in the year 2021, I will recommend investors look at investing in mutual funds. These funds will help with their professional managers having insight and deep knowledge on the happenings and trends in the industry. Investing in mutual funds will be the best option now since economic indicators that affect investment are not well understood by most retail investors. I will recommend putting a chunk of the money in equity funds in order to take advantage of the decline in asset prices and maximize returns in medium to long term.
Fixed income funds(Bonds) have been good investments for medium term investing and in the year past have been good income generating investments for most people.
As a young investor, “the best investment you can ever make is to invest in yourself”. Finding good quality mutual funds that will meet your objectives should be the focus in 2021. Keep updating yourself with financial resources frequently to know the developments in the market. Be an Informed Investor_ Focus the Warren way.
By: Kenneth-Shine Adu