By Dr. Fred Msemwa
Last week we identified barriers that may prevent someone from attaining successful personal investments. Some of the barriers identified included investors’ emotions that tend to drive investment decisions. Sometimes emotions can include fear and even greed which push someone to make irrational and detrimental decisions.
From the discussion, it was also evident that lack of general knowledge on the area that someone wants to invest in can also contribute in retarding the speed at which one attains the desired level of success in the chosen area of investment.
As we went ahead with the discussion, we further noted existence of some socialcultural aspects within our society that can also contribute to put off some prospective investors in pursuing their objectives while at the same time attempting to align to the social demand of the people surrounding them.
It is also important to appreciate that in the last week article, only few barriers were identified as in practice there could be more barriers than those we were able to identify. Likewise, barriers identified may not apply to all investors and in fact some of them may not apply to some investors at all.
Impliedly, while one barrier caused by say an investor’s emotions can be very relevant to that one investor, it may not equally apply to other investors who may have their other barriers as well. In today’s discussion, we will look at what can be done as a way of laying down some strategies that can be of assistance in managing the identified barriers.
No matter what your barriers might be, it is always helpful to put together actions that can eliminate or reduce barriers to manageable levels. Here are some techniques that may assist to tame your investment barriers: Manage your emotions Knowing oneself can help in making self evaluation with a view to improving your future behaviour.
This can start by looking at how you have performed and behaved in making investment decisions in the past and the outcome of the same. Looking at the patterns of your past response to market investment opportunities should help you to establish whether patterns observed point to the barriers to your success or not.
Does your decisions prove to be wrong most of the time? Did you impulsively decide to commit your resources at a certain investment opportunity without doing any homework on the nature of the investment itself, how it has behaved in the recent past, the potential outcomes etc.
It is advised that investors remain focused to see the bigger picture and remain long term oriented. Typically, losses are more likely in the short term, so investors who make emotional, impulsive decisions could be hindering their own success at the expense of long term gains.
If you’re about to make a change in your portfolio, try to establish why exactly you’re choosing to make that change. Take for example, if you want to buy or sell your shares and you are about to make this decision just because of a short-term market movement, that decision is probably pushed by emotions and is likely to be a guess work that could erode on your portfolio.
Decisions based on a longterm views and backed with data, are more often than not likely to be prudent decision compared with those driven by short term market movements. Dramatic market news or high profitability hype heard from friends and colleague on certain businesses can be a factor injecting higher emotions around your investments.
Likewise, listening to media headlines and everyday noise can be a great factor in limiting how often emotions will impact your investment decisions. Instead, reading insights from trusted sources or consulting with a financial advisor can prove immensely helpful.
Gain relevant knowledge As you travel through the investment journey, you will definitely settle for some chosen investments or business that you will decide to devote more time to. To enhance your chances for success, you should seek to be an expert in the areas you have chosen.
If say you have decided to direct your efforts at investing in real estate, to increase your efficiency and potential for success, look for and seek to get as more knowledge as possible in the area that you are putting resources as possible.
That knowledge may be acquired from reading books, real estate magazines, media briefings, listening to other real estate investors, attending relevant meetings as well as travelling and finding out how other people are doing as far as our area of interest is concerned.
Too often many investors tend to overwhelm themselves with all information that is available on multiple type of investment or many businesses for that matter. Instead of trying to understand everything that can be potentially done by any investor, it is best to get to know one proven investment strategy or business.
While you are likely to lose on other investment opportunities as you focus on one at a time just to begin, you will definitely gain the confidence you need on at least one investment approach that you can build upon in diversifying your portfolio.
The knowledge so gained will soon prove to be useful as it can be applied elsewhere to compliment your proven strategy and expertise. Learn to be objective Many investors want the market or the businesses they manage to do what they wish the market or business to do rather than what the market actually does.
In most cases, any limits that you put on your business or market will usually turn the other way around. The market does what the market does. Investors are best served if they do things objectively.
If you are objective, then you will not feel pressured to act quickly, not be afraid to make investment decisions and not force your opinion on the market but rather sense and try as far as possible to manage what the market is trying to do to you. Learning to be objective can be achieved by remaining focused and being able to monitor and gain from your past performance.
Measuring your past performance is useful as it builds your track records to allow you to appreciate as what can work and what can’t work. Sometimes, documenting to capture some details on your previous performance may help in assessing your investment style over time and can be used to identify what you are encountering that hinders your success.
Overall, removing and managing your barriers to successful investment should be an ongoing process. By following a defined plan, one can identify barriers and formulate actions to manage and remove them.
Like it has been highlighted above, managing emotions, putting a plan to acquire more knowledge in your chosen area of investment and learning to be objective are actions that need dedication and focus if one is to realize the intended results.
Existing and prospective investors should seek to acquire knowledge on continuous basis as apart from enabling one to manage barriers to successful investment, knowledge is power and is poised to crystallize into an important competitive edge over your competitors which all of us need to succeed.
Dr. Fred Msemwa is the CEO of Watumishi Housing Company Real Estate Investment Trust (WHC-REIT) responsible for management of collective investment schemes and provision of affordable homes in Tanzania.
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