Investing in some ways is like driving. No two people heading to the same destination will drive in the exact same manner. The destination for most people with their finances is financial security. Having enough to settle every expense and still have savings and investments; not having to worry about every single debit alert or that phone call from either home or kids asking for help with a bill.
The cars people drive also differ. Some drive Sport Utility Vehicles(SUV), others may choose to drive sedans or, if you have a small crowd, a hatchback may be your thing.
In the same manner, people have different paths to financial security. Some may decide to focus on climbing up the corporate ladder while investing diligently, others may choose to start a business straight out of school and a few may choose to combine both; having a 9 to 5 and a side hustle.
Whichever path you follow or whichever vehicle you drive, some principles are universal:
- Do you know the basics?
When driving, a basic knowledge of the highway code is necessary. If you live in a cosmopolitan town you can’t escape driving on an expressway. If you are willfully or innocently ignorant of the rules, there are consequences like getting your car dented or God forbid having it written off in an accident.
The same applies to investing. Yes, mathematics gave many of us nightmares but the basic rules are all you require: addition, subtraction, division and multiplication.
How much do you need to invest to achieve a level of financial security? How many years will it take? What is the interest rate this investment will yield? Would taxes be paid? Do you work in an organization that by law should have a contributory pension scheme in place? Is it being funded? How much will that loan you have been considering cost you?
- Who was your instructor?
For some of us, we were taught driving by an uncle or an aunt or maybe a driver who worked for our parents or relatives. The proper procedure however is to attend a driving school. Indeed, you can’t be given a driver’s licence without proof that you attended a driving school.
In some ways, the same would apply to investing. We usually have someone who puts us through the rudiments, a financial adviser of some sort. It could be a relative with some training and expertise in finance or a website we get information on financial literacy. In matters of personal finance, walking in the dark is not an option. Learn to crawl, then walk, and then run.
- What route do I follow?
Some people prefer the backroads of town, others would rather take the expressway while some would prefer to use both. The same applies to investing. What should you invest in? Would equity be better or fixed income? Bonds or Mutual funds? Real Estate or Cryptocurrency? Should i invest a bulk sum or spread it out monthly?
- Dealing with challenges
The most challenging part of driving is when you find yourself in ‘bumper to bumper’ traffic. Tempers flare up, roads are often bad and sometimes the traffic lights do not work. Then you have to contend with okadas, keke marwas and pedestrians. All moving abruptly and If you check properly, the zebra crossings are also non existent.
The hardest part of investing is maintaining your cool when challenges come up. Swings in the stock market or a slowing economy, a company fold up or merger. What do you do? Double down or maintain your cool. Here again, all that you have learnt in driving school comes to play. From past market swings, books you have read and discussions with advisors and mentors will help deal with these challenges.
Oluwatosin Olaseinde is a chartered accountant with over 9 years of experience spanning across accounting, audit, financial management and taxation. She is the Founder/CEO of Money Africa, a platform that enhances financial literacy and wealth management coaching. Prior to Money Africa, Oluwatosin was a commercial finance manager at British American Tobacco, providing commercial & financial advice on capital investment and managing marketing investment budget in the 14 different markets across West Africa.