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Grow Your Money: Investment Tips for Your Future

Alphonse Ndzinge

Investing can be intimidating to many and while experience plays an important role in investment success, it is not the only element. Being prepared is the best option. It is therefore important that when making the decision to invest, you have knowledge and understanding of all the investment opportunities available to you, their pros and cons, and also what to look out for.

Let us start by understanding what investment is. Investment is the purchasing of assets such as securities that are not consumed today but are used in the future to create wealth. Investments help you meet your financial goals in life such as your child’s higher education, your retirement and to build your wealth. Investments are a form of savings and are the perfect example of saving in the right way.

Investing also serves to grow your money fast and generally with higher returns compared to a bank savings account. In today’s markets, you are exposed to numerous investment opportunities, allowing you to invest in a number of ways. This includes but is not limited to: shares, bonds, unit trusts, property market, vintage cars, farms, wine and even art, to name but a few.  

Working in the global investment space for the last 15 years has been a journey of continued education in many ways. Over the years, I have come to learn that good investment advice is timeless, allowing one to sidestep some of the common traps that damage returns and jeopardize financial goals.

Below are 5 essential tips for investing to get you started.

Pay yourself first: One of the key principles of personal finance, this refers to how to save money. This simply means it is important to spend what is left after saving rather than save what is left after spending. How can this be achieved? One way is to set up automatic transfers from your bank account to a savings account or investment account.

Beware of behavioural biases in investment decision making: Irrational investor behaviours that can affect or unconsciously influence investment decision making.  When making investment it is important to be aware of such behaviours and biases such as:
Confirmation bias – when investors focus on information that confirms their previous beliefs. In this regard, the investor may become overconfident and make bad investment decisions.

Loss-aversion bias – where investors act to avoid realizing a loss. This is also called “good money following bad money”. You don’t want to admit the loss on your initial investment and instead you hold on in hopes that you will, one day, make it back to break-even or make a profit.

Understand investment costs: All investors whether talking about stocks and bonds, unit trusts, insurance products or retirement funds involve costs that investors should research, understand and be aware of. It is important to look for investment products and solutions that have transparent fee structures so as to make a sound investment decision. One way to practice this is to always ask the service provider about the total in all costs and or implicit costs for early termination / cancellation and also look for products and solutions that have transparent fee structures. This will help you decide whether to invest or not.

Investment in what you know … and nothing more: When investing in industries or markets you are familiar with, you are more likely to make informed choices. If an investor cannot make a reasonable understanding of how a company makes money and the main drivers that impact its industry, it is advisable to invest with caution. As Warren Buffet’s personal investing rules says, “If you don’t understand a business, don’t buy it.”

Most news is noise, not news: Every day we are exposed to a number of financial news and headlines aimed at generating buzz and to trigger our emotions to do something. According to the 99-1 rule, 99% of investment actions we take should be attributed to just 1% of the headlines we are exposed to. This means that investors should be very selective of the news they hear and eventually act upon.

With these tips, it is my hope that you are now in a better position to make good investment choices and strategic moves to invest wisely and plan for your future financial wellbeing. This article is an educational supplement by Alphonse Ndzinge, Managing Director of Kgori Capital

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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