A lot has been said about investments- it may be hard to separate the myth from reality. But we find this article on When You Should NOT Invest by Ugodre Obi-Chukwu in Punch AM Business practical and sensible.
Do you invest all the time? What exactly do you sacrifice in exchange for making an investment? Economists teach us about opportunity cost as it relates to everything we do. Even a decision to invest provides its own opportunity cost.
However, there are sacrifices we should not make in exchange for investing because it is counter productive. And when investing is counter productive, the benefits no matter what, is not worth it.
When you cannot afford a three square meal
We have often read of people making several sacrifices in life just to invest. Some sleep in their car, sell their houses, quit their jobs etc. However, will you go a hunger strike in exchange for an investment goal? It is foolhardy when you have to starve yourself just because you want to put that extra money you would have used in eating a decent meal in an investment that is yet to yield a dime.
When you have a health problem
It certainly doesn’t make any sense investing cash you would otherwise use to cater for yourself when you are sick or have a major health setback. Your health is certainly not an opportunity cost to an investment no matter how viable. You want to be healthy enough to execute your dreams and not sick. An investment is not wealth rather Health is Wealth.
When someone dear to you is in need
There are times when we have people dear to us who have need that in all fairness supersede our personal goals. It could be that they have a health challenge or even a financial need to avoid bankruptcy. How does one explain sacrificing a sick wife or child in a bid to pursue an investment goal no matter how viable?
When you haven’t paid your children’s school fees
Imaging telling your child, daddy can’t pay your school fees because he has to buy shares? It makes no sense sacrificing your child’s education for an investment goal. They are mutually exclusive investments and shouldn’t even be thought of as close substitutes. The most important investment is the education and welfare of your kids no matter what.
When you have a debt to pay
How many times do we see debtors giving us excuses to repay their debts despite seeing them making significant investments in other areas. You have someone owing you money that is over due and telling you he does not have the cash to pay now, yet they end up investing. Overdue debts should be serviced ahead of investing to avoid bankruptcy litigation.
When you cannot afford to pay your bills
How do you claim to be an investor and yet you are unable to pay your light bills, water bills, phone bills, taxes etc. Investments should wait until you have cleared your bills and not the other way round. It is part of being financially prudent.
When you haven’t put money away for the rainy day
Life always presents us with ups and downs. It is inevitable that one day we will face a sudden financial or medical challenge. It could be to bury a loved one, to celebrate a loved one, to cater for an urgent financial need etc. Sometimes when this urgency shows up we are not financially prepared and may not be able to liquidate our investments quickly enough to meet such challenges. It is therefore important to stash away some part of our cash or return on investment in a fund specially designated for rainy days.
If you are a novice in investing
You should never invest when you have no idea of what you are investing in. Take time to ask questions or seek investment advice before you take an investment decision.
When the stock market is bullish
After the stock market crash of 2008/2009 I learnt a bitter lesson in investing, ‘Invest cautiously!’ . A Bullish market is basically when the market indices are constantly up indicating an upswing in the price of equities. Whilst it is not bad for the stock market to have price appreciation, bullish markets also create a bandwagon effect that ostensibly fetes artificial price valuation. Equities become too expensive and quality stocks with intrinsic values become scarce. A bullish market is mostly followed by a crash which results in massive loss of value. It is often better to wait on the sidelines at times like that until prices become more realistic.
When interest rates are low
In Nigeria investing in the money market can be an unfair proposition when interest rates are just too low and below inflation. It is even worse when the rates you get on your money is lower than inflation rate because it presents negative real yields. When interest rates are low alternative higher yielding assets can be explored. It is however important to weigh the risk as well. If the risks in investing in alternative markets are too onerous for you then just stick to safer money market instruments no matter the yield.
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