INVESTMENTS: DRIVER OR PASSENGER?

When you are a passenger in a car you don’t notice that much. You may not be even aware of the route being taken or what is happening on the road.  In fact many passengers, if asked to go back to the same place they were driven to, would not know how to get there.  That is because someone else was doing the hard work.  The driver had to know the road or at the very least find out how to get there.  Even if they get lost once they will never get lost again. Drivers use a lot more energy and senses than the passenger does. Wekesa and Kimani, both 35 years of age want to know where to invest.  They have heard about investments and they think that it is about time they jump on this bandwagon. The dilemma both of them have is how to start and where to invest in and be able to partake in these gains that they are hearing other people making. The question that is keeping Wekesa up at night is “Where should I invest – i.e. how will I know which is the right investment for me”? Since there is not immediate magic solution to this, Wekesa has decided to start talking to different  people who have made certain investments to understand what made them enter those investments.  He has also gone to several financial institutions for the moment just to learn about the products they have. He visited a stockbroking firm and spoke to the research analyst to get a basic understanding of what makes a good share.  In addition he has started reading as much about investments that he can get his hands on and has  even attended a short course. The question that is keeping Kimani up at night is “Where can I invest – i.e. what is out there that I can take part in?” Kimani is bothered by the fact that other people seem to be investing while he is not.  He has spoken to people who have invested but only to understand what they did, if they made money and whether those opportunities are still available.  He has visited financial institutions to see of their products have made money in the past and judge the likelihood that the will make money. He went to a stockbroker to be told what shares to invest in. He is not really interested in the articles, books and courses but more so the advertisements that are put in the papers with titles such as “property for sale”.

They both want their money to grow and  to know where to invest but they are approaching it from very different directions. Wekesa knows you cannot divorce knowledge from the process of investment.  Wekesa is seeking to learn about investments and then make an educated choice. He is talking to people not just to understand where he can invest but also the rationale behind the choices others have made and the options available.Wekesa is empowering himself to understand and rely on his own choices.  There are no guarantees that all the investments he pursues will work out but either way it will be his decision. Learn from his failures, similar to a driver taking a wrong route and build on the gains. Either way his knowledge will keep increasing. He wants investment opportunities to  align with his goals rather than him aligning himself to the investment opportunity.Wekesa is empowered. He is the driver in his vehicle.Kimani wants instant gratification.  There’s no need for knowledge and he just wants to be told where to invest. Kimani is adopting a system where he will always bedependent on someone to tell him what to do.  He will never bear responsibility and will not be a decision maker.  He is not evaluating possible investment opportunities based on his objectives but the end result of making money. His method will increase his reliance on what other people tell him what to do, similar to the way a passenger relies on the driver of a vehicle. He will never build the investment skill and confidence that comes with the experience of continuously making your own choices. He will be very susceptible  to the smooth talking financial sales person who happens to have the right sounding product.  He will not know the right questions to ask and the danger signs to look out for.

In the short term it may be easier to be Kimani.  There are more that enough people selling something that are willing to use the right language to convince you to invest.  However as long as you find yourself reliant on someone else’s opinion you are going to encounter problems.  You will continue feeling like don’t know where to invest even though you may have made several investments because you have created dependency on people. I am not saying that you don’t use professionals or that have to understand all the technical intricacies of every investment but take time and ask the questions to make you understand the rationale behind why an investment would  work for you. This is what Wekesa is doing.   Look at all the investments you are making or have made.  Can answer the question – Why have you invested? Yes it will make money but have you understood why you think it will make money.  If you haven’t you are apassenger. To become a driver is initially harder and more time consuming but without fail always more productive. When you are listening or seeking investment advice keep your ear tuned in to the “Why” not just the “What”.  Be curious about why your colleague choose that investment not just what it was. Ask why the stockbroker says that share price will keep rising.  Ask why property in that area will appreciate.  You may even not have put money anywhere but as long as have started learning, you have started the process of investing.