Investment Strategy – Every Chama needs this

As Chama investors, it is important to have a plan on how you are going to do your investments.

Since your group consists of different people with different ideas and goals, it is very easy to drift from one investment to another without any sense of direction. This is due to lack of an investment strategy. This document acts an investment map for your Chama and helps keep you on the right track at all times. An Investment Strategy is a set of sensible guidelines for your investment activities and as a Chama; you must have the discipline to stick to them to keep you involved in more suitable investments.

Whether it’s considering companies of a certain industry to buy shares from, or investing in real estate only, remaining with what you know best and feel comfortable with should limit any heartache.

Clear thinking

For instance in the stock market when your Chama wants to invest; the market can be a confusing place. There are so many different companies out there, all spread over various industries. And with every company issuing a never-ending stream of corporate news and mystifying accounts too, there’s a real danger of too much information. However, applying a clear investment strategy leads to better investment decisions. The information overload is curtailed, as the number of investment possibilities reduces significantly. For instance, your Chama may strategize to buy shares that pay dividends only. That creates a lot of clarity for you thus there is no room for confusion.

Which strategy works best?

A good strategy should also be simple to follow, easy to summarize and tell you when to buy and when to sell. And of course it should be based on sound investment logic. Value investing is one strategy that has worked well over time. Simply speaking, you buy shares when they appear cheap, and then you sell the shares once they become more expensive. If you have a solid investment portfolio fully stocked with choices that came from your own investment strategy, you’ll need to stay the course in order for your investments to payoff. This means that as a Chama, you must be sure of your investment strategy in the first place. Your strategy should be based on careful research, the opinions of people you respect and your own Chama’s financial circumstances. Once your strategy is in place, it’s time to focus completely on it.

Avoid copying other Chamas

Keep in mind that a strategy that may work for another Chama may be completely wrong for yours.
As an example, you may see a lot of stock brokers recommending energy stocks. Your Chama on the other hand, tends to understand the financial sector stocks. Energy stocks may work very well for people who have some knowledge of that sector. But if you have neither the knowledge nor the risk tolerance, energy stocks may be all wrong for your Chama; no matter how right they may be for another Chama. Since one of the best strategies to make money is to avoid losing it, you may be ahead simply by avoiding investments that you don’t understand.

Be patient

Patience really is key when it comes to investing. But sometimes we get a little bored when our investments are just running in place. We may even find ourselves craving action the kind of fast investment growth that makes investing exciting. But when investing gets exciting, it also becomes a lot more risky. That’s when you’re in danger of losing money, and that defeats the whole purpose. Success in investing comes about largely by adopting an attitude of patient capital. You want to choose the best investments, and then be prepared to wait until they payoff. Over the long run, slow and steady usually beats a series of unpredictable big wins.

Avoid changing strategy

If you are prepared to change investment strategies, you may need to ask yourselves if you even have a strategy at all. After all, if you’re willing to abandon your original strategy in favor of something new and different, how solid was your original strategy to begin with?

If you have done your research and considered the available options, you need to stay with your strategy. Never abandon your core investment strategy simply because another one seems to be working better at the time. Investment gains have a way of balancing out over time, and the hot trends of today tend to cool off as time goes by. Have confidence in your investment decisions, and understand that patience is an essential part of that success.

Categorised in: chama constitution, chama management, Chamas, Investment groups

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