For many people, deciding where and what to invest in is a difficult thing. Apart from the wide range of assets that are available to invest in, personal factors such as age, investment horizon and the ability to meet emergency expenses must all be considered in making the decision. However, if we were to ignore individual circumstances and take a general approach, what would be the best way to invest GH¢10,000 given current economic conditions?

In an environment where there are both opportunities as growth recovers and dangers on the back of the public debt level and economic uncertainty brought on by COVID-19, it is best to take a balanced approach to building your portfolio. You should seek to invest in a combination of assets with a defined upside and protection from the downside.

With GH¢10,000, consider investing 30% in shares on the GSE. This year’s remarkable growth comes after 3 years of negative returns so there is less of a concern that the market is running too hot. The expected normalisation of economic activities post-pandemic also bodes well for the revenue of the listed companies and so there is still room for growth.

The next recommendation will be investing 50% into government bonds. Difficulty in raising money on the international market should compel government to rely more on the domestic market, thus pushing yields up. In fact, yields on the 2-year bond has seen gains in recent weeks. Investors can take advantage of both these increased returns and the safety that comes from investing in government debt.

The final 20% should be invested in cash-equivalents, such as 91-day treasury bills, or mutual funds that invest in the money market. This will ensure that the investor will have emergency funds to rely on such that, they need not liquidate their entire asset holdings when required to do so in times of emergencies.

There is no guarantee that such a combination of assets will provide the absolute best risk-adjusted return to an investor. However, given currently available information, a portfolio like this is likely to perform better than many other asset allocations.

If you want to get started building a portfolio such as this or something else, why don’t you talk to IC today on +233 (0)308250051 or email clientservice@ic.africa. We have a team of professional investment advisors who will guide you on building a portfolio which will withstand all economic conditions.

 

Thank you for reading.