Understanding your risk tolerance is key when investing

The Managing Director of Stanbic Investment Management Services (SIMS), Dr. Kwabena Boamah, has advised investors to understand their risk tolerance levels before investing in any investment fund. Dr. Boamah was speaking at the third edition of The Money Summit in Accra.

According to him, investment companies have a responsibility to assess and understand people’s risk tolerance before signing them onto investment policies; and investors must also do self-assessment to know the kinds of risks they can take, Dr. Kwabena Boamah said.

“In the area of investor education, one of the missing elements over the years has been understanding of risk, and the over-emphasis on products rather than letting investors know who they are when it comes to investment. We fail to educate clients to understand their risk tolerance, their ability to take risks and their willingness to take risks. This is the work we, as investment companies, have to do so clients understand that the moment they decide to invest, there are risks associated with those investment decisions.”

Dr. Kwabena Boamah further mentioned that even though the country is going through a difficult time, it is important to make investors understand markets go through cycles and will recover in due time. He said: “All investors must understand that markets go through cycles. We are in a situation where we have seen probably the lowest level in many years. But it doesn’t mean that this is the end of the story. The market will recover, and we need to accept and believe this. We have to live with this understanding, otherwise we will not see the recovery coming in”.

The Money Summit is organised by the Business and Financial Times as a platform that brings together financial and economic minds to deliberate on topical economic issues. This year’s edition, which was held under the theme ‘Africa’s Robust Financial Sector: The Catalyst for Sustainable Economic Growth’, saw the domestic business community’s highest echelon attempt to make sense of the current economic landscape, and hence proffer workable solutions and areas for public-private collaboration.