Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.


7 principles for building wealth

03 December 2014, 14:23

Nairobi - What are the common threads that link the production and appreciation of a great wine to the investment principles underpinning the building of great wealth?

Siboniso Nxumalo, portfolio manager at Old Mutual Investment Group, draws an analogy between seven basic investment principles and wine:

1. Keep investing at regular intervals over the long term

Most people want to invest when markets are doing well and tend to disinvest when the markets fall.

It makes better sense to keep on investing through market lows when share prices are undervalued and a lot cheaper, so that you gain more wealth during the highs.

Growing top quality grapes requires constant attention, hands-on vineyard management, pest control, pruning and replanting to ensure a steady supply of premium quality grapes from which to make wine.

Read Also: Investment advice for 20s, 30s, 40s and 50s

2. Understand your time horizon and risk profile

They affect how you invest. The younger you are and longer you have to invest, the more risk you can afford to take.

If you have 18 years or so to invest, you could invest in high-risk markets.

Focusing on the end destination instead of the short-term ups and downs should ensure the best return on investment.

On the other hand, if you only have five years to invest, you should consider a more cautious investment strategy, because you won’t have the time to make up for market losses.

Remember that cash is unlikely to outperform inflation over the longer term, although it may be seen as a safe haven during uncertain times.

From a wine perspective, the sooner a vineyard is planted, the sooner the farmer reaps the rewards in terms of harvest.

Time also allows for experimentation in different cultivars and blends, which would ensure the best return on investment.

On the other hand, with only a short time to invest, planting known and trusted cultivars is a more cautious investment strategy.

3. Diversify

When one market does not perform well you will still have other investments doing their best for you and thus managing your risk in the process.

Read Also: Africa's business game-changers named

Don’t focus on returns from individual investments. See your investment portfolio as a whole.

Similarly, with wine, growing different cultivars spreads the risk.

If adverse weather conditions, for example, negatively affect an early ripening variety, having a later ripening cultivar is a necessary hedge – a sound risk management strategy.

4. Balance your portfolio

Do not put all your eggs in one basket by only investing in property or only in cash.

Seek to maintain a sensible balance between different types of investments.

There will always be times when one asset class outperforms another.

Remember that cash and bonds provide stability whereas shares and property provide growth.
Much like having a good season for pinotage grapes, but a bad one for another variety.

5. It is time in the market that counts

It is time in the market that counts – not timing the market.

The longer investors are in the market, the better the likelihood of making up for losses.

Furthermore, the sooner you start saving, the more time you have to earn compound interest.

The principle of compound interest basically means that interest is earned on the interest already earned, so that the effect is a dramatic snowballing effect of the money invested and the interest earned.

By starting early you may only have to invest a small amount as opposed to investing a larger amount at a later stage to get the same investment growth.

One bad year in the vineyard may well be followed by two bumper crops – if you don’t give up too soon, and older vines tend to make better wine.

6. Each person is unique

What is a good investment for one person is not necessarily a good investment choice for you.

Much like wine, which is a personal taste. What appeals to one person doesn’t to another.

7. Proven track record
Invest with a company that has a proven track record and is well known within the industry.

Do not invest with a company that offers astronomical returns that are simply not viable in current market conditions.

Choose a professional portfolio manager whose job it is to investigate opportunities and make sound investments and who is registered with the Financial Services Board.

Who would buy a two-litre box of Vin de Cardboard on the advice of an uninformed salesperson and expect it to be drinkable in ten years’ time?

No profit there, only a headache.

For the latest on national news, politics, sport, entertainment and more follow us on Twitter and like our Facebook page!

- Finance24


Read News24’s Comments Policy

Comment on this story
Comments have been closed for this article.

Read more from our Users

Submitted by
William Korir
Kikuyu 2022 vote will go to Peter...

The 2022 Kikuyu vote will go to Peter Kenneth, a Rift Valley Governor has warned DP William Ruto. Read more...

Submitted by
William Korir
CORD threatens to boycott 2017 po...

The CORD Coalition says that it will be forced to boycott the 2017 elections if there is no new voter register in place by the time. Read more...

Submitted by
Wilson Ochieng
Disgraced Jeptoo stripped of 2014...

Organizers of the Boston Marathon are stripping Kenyan runner Rita Jeptoo of her 2014 victory as part of the athlete's newly extended doping ban. Read more...

Submitted by
Wilson Ochieng
ODM beats Jubilee in 3 by-electio...

ODM dominates Jubilee Party in by elections.

Submitted by
Wilson Ochieng
Kenyan ivory seized in Vietnam

Vietnamese authorities have seized 1 tonne of ivory smuggled from Kenya, the fifth such seizure in the past month. Read more...

Submitted by
Cyril Mike Odhiz
Kenyans furious on young lady aft...

A young Kenyan woman is the talk of town after she posted a photo with her elderly lover after a round of steamy sex, or so the photo suggested.  Read more...