Every now and then we hear financial experts like me (just joking) advice people to invest money regularly and not spend all the time. In most cases, experts will advice that you invest more and save less if you are to attain financial freedom. But should one really invest all the time? Will the world come to an end if I do not invest? I do believe investing is good for everyone, however there are certain times when investing should just be kept aside.
1. When You cannot afford a Three Square Meal
We have often read of people making several sacrifices in life just to attain an investment goal. Some sleep in their car, sell their houses, forfeit their jobs etc. However, you hardly hear anyone saying they went on a hunger strike just to attain an investment goal. It is certainly fool hardy when you have to starve yourself just because you want to put that extra money you would have used in eating a decent meal in an investment that is yet to yield a dime.
2. When You have a Health Problem
It certainly doesn’t make any sense investing cash you would otherwise use to cater for yourself when you are sick or have a major health setback. Your health is certainly not an opportunity cost to an investment no matter how viable. You want to be healthy enough to execute your dreams and not end up with a deteriorating health and yet see the investment remain a dream. Investments is not wealth rather Health is Wealth.
There are times when we have people dear to us who have needs that (in all fairness) supersede our personal goals.
It could be that they have a health challenge or even a financial need to avoid bankruptcy.
How does one explain sacrificing a sick wife or child in a bid to pursue an investment goal no matter how viable?
4. When You haven’t paid your Children’s school fees
Imaging telling your child “Daddy can’t pay your school fees because he has to buy some stocks?” It makes no sense sacrificing your children’s education for an investment goal. They are mutually exclusive investments and shouldn’t even be thought of as substitutes.
The most important investment is the education and welfare of your kids no matter what.
5. When You have a Debt to pay
How many times do we see debtors giving us excuses to repay their debts despite seeing them making significant investments in other areas. You have someone owing you money and telling you he does not have the cash to pay now, yet they end up buying new assets. The same attitude is sometimes seen in companies who amass huge debts in the claim that they are investing.
Whilst it is okay to borrow to invest if the returns are higher than interest rates, it makes no sense investing when you have debts to repay.
6. When You cannot Afford to pay your Bills
It is strange when I hear a lot of people with huge bills boasts about their investment achievements. How do you claim to be an investor and yet you are unable to pay your electricity bills, water bills, phone bills etc. Does it make sense owing a supplier for months even though you end up spending money investing in new businesses or assets?
Investments should wait until you have cleared your bills and not the other way round. It is part of being financially prudent.
Life always presents us with ups and downs. It is inevitable that one day we will face a sudden financial challenge. It could be to bury a loved one, to celebrate a loved one, to cater for an urgent financial need etc. Sometimes when this urgency shows up we are not financially prepared and may not be able to liquidate our investments quickly enough to meet such challenges.
It is therefore important to stash away some part of our cash or return on investment in a fund specially designated for rainy days.
8. When the stock market is bullish
After the stock market crash of 2008/2009 I learnt a bitter lesson in investing: DO NOT INVEST WHEN THE MARKET IS BULLISH. A Bullish market is basically when the market indices are constantly up indicating an upswing in the price of equities. Whilst not totally bad for the stock market to have price appreciation, the problem however is that bullish markets always create a band wagon effect that ostensibly creates an artificial price valuation.
Equities become too expensive and quality stocks with great prices become scarce. It is often better to wait on the sidelines at times like that, rather than buy expensive stocks.
9. When Interest Rates are low
In Nigeria, investing in the money market can be an unfair proposition when interest rates are just too low and below inflation. For most of 2011 and 2012 treasury bills and government bonds had double digit above inflation yields which were favourable for investments. However, when the rates, especially fixed deposits are below 8%per annum investing in such products present negative yields.
When interest rates are low, alternative higher yielding assets can be explored. It is however important to weigh the risk as well. If the risk in investing in alternative markets are too high for you, then, just stick to safer money market instruments no matter the yield.