Remain positive and resolute

Megameno M. Shetunyenga

The idea behind this write-up is really to give educational update on the investment world, given that it is the world I am applying my skills and knowledge for more than 50% of my time. The idea is to write into wide range of current topics which are of interest and are investment related.

I will be aiming to educate and learn at the same time, hence, constructive comments and additions are welcomed. I will be taking suggestions on topics to address or write about if time permit, I will include it as and when I write up the next one.

Globally, there are numerous of asset type/vehicles available for investment purposes. Perhaps let us begin with my personal definition of what investment is. When I think of investment, I am really referring to setting money aside into productive assets for a short-, medium- or long-term purpose, with an aim of earning an income or increase in value. So, the three key ways to approach investment from my side are:
1. Purpose/aim of the investment,
2. Timeline of the investment,
3. Amount of risks the investor is willing and able to take to achieve that purpose. I am obviously speaking into a lot of terms here, but we will unpack further if needs be and when time allows.

Perhaps, let us get the cat out of the bag by establishing the distinction between Saving and Investment. Broadly, saving is referred to putting money aside for a short-term period and taking relatively low to no risk. On the other hand, investment is associated with longer term horizon and taking higher risk.

Do I always agree with this broader definition? Most certainly not, mainly due to the negative connotation associated with savings in that one ought to relinquish their oversight responsibility due to its low-risk nature. Questions I have with regards to this are: How is low to no risk really saving? What is the return? And what opportunity cost am I foregoing? I will leave you to ponder on and answer those.

Getting back to different investment asset types, I have presented below historic returns some of those types which one can invest into. This are listed investment and the list is no way close to being exhaustive. There are obviously wide ranges of performances and that depends on the time frame that you may be interested in. The table below is meant to give you a picture of the kind of returns one would have generated over the respective periods. A disclaimer here is that past investment performance is not an indication of future results.

Typically, when you go to an investment advisor, they will try and give you an exposure to any of these investments (if not related), and the recommendation is normally on the back, as indicated above, your aim of investment, horizon, and risk appetite.

Bitcoin and Currency Trading

Bringing in Bitcoin and Currency trading into the discussion is inspired by the increasing number of people asking me about getting exposure in trading into these “assets”. And also surprisingly, finding out that one of my aunts has invested a substantial amount of her hard earned cash into bitcoin.

I generally do not see myself as an expert on this subject, but Perhaps let us begin with the difference between trading and investing. Here is what I got on Investopedia; “While one could consider their trading activities as investing, for me, the difference between trading and investing has more to do with time. When you invest in something, you are looking to grow your money. Some people invest for a long time, such as for retirement, while others invest for a short time to hit a specific goal, such as buying a car. Trading, on the other hand, suggests the investor is taking a very short-term approach and is principally concerned with either making quick cash or the thrill of participating in the markets.” Brein Wealth Management, LLC, Bellevue, WA

The main point I would like to bring across here is that when it comes to investing or trading, one must appreciate the amount of risks they are taking. I would probably define putting money into Bitcoin and Currency as trading, especially with the people I have encountered, and I guess there is a way to approach this as an investment, but our focus is on the trading part. Quite often than not people are focused on the thrill of earning short term returns and if you listen to a lot of people in this space, it is the potential percentage of increase that they quote. However, nobody really gets to focus on the risks being taken. The two risks I must address here are: 1. Risk of losing your capital/money; 2. Risk of being taken for a ride by third parties (conned).

The risk of losing capital due to the “assets” value declining really speaks to the fact that these two instruments are volatile in nature, and one must be comfortable with the fact that the capital invested could diminish (decline), just as much as higher (increase) returns are lucrative. So, the point is, in most of these highly volatile “assets”, if you are excited about making 50% in whatever quoted period, you must equally be comfortable with losing 50%, unless you have put in a hedging mechanism (another investment jargon that we may tackle sometime in the future). But surely it goes without a say that more uninformed people get to “invest” into these instruments unaware of such hedging instruments.

The other risk is being taken for a ride (conned). Formally, to provide trading and investment opportunities in these instruments, one must be regulated, either by Namfisa, Bank of Namibia etc. Hence, the first thing one needs to check especially if you are going to trade or invest through a third party, is to ensure that they are properly regulated and registered with the relevant authorities. They are a call, or an email away, and normally lists of regulated entities are publicly available on their websites. It is the gullible nature of certain people that makes them fall prey for the unregulated conning entities and individuals. The adage, if it sounds too good to be true then it is, is highly applicable here. Hence, be cautious and do your homework, and this applies to all other types of investments as well. Remember you are ultimately responsible for your hard-earned money that you are committing to a trade or an investment, and it is a responsibility that one cannot outsource.

Inflation and interest rates outlook

I felt a serious need to address these given where we are in the cycle. Globally, Inflation and interest rates are at all times low, if not negative. Interest rates are significantly lower due to central banks cutting interest rates. Theoretically, the idea is that the low interest rate environment is created for individuals and corporates to borrow and invest into productive assets (another topic we must have a conversation on), such investment will lead to uplifting the national economy.

Locally, what I have observed is obviously a decline in individual and corporate debt growth rate over the past five years. Can this probably be attributed to the heightened uncertainty atmosphere we find ourselves in? However, this is notwithstanding the already high level of indebtedness the individuals hence people are perhaps being cautious(unwilling) and/or unable to take on further debt? On the other hand, we have observed people liquidating their longer-term investment to shorter term period. This calls for two questions though: Did we allow the circumstances we find ourselves in to shorten our saving/investment horizon or are we letting a crisis to go to waste? I firmly believe that we ought to take advantage of any crisis.

That is, invest and emerge as a beneficially when the crisis does lapse/subside/end. When hit by a crisis, you really have about three options.

1. Have a tail between your legs or throw in a towel,

2. Analyse and identify opportunities presented by the crisis or,

3. Change your way of doing things by innovating around the crisis. I would like to suggest that we lean on the last two. That in as much as things may look uncertain and the dust will probably take longer to settle, you may have to look beyond the now circumstances and push through. Alternatively, unless of course if you are pricing in the end of the world (which I do not know if any of us can really predict to the T), then perhaps go with the first option.

My conclusion is that I think the environment is prepared, it’s time to take calculated risks and let us not waste the crisis. It is time we begin to be innovative – and put minds, thoughts, and hands to action. As for those long-term dreams and ideas you harbour, it is time they get to be implemented.

Let us be job creators instead of looking for employment (the nation’s youth’s unemployment rate is very high). We have an environment that is ripe in terms of capital. In our day and age if you are using “lack of capital’’ as an excuse, you are probably living in another planet. Investors are ready for bankable and innovative ideas, locally and globally. And I would also like to urge us to adjust our horizon to a longer term and see beyond our local boundaries (looking beyond Namibia in terms of what we can offer and the impactful solutions we can bring).

I quote Winston Churchill, “ A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulties”. Obviously, this should not be taken out of context that I am being oblivious of the negative livelihood impact the pandemic has on many people’s lives but rather this is a measured caution not to let in an oversupply of pessimism that will paralyse our chances of seizing opportunities.

If I may, let me address one last thought on low interest rate, debt and investing into productive assets. Obviously, the concern is that the rate cycle will turn and you might be found on the wrong side of being leveraged. My counter argument to that is, you obviously leave a room of margin of safety in your calculations and ensure that you do not over commit capital or leverage. Let me end with this last quote from an unknown author, “Never forget: Bears (pessimists) sound smart, Bulls(optimists) make money”.


The holy book talks about “But divide your investments among many places, for you do not know what risks might lie ahead” Ecclesiastes 11:2 NLT. I attribute that to diversification, the idiom of not putting all your eggs in one basket immediately comes to mind. Perhaps that is one of the prominent lessons I have learned since this pandemic came on our shore.

The other lessons are that we do not know of the future, are not guaranteed and are not in control either. As a side note, I believe the above scripture obviously does not apply to marriage, there you commit to one and only. I hope my dry humour is coming out and you are liking it, please excuse me I have a history of being an accountant, and as you know or about to find out accountants are boring.

On a serious note, I am a big proponent of putting all your efforts into one mission, devoting all your effort to one aspect, and giving it all your attention. I am not really a believer in being – a jack of all trades but when it comes to investments one has to invest into different asset classes/types, and you are often better off if your investments are split into different buckets. History has it that all asset classes/types go through high and low return environments. In addition, diversification also apply geography, because history also has it that different economies go through cycles differently as well.

The conversation I hope I will have one day with my dad is his over reliance or investment in communal farming, which we all know did not go well during the drought (Namibia experienced 2 years ago). I could feel his pain. Equally another example is people that purely invested in entertainment business (“shebeens”), in my culture that was seen as a recession proof business (business that stood the test of time and thus will survive and will not be impacted by anything), with the lockdown introduction, I understand a lot of our own were impacted negatively and had “high blood pressure”, no pun intended.

Hence, one always need to ensure that they are diversely invested, this is because no one knows when disaster comes upon your underlying investments.

Covid 19, Vaccines and Market Outlook

Some camps have it that covid is here to stay (we ought to live with it) and while others feel that we will get through this (covid will be history). I am leaning more on the latter camp. I think if history can be relied on (even though it is not a great predictor of the future in most instances), we have observed that diseases came and we overcame, obviously with different approaches.

I am not qualified to speak on this subject, so take anything I say regarding this subject with a pinch of salt. However, given that covid impacted the economies and subsequently some of our investments, it remains our obligation (as asset managers) to study up on such subjects. A study on past “similar” pandemics and conversations with subject experts did assist us in getting up to speed with information on covid-19.

Here is my take on covid (for what it is worth), covid is here and we need to look past it and have that long term outlook or view again. We obviously have to take precautions in the short term (as covid is not a myth as some would like to think). If it’s a conspiracy that I cannot confirm (I do not have evidence to that), then let us not be ignorant. So, as with any other thing or time in life, we do not know what the future holds, but the worst possible scenario I think is to get there unprepared, not having planned, or living only for today kind of approach.

If you have a business, it is time to plan again, it is time to dream. If science is true, as has been the case in some of the past pandemics, vaccines are coming. In fact, they are already at some places. If what scientists are saying is anything to go by, then if we get 75% of the population vaccinated then we would have achieved national immunity. After that, I think covid will be history in terms of it having major impacts on our livelihoods and economies.

Let us finally end with a brief market outlook. Globally, markets valuations are at all times high across different investment assets (as a side note, Namibian listed assets are not, perhaps presenting opportunities). The outlook globally is that market valuations will pull back in the short term, which is normal if you come to think about it. Markets do go up in a straight line (history has it). The thinking is that markets are held up at these levels due to significant monetary (central banks) and fiscal (government) stimulus initiatives that has been flooded into the markets, a taste to which we have also experiences as well locally (about N$8-9 billions of stimulus was pumped into our economy by the government, the central bank of Namibia has also cut rates by more than 3%).

What we find positive is that economies are recovering, in general, especially in areas where vaccine have been rolled out aggressively and so far to some extent successfully i.e UK, Israel and US. Businesses/companies are getting back to their feet and things are getting back to the so called – new normal. With inflation also expected to pick up aggressively, that is specifically a great risk specially to fixed income markets (i.e bonds), especially when interest rates start to go up again (probably more in developed markets than in developing like Namibia). So as a firm, we have a cautious outlook on the fixed income markets.

There could be some serious fall out especially on inflation, and if interest rates subsequently does pick up aggressively. This is because of the inverse relationship between inflation & interest rates compared to fixed income valuations. However, on the equity/shares side of things, we are cautiously optimistic, especially due to that, as indicated above, economies and businesses are getting back to the new normal and earnings are recovering from the lows we observed last year.

Generally, there is a positive correlation between economic growth and business earnings (profits). Despite interest rates being the denominator in valuing shares/equities, which does impact valuations as well when they go up, we will use any short-term significant pull backs on shares/equities to add to our portfolios. We see the benefit of earnings picking up outweighing the negative impact from discount rates going up, as far as equity/share valuations are concerned. Nonetheless, until such time that vaccination globally is successful and covid immunity has been achieved, collectively, there will be heightened global uncertainty.

Remain cautiously optimistic, dream big, innovate, and make an impact in whatever way and wherever you are planted. We owe it to our children, families, and the broader Namibian economy and livelihoods.

Let our heads remain above the water as they say, do not allow yourself to sink at any moment. Remain positive and resolute regardless of your circumstance/environment.

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