Why It Is Important To Diversify Your Investment Portfolio (Part 2)

May / 23 / 2016

In the first part of this interview, Eugene Birikorang, current Sales and Marketing Manager for Devtraco Plus, talks about investments, and what potentially happens when your investments are converges at one point. In this second part, he walks us through more reasons to diversify investments, and why Devtraco Plus should be one of your choices.

Why is it important to diversify an investment portfolio?

To deal with the almighty problem of risk. Risk can only be defined or modelled to an extent.

There are many things that affect your investment. For example if you invest in a vehicle, factors like fuel costs, maintenance costs, road quality, the smartness of your driver, and even the other driver across the road, are a combination of factors can affect your investment in that vehicle. In relation to the Accra-Kumasi transport route scenario, if the previously stated factors are favorable, but for some strange reason the passengers who usually plough that route decide not to do so any longer, there could still be the risk of your asset not generating the expected revenue. All these factors come together to affect you, and because of this myriad of factors, it is better to diversify your portfolio. It is almost like a game of – not chance – an intelligent guess. Different areas are exposed to different factors. Exposing your investment to more variables exposes them to more positive factors as well.

What are the risks involved in diversifying a portfolio?

Managing multiple risks if you are an active investor, can create a problem for you. This is because you need to gain the capacity to handle diverse risks in various sectors, all at once. Whereas if you were investing in only one thing, you can focus on handling that one particular risk.

How do you manage those risks?

You need to know a lot about what you are doing to minimize this potential problem. Understand the underlying variables that make up that risk and do much to mitigate them if you can. Spend time to learn/research about what you tend to invest in.

Why should investors see Devtraco Plus as a worthwhile investment opportunity?

From the macro-economic outlook, Africa is generally seen as the next big thing in the world economically. Europe, America and Asia are to a large extent, already developed and now Africa holds the resources of the world. Investors who are currently getting 5% on their dollar or Euro want better returns, and because of that they are looking at Africa. However Africa’s biggest problem is political instability, but Ghana has positioned herself as very strong so we seem to be the investor’s choice.

The general principle that surrounds emerging markets is that they typically have a lot of opportunities and possibility, and you can generally make more. Ghana is seen as one of the strongest emerging markets among African countries, due to political and economic stability. In Ghana, there are various investment options available to you. When you look at the skyline of Accra and other major cities, you can tell that it is probably going to be the next “New York” or any other major international city, and that is through buildings. Buildings are what are going to fast track businesses: offices, living space, etc. The world is going to try and come to Ghana, and this is the investment case for Devtraco Plus. Once this is happening, it shows that there is interest in developing the country into a world class society. This will start from the capital Accra, a prime area.

The reason I will put Devtraco Plus forward is because of investment risk. If I am coming to Ghana and I want to invest in real estate, due to the risks involved, I will need someone with a proven track record whom I can trust. Devtraco Limited has been Ghana’s trusted developer for over 20 years, therefore Devtraco Plus’ affiliation with the brand puts our products/services in a good light.

There are also new international companies establishing themselves in the capital, and averagely 150 to 200 people are flown in to do work for these companies. These people cannot stay in a hotel for say 6 months or one year, so they would want an apartment that resembles the quality they are used to. This is what Devtraco Plus provides.

Our apartments are proven to give about 12% rental yields, and in addition to the capital appreciation, this is a good call. This means that in about 5 years to 7 years’ time, if you are reinvesting your yields, you can make all of your money back. This is a secured investment.

What investment quote will you leave us with?

“Only buy what you wouldn’t mind having if the market is closed for ten years.”

This means that you should buy what you love. The fact that you are investing to generate returns does not mean that you should invest in something that you have no passion for. At Devtraco Plus we want people to see what we have and love it, so that in the slim chance that in an emerging market, you do not get your money back, you will still be able to enjoy what you own.

“You can’t reach success in investment if you cannot think independently.”

Don’t do what everybody is doing. Analyze the factors on your own and make a bold choice. In as much that there is space for as many stars in the world, if we were all stars in the world, stars wouldn’t be a special phenomenon anymore. In order to be part of the special small percentage, you need to think independently.

Is there anything you might want to add?

I once tried to understand where the term “real estate” came from, in reference to buildings. Though I am still researching on this, I have come to understand that real estate is as real an investment as you can get. A treasury bill is merely a paper that gives me rights to something tomorrow, however real estate is more tangible and sturdy, and can always be referred to. Even if this went wrong, it has a huge future gain. Unlike a car whose usability can depreciate in the next 5 years, real estate last longer. If you didn’t make your returns in 5 years, you can make it in 20 if it is well managed.

At Devtraco Plus we realize that the ability to manage and maintain buildings is as important as the building itself, therefore we have come up with our own team of people to manage each one of our buildings to keep them up to standard and to ensure that your real estate asset stays as relevant as it was when it was built in 20+ years’ time.

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