Investment strategy: always reduce risk [Archives:2002/09/Business & Economy]

February 25 2002

Mayoob Al-Kamali
Economic Editor
There are many money-exchange shops in Sana’a and other main cities in Yemen. Yet, exchange-rates fixed at these markets are set by exchangers themselves. Some abide by the Central Bank of Yemen’s rates. Others do not.
Exchangers say avoiding the risks of investment is not an easy job. Thats because the majority of start-up investors do not use accurate and scientific criteria that enable them to have successful enterprises.
Further, money exchangers stress that financial investment in Yemen lacks well-defined plans, as individual financial abilities still play a major role in regard to the size of the businesses.
Investment experts, however, believe that channeling individual capitals to investment funds that match the objectives and capabilities of businesses will help new investors avoid risk of losing their savings.
From this point, it is necessary for investors in money exchanges to avoid the following risks:
– Market risks: Investors usually worry about stock market exchange instability because it keeps fluctuating. Yet there is no such risk in Yemen, owing to the absence of that market.
– Inflation risks: Some people tend to put their savings in deposit accounts to avoid the risks of unstable markets, although such a move could be hazardous for their savings in the long-run. Risks here are represented by purchasing power or inflation risks, which reflect the decline of the real power of savings with regard to the rise of living costs.
– Liquidity risks: Some investors like to liquidate their cash for investments within a short or a long period of time, with the view of having fast gains. Others prefer to put their capitals in some bank-related investments to avoid risks. However, such investments originate little profits, or abruptly stop.
Experts conclude that investments will only succeed when investors understand the risks businesses may encounter. Taking precautionary measures by relying on diversification and a wide-range of investments, such as treasury bills, stocks and investment funds, then, is the answer. This is what will undoubtedly reduce money investments risks.