Acting your age: Investment trends shift as the years go by

Since the birth of our capital market on January 31, 2008, a number of individuals have posed challenging questioned about the safety and profitability of the products on the Rwanda Over The Counter (OTC) market. It is only unfortunate that after nine months its launch, the Rwanda OTC market has only one corporate bond (BCR) and three Treasury bonds listed, with no equity stocks. But it is also regarded as a success because some stock markets in the region cerebrated their first birthdays without any listed product. And while we are gearing up for our first Initial Public Offering (IPO), probably early next year, Rwandans are enthusiastically picking interest in apportioning part of their savings on the Rwanda bourse. This has often raised questions, especially among the youth on how their meager savings can generate income. Investment priorities on the stock markets vary particularly in countries with developed stock exchanges which have many products. But this also has something to do with the age bracket of the individual investor. Stocks are believed to be less risky for young people who have long term investment horizon. Stocks are also necessary for young people to meet their large financial obligations. Unlike bonds, stock are very volatile, their values tend to fluctuate a lot, given the market situation and because the value of an individual stock is based on what people are willing to pay for it, stocks are always subject to higher gains or higher loses compared to bonds. Younger people have got more years of labour income ahead with which to recover from the potential losses associated with stock ownership, old people tend to look for assured returns. Bonds usually have a predictable stream income and old people invest in them to receive dependable interest income.It is prudent to allocate much of your savings to stocks when you are still young but you should diversify to bonds to decrease your leverage as you come closer to retirement. gahamanyi1@gmail.com