Contrary to popular belief by people, successful investment choices do not need a high IQ level. One should have a logical framework for making decisions and making judgments with the ability to curb emotions that corrode that framework. When it comes to the deployment of capital in a business, the safety margin is the most significant factor for you to consider. Investors are carefully analyzing market trends, and today equity markets are hammered with high-interest rates. If you think about the trading market today, there has practically been a sell-off everywhere, from cryptocurrencies to technology.
Kavan Choksi– investors are making poor choices now
Business and finance expert, Kavan Choksi, admits that several investors are making poor decisions because of the prevalent manic depression in the market. Most of them are succumbing to group thoughts and the beliefs of flipping. In this context, he observes that the worst enemies of investors are themselves, as they cannot separate themselves from the emotional roller coaster ride in the market. In the process, they are falling prey to its negative influences.
Three rules to remember
According to him, there are three rules to note when it comes to the subject of capital allocation. The first rule is you should never keep your money in a firm that has no profits. You must concentrate on disruption, and with the help of technology, you can choose winning firms. The second rule is every investment you make should yield a profit, and this means you earn a dividend yield in the stock market. This yield is the rental flow of cash that the investor accrues, like in the real estate market.
When the rental or the dividend yield fails, the assets tend to become overvalued, and this is where you should see warning signs. The third rule to note is the principle of safety when there is deterioration in market conditions. Assets and organizations that exhibit endurance in the generation of cash during this time will outperform in the long term. Investors that do not understand the above three rules will become symbolic pawns in the market.
Steps were taken by the UAE
Right from the freehold phenomenon that emerged in 2002 to the current disinvestment program, the government of the UAE has been really proactive in deciding when the next phase of asset development will take place, ensuring dividend yields by enterprises that are financially stable. They are being integrated into the region’s economy.
The government of the UAE has donned the role of an investor that is business-driven, maturing assets, and making decisions easier for institutional and retail investors. Prominent businesses in the region have compounded capital during the slumps and booms of the business cycles. The companies listed sport a margin of safety that makes the above investments hard to ignore, perfecting syncing in with the rising costs of capital.
According to Kavan Choksi, history has proved that following the basic three rules listed above has outlasted the international market even above the inflation rate. These rules are successful, and they date back to the South Sea Bubble that took place in 1720- it was a natural experiment surrounded by ignorant supposition that resulted in negative repercussions!