The 3 investment strategies that will pay off in the long run

We explain how three important strategies will benefit investors who participate in the stock markets for high returns.

The investments universe is so vast and full of different options, that investors can often be left confused about the investment strategy that they must adopt. Often, it pays to adopt a slow and steady approach for higher gains. A long term strategy also helps investors gauge the markets better and adjust their investments accordingly.

The following three strategies pay off in the long run:

1 Understanding ‘risk’. Most investors equate risk with the rise and fall of the stock market. This definition is often misleading. Rise and fall of rates is simply a matter of market trends. Risk is better seen from the point of view of loss of capital – it is the chance that the invested capital will be lost in totality. Once you correct your understanding of ‘risk’ and what it entails, it becomes easier to choose the correct investment option. At the same time, it is worthwhile to consider the element of ‘volatility’. The more volatile a stock, the riskier it is because it is faster in losing money. However, short term volatility can be offset by long term investment strategy in that stock.

2 Stay invested in both long and short term options. The story of successful investments is both a short and long one! Most investors consider the time frame for investments basis the time frame in which they want the invested capital to show gains. A good example is the population of near-retirement persons who want short term instruments which will mature by the time they quit the workforce. However, whatever one’s age and risk appetite, the investments portfolio must comprise instruments that show both short term and long term profiles. Hence, the first good investment strategy is to build a portfolio for both short term and long term time frames. The strategy must involve getting enough returns to meet your cash inflows for the first 10 years without liquidating other assets. Later, the long term part of the portfolio deals with conservative instruments that can withstand market downturns better. These can come via fixed income securities.

3 Follow a consistent plan. Changing the goalposts of investment goals and returns does not help at all. You might dabble in a series of short term investments for a while, but this does not provide stability. Once your advisor draws up a detailed investment strategy for you (it may span a series of years that are broken down into 5, 10 or 15 years), you MUST stick to it despite short term volatility and gains. Your investment plan is drawn considering your risk profile and overall objectives, and deviating from the plan often is counterproductive to the growth of the portfolio. 

The potential for debt markets’ growth in MENA

The MENA’s debt capital markets have not yet been utilised to their full potential, and have ample space to grow in the coming days.

The financial markets of the MENA region are in a stable condition, owing to large scale deposits in banks and a growing interest in the debt and equity markets. However, the independent debt capital markets still constitute a very small portion of the overall financial markets. Thus, they have a huge potential to grow in the coming years and become a dominant source of funding for the private sector.

For the uninitiated, the debt capital markets trade in such securities as Commercial Papers, Government Treasury Bills, loans and bonds. The markets are split into two: Primary and Secondary Bond Markets.

Why have strong debt markets?

A robust debt capital market increases the effectiveness of private and public companies that seek non-traditional funding sources for their various objectives. At the same time, they strengthen the monetary policies laid down from time to time by the Governments in the MENA region. The stronger the debt and equities markets, the more developed the market operations become, primarily by facilitating higher access for both private and public entities.

Market stability is also an important factor in the process; it promotes better development and sectoral stability as well. Hence, a more robust fixed income market is more stable and resistant to swings in market forces. Besides, it offers more diversification to investors and borrowers.

The debt capital markets can play a crucial role in developing the private sector growth by helping to channelise resources better. They can also be an interesting counterpoint to the traditional bank loans that Governments seek for their own public works projects in the region. Regular issuances and steady benchmarks in the debt markets can go a long way in strengthening revenue flows in the coming days.

Partnering with the right advisors

The debt capital markets departments of the most reputed investment and trade advisory firms in the region have their work cut out across sectors. They are entrusted with the correct placement of debt in the region, and to arrange fixed income securities for companies looking to expand operations here. Partnering with these companies ensures that one receives timely advice to tap into the many opportunities that the MENA region presents.

It is wiser to partner with firms that have a large investor base and an equally large network that can be leveraged to provide the best debt placement opportunities in the region. These firms help companies and private investors raise both conventional and Islamic funding, in line with their business objectives.

Private investments and their management with NBK

NBK Capital provides the best-in-class options for private investments, and offers cutting edge solutions to those looking for private placements both in GCC and outside.

Investors today wish to maximise their capital by exploring a wide range of instruments, and equity capital offers one of the most attractive options today. However, the inherent risk of losing all the invested capital by inadvertently associating with fraudulent entities is all too real. The private placement space can be a tricky area to navigate if one does not have a reliable trading partner to guide one through the process.

What is private placement?

It refers to the sale of securities to a small group of investors so as to raise capital for both short-term and long-term needs. This instrument is often used by companies looking to raise funding for its business goals. Such entities as insurance companies, pension fund companies, banks and mutual funds are significant participants in the private placements universe.

Private placements differ from public issues; in the latter, securities are sold in the open market to the highest bidder for that investment. In the former, the placement is offered only to a select group of investors and may or may not be sold by prospectus. It is an important function in the Equity Capital Markets (ECM) ecosystem. However, its success is assured by partnering with a reputed advisory firm such as NBK Capital, so that maximum equity capital may be raised within the specified time frame.

NBK Capital facilitates transparent transactions between all participants so that sufficient equity capital may be raised by the right means. The capital is raised through new issue allocation, Initial Public Offerings (IPOs), marketing, stocks, futures, swaps and derivatives.

NBK Capital offers a wide range of trading activities and principles so that companies may thrive in the ECM ecosystem. The firm helps all its clients assess their goals before moving to strategising and planning their milestones for them. This is done in a way that the firm can leverage its own expertise and wide network in the region and beyond, and thus ensure success for clients with maximum exposure, customised structuring, market-based analysis and regular study and advice in structuring.

Clients’ private placement is thus assured of success with NBK Capital’s Equity Capital Markets group offering a gamut of advisory services. The firm also offers public placement to several regional companies. Till date, NBK Capital has worked closely with such high net worth clients as Saudi Telecom, Kout Food Group, Jazeera Airways, Mezzan Holding and Qurain Petrochemicals, to name just a few.