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Way of Investing


Investments: First Time Then Money

Talking with Georgians someone can often hear that there is a lack of investment opportunities for ordinary people’s capital in Georgia. In my opinion this statement is exaggerated. If the person will spend some time for investigation and education he or she could build well balanced investment portfolio to protect his or her wealth and to create the solid base for further capital growth.

In 2017 Georgia demonstrated impressive jump in the World Doing Business rating from 23rd to 16th place. Transparent legislation, favorable tax administration, developed and technically advanced banking system, fast and competent relationships between state power and business are really important factors for creating healthy business environment in the country to attract foreign and local investors. But there is another side of coin. Georgian financial market is still in rudimentary state. And it’s a sad fact. Despite the formal availability of Stock Exchange and other signs of financial infrastructure like several brokerages and formal availability of financial instruments, ordinary Georgian has no wide range of options to invest his capital. At first glance all what serious Georgian concerned about his prosperity and wealth protection can do is to invest his in own business, in his own real estate or deposit money to bank. But it’s not correct. Financial market lanscape has been changed couple of years ago.


Invest Your Time

Despite short list of licensed companies which operate on Georgian financial market this list looks already well balanced (https://www.nbg.gov.ge/index.php?m=487). During last couple of years some other non-licensed financial companies (both local and representative offices of international brands) not mentioned in that list occurred on Georgian financial landscape. Those brokerages and fund managers offer wide range of investment vehicles starting from mutual funds to self-trading opportunities on wide range of world financial markets. So we can state that for such small country as Georgia there are plenty of opportunities for serious Georgian concerned about his prosperity and wealth protection to build investment portfolio and select financial instruments most suitable for his/her financial goals. But every investor should realize that the more the goal the higher the risk which investor should take to achieve that goal. And here the question of education becomes critical. Let’s make a first glance which investment instruments are available for public in Georgia.

What to buy?

First of all every investor considering building of his/her portfolio should understand that investment vehicles are divided on two big classes.

  1. Fixed income like government and corporate bonds, bank deposits.
  2. Floating income like corporate stocks, currency marginal trading and derivative trading.

Second group is divided on two big sub-classes: linear and non-linear instruments. Linear instruments envisage trading or investing in the asset class which have some real property under it. Even investment in real estate could be considered as linear instrument because prices for houses or lend could fluctuate. Other examples could be represented by corporate stocks, marginal forex or CFD (contract for difference) trading, buying of cash currency etc. In general linear instruments are those which price could fluctuate but value remains stable.

Non-linear instruments are those where not only price but value is changing when time is passing. Classic example of such an instrument is options. World financial markets can offer wide range of non-linear derivatives, but that king of investment is much more complicated and require deep understanding and learning how to handle with it. Actually I don’t think that such a kind of investment is necessary for ordinary investor. Let’s leave it to big sharks – professional traders and speculators.

Nevertheless, even less complicated linear financial instruments require education and training. And here it looks logical to ask the following question…

Where to start?

First of all there are hundreds of on-line courses available in internet both free and quite expensive. Worst feature of all of them is the language. I didn’t find any online comprehensive course in Georgian. Moreover some people would prefer not to spend hours before monitors and want to talk with live mentors. And in this case Georgians have good options. At least two companies in Georgia offer free public introduction courses and paid face-to-face master-classes where the potential investor can learn how to trade and invest on financial markets from Georgian speaking experienced mentors. Such an opportunity and schedule of those courses could be easily found in internet. But I want to stress that general knowledge about markets and methods how to buy or sell an asset is not enough for successful managing of Your wealth. Another hidden menace is inside of the person. I don’t want to deepen in this topic in this article but if You will decide to enter this exciting world of financial trading and investment be ready to meet with such a sides of Your personality which You even never think that they are existing. Greed, Fear and Hope are most dangerous enemies of trader/investor and You will need to learn how to handle with them too on Your way to prosperity and market competence.

Outcomes

My main goal of this brief introduction to investment world was to eliminate the opinion that ordinary Georgian has no a lot of options to manage his wealth in his own country. Also I want to stress the importance of making first steps in this Wonderland in right direction. And those steps should be education. Because dealing with modern financial instruments could be both extremely lucrative business and extremely risky. Conscious investor should clearly realize that during investment process he or she could lose not only initial investment but even more. That’s why it’s extremely important for successful wealth management to build well balanced portfolio of linear and non-linear financial instrument combining them with fixed income assets and physical property like land or diamonds for example. In which proportion those assets should be distributed? The answer on this question can be found during education. Invest Your time first!

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