Banking and Finance

Investors urged to understand risk-return profile before investing on Stock Market

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Investors have been cautioned against following the bandwagon when it comes to investing on the Ghana Stock Exchange this year.

According to the General Manager of UMB Stockbrokers, Ben Ackah, investors need to prioritize understanding their risk-return profile before investing in popular stocks.

The risk–return spectrum, also called the risk–return trade-off or risk–reward, is the relationship between the amount of return gained on an investment and the amount of risk undertaken in that investment. The more return sought, the more risk that must be undertaken.

Mr. Ben Ackah’s comments come on the back of growing optimism about the performance of the local bourse in 2020, following a poor showing in 2019 with the market returning negative 12.25 percent for investors.

In an interview with Citi Business News, Mr. Ben Ackah said investors need to position themselves to be able to take advantage of the many opportunities that will arise on the local bourse throughout the year.

“Investors in general really need to understand their risk-return profile in order to better take advantage of the wide range of instruments available. It’s not everyone who wants to do long-term investments, everyone is different. A key thing is for people not to join the bandwagon and invest in instruments that others are investing in. People should rather get advice from qualified brokers.”

He however expressed confidence in the market’s ability to yield positive returns for investors.

“I’ve been in this market and seen the market do more than 100 % in a particular year, but I’ve also seen that the market has done some negatives. If you however look at the market in the long-term, you realize that it’s done extremely well.”

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