Analysing investment risk inclination among Namibians
By Jo-Ann van Wyk /
A large number of Namibians do not invest at all, and those who have the ability to invest often avoid taking investment risks.
According to results of the 2023 Old Mutual Financial Services Monitor (OMFSM), 37% of Namibians are not prepared to take on any risk, and this aversion is particularly notable among certain demographics, such as younger consumers.
The Namibian financial market offers a wide range of investment products across both banking and non-banking financial sectors. Risk inclination varies from individual to individual, with a significant divide in risk tolerance across the population.
A considerable portion of Namibians show a strong preference for safer, low-risk investment options. Many individuals prefer keeping their money in savings accounts or other low risk alternatives, rather than venturing into the various high-return investment products available in the market.
Risk aversion is often driven by the desire to maintain financial security and avoid potential losses.
People generally lean towards options that offer steady returns over time, even if those returns are lower.
Risk aversion also reflects a hesitation to engage with more volatile investment options. While such investments may offer higher returns, they come with a level of uncertainty that many prefer to avoid.
This desire for stability often leads investors to products that offer more predictable growth.
On the other end of the spectrum, those who are more inclined to take risks understand that achieving a higher rate of return typically involves significant risk. Risk-takers are often drawn to investment opportunities that promise short term gains, but these investors must be prepared for volatility and the potential for loss in the short term.
Their resilience and long-term outlook are essential in navigating challenging market periods.
For younger investors, the willingness to embrace risk may stem from having a longer investment horizon, allowing them more time to recover from potential losses.
However, this can also be attributed to a lack of experience, as younger investors might not fully understand the complexities and risks associated with certain investments.
Investment strategies vary depending on individual risk tolerance and financial goals. Low-risk options such as money market funds, savings accounts, and other secure financial instruments remain attractive for those who prioritise capital preservation.
However, for individuals seeking higher returns and willing to accept greater risk, there are numerous opportunities available in the market.
For investors looking to preserve their capital while still earning regular income, the Old Mutual Namibia Money Market Fund offers a low-risk option. The fund aims to outperform traditional bank deposits and focuses on capital preservation, with an average maturity of no more than 180 days.
Additionally, 35% of the portfolio is invested in Namibian instruments, making it a secure and locally aligned choice. The fund allows for a minimum monthly contribution and Lump sum of N$300, offering flexibility to suit various investment needs.
– Jo-Ann van Wyk is the Client Relationship Consultant for Old Mutual Investment Group, Old Mutual Namibia.
