Tuesday, August 9, 2022

Rufus Kamau: What I learned after losing Sh. 2 million trading forex

Rufas Kamau is a research and markets analyst at Scope Markets Kenya, a non-dealing forex broker that is licensed and regulated by the Capital Markets Authority (CMA) of Kenya to offer access to trading in global online markets such as Forex, stocks, commodities, indices, futures, and exchange-traded funds.

Learning to manage my own portfolio and earning profits by trading currencies and stocks online is my biggest milestone so far. It took me a long time to learn various strategies from the internet without a professional to guide me. In my early trading years (2013-2017), I would read books, tutorials, attend live webinars, listen to podcasts, and practice the information on my live account. Sometimes I would make profits, sometimes I would lose everything in my account. I never gave up. Eventually, I learned risk management and improved on my trading discipline. This is what transitioned me from a noob to the trader I am today.  I have also learned that one needs at least two streams of income to successfully build an investment portfolio. One income will help pay the bills while the other will help cater for emergencies and the surplus goes into building the portfolio. In my early trading days, I would depend on my forex trading account to pay bills and that did not go very well. In a bad trading month, I would find myself paying my bills from my invested capital.

I used to invest my surplus income after spending. Let’s say your monthly income is Sh. 70,000. Spending this money on your bills and projects and then investing the remainder is not principled. The solid way of investing includes determining the investment amount first, setting it aside, and then surviving on the balance. Before I realized this, my surplus income, the one destined for investment, would be very minimal and sometimes negative.

I once lost Sh. 2 million trading forex. I attribute the loss to my lack of discipline in my early trading years. I had built the portfolio up from Sh. 300,000 and was very excited to have reached Sh. 2 million. This made me overconfident, and I began taking bigger trades with larger risk exposure. I learned that your own emotions and expectations can be your enemy in trading, and one needs to learn to control them by having a strict trading plan. If I had a strict trading plan with risk management rules set, and followed it religiously, there are chances I could have controlled my losses and survived the losing run.

I still have a challenge saving money. This is because I tend to view every single shilling lying in my bank account as investable. I feel like this money should be making me more money. Sometimes I fall into liquidity traps when I have used my savings to buy a stock and then a cash emergency forces me to get a small loan from a bank or mobile app to survive. Step by step, I am learning to build an emergency fund though I admit it’s very challenging to keep my savings uninvested. Spending my income first before saving or investing was clearly ineffective. At the end of the month, I would find that I had very little to invest or even in debt.

Investing early is like making your own gold in the backyard. New technologies are coming up every day that are changing the way we live and interact with each other. People who invest in these technologies are most probably going to be the millionaires of the future. These tech companies include Airbnb, Uber, Tesla, Amazon, Apple, Coinbase, PayPal, and Pfizer. Buying shares of these industry-changing leaders may create you enormous wealth in the next 10-20 years. Don’t invest in ‘One day’; make it ‘Day one’ instead. It’s also okay to have a relatively high income and be broke sometimes because you have invested in your future and the future of your kids.

My sister stole Sh. 1 million I sent back home while working in Saudi Arabia

I have done both business and employment. Entrepreneurship is marketed as the best since there is a huge potential for income growth while job salaries tend to be viewed as stagnant. However, I tend to view employment as the base foundation where most entrepreneurs learn and build themselves before venturing out. If you have the funds and the entrepreneurial skills, go for it. If you have the entrepreneurial skill and you don’t have funds to get you started, it’s okay to get employed and build capital.

This feature was first published in the Saturday Magazine. The Saturday Magazine is a publication of the Nation Media Group.

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