The Four Golden Rules of Investment Management

An easy 4-stage investment management model explained

Agatha from The Wealth Tribe
7 min readMay 28, 2020

I have read several articles online that say ‘rich people don’t save money, they invest.’ I have also heard it being repeated in personal finance videos on YouTube. And from conversations on money I’ve had with people of late.

There might be some truth to it. I’m not rich so I can’t fully fact-check the statement. But I’ve done my fair share of work that leads to having a grip on my money so I’ll go ahead and say that is bullshit.

Why? Because when this is repeated over and over, it makes young people who are trying to learn financial wellness feel defeated. It makes them think that the world of wealth is not for them. It cripples those of us who are trying to make small consistent savings efforts that feed into our bigger financial goals.

Knowledge of investments is not the easiest thing to learn. Think about it. What were your first impressions when you heard the word Investment or Investing? For me, it was this foreign thing that I couldn’t grasp. Something that wasn’t for people like me, for people with small money.

So when I hear this ‘rich people don’t save money, they invest’ statement being peddled around, I get irritated. I usually wonder, is this what I would have needed to hear when I started earning/working? No!

It cripples people from starting their investment journey because they’re afraid they know nothing. Or they don’t know enough. It’s for a special ‘them’ not for us.

Learning about investments and how to invest is a continuous journey.

What would I have needed to hear when I started earning/working?

Saving is the entry to investing.

You invest through saving. You’ll have an investment goal and break it down into small savings per month or week. With time, you hit the target.

And sometimes when you’re in your savings journey, you discover that some investments can be done in instalments. That’s how you gain knowledge of the investment world. Kidogo kidogo clarity every day.

Yes, of course, there are stages to this money game. And some people will always have more money than others. Some people will not need as much time to come up with a huge investment sum. While that is true, don’t cripple others.

And anyway, before you start investing, you need to start by building a 6 months emergency fund. How else would you do that without saving? Don’t listen to them. Save. Honour your journey however small.

My small brother (okay, he’s my cousin but I call him my bro because we grew up in the same home) just turned 21 last month. For his birthday, I chose to have an investment conversation with him through a video call. To teach him a few hacks and investment options that I know of. This conversation was easier because he has been saving in a Sacco for 6 months. He had mastered the art of consistency. He already knew the basic money lingo such as interest rates on his savings and loans. What I did was to simply take him a step higher. And it made much sense because he already has his savings so all he needs to do is transfer it to an investment of his choice.

So, please go ahead and start by saving. Baby steps.

If you’ve already done the saving or you’re wondering where to start with your investment journey, this article is for you.

It’s also a good one if you’re looking to diversify or manage your investment portfolio.

I’m always hunting for online courses where I can learn more about money and investing.

I came across one titled Finance Fundamentals: Investment Theory and Practice on Unless you’re from the UK, based in the UK or looking to invest there, I wouldn’t recommend that you take the course. It’s based on the UK investment market and uses jargons to explain basic concepts. I’m surprised that I stuck with it to the end though I did a lot of skimming and skipped some parts that I thought were not relevant to me.

Then something magical happened, at the end, the very last lesson was a lesson on the four golden rules of investment management.

1. Time Horizon

You have to link your investments to the time horizon that applies to you.

Are you a short, medium or long term investor?

What are you saving for?

When are you likely to need the funds?

For example, a holiday is a short-term goal. A wedding is a medium-term goal while investing for your retirement is a long-term goal.

In the above examples, it’s not advisable to invest funds that you would need for a holiday within the next 6 months in the stock market. The stock market is a long-term investment.

Have you taken inflation into account? Remember that due to inflation, what you’re saving for is likely to cost more in future.

2. Risk Appetite

This is linked to your time horizon.

The longer the period you can invest your money, the greater the potential to invest in assets which perform best over the long term but which have interim periods where they can fall in value. Such as the stock market! Oh, which is also why you should start as early as now.

Your risk appetite must also reflect your personality. If higher-risk investments keep you awake at night, your life is happier if you stick to lower-risk investments.

While thinking about your risk appetite, remember not to risk everything. Even when you think you have an edge, don’t risk everything.

People have lost all their money or fortunes because they thought they know everything about the industry they’re investing in. The most common risk here is when people say ‘I know the investment manager’ so you end up trusting that person so much that you give them all your money. Remember the golden rule: Don’t put all your eggs in one basket.

And even if you think your personality is the kind that can take high risk, avoid cutting corners. Ending up in jail might mean losing everything. Avoiding illegal businesses is one easy way to manage risk.

The paradox of risk:a) Don’t put all your eggs in one basket. If you lose the basket, you lose it all.b) Don’t put your eggs in too many baskets. The more you manage, the less energy you can put into each one. It’s risky to do things halfway.Diversified, but focused. — James Clear

3. Decide Where and How to Invest

Think about the following:

Financial advice is an asset. It’s better to pay for it if you don’t have the knowledge than burning your fingers while using shoddy information. People never take free advice seriously. If you pay for it, you will listen and commit to action.

PS: I can help you make sense of your money. Reach out to me at

Read the documents presented to you carefully. If you don’t understand some terms, ask the institution you’re investing with to explain to you. This is how they hide hidden charges. They know most people don’t read the documents. And when they do, they’re afraid or embarrassed to ask what they don’t understand.

Always seek clarity.

While reading about a recent real estate scandal, a lawyer said that it’s important to have a lawyer go through the contracts before you sign and commit your money. It will cost you, but it’s better than losing millions and being in a situation where you can’t sue anyone because well, you didn’t understand the terms.

For example, some government bonds are tax-free.

Btw, avoid investment companies. Or please be in the know about all their fees. Arm yourself with investment knowledge so that you can do some or most of it by yourself.

Again, don’t put all your eggs in one basket.

Remember the devil is always in the details. Ask a million questions. Connect the dots. If you chose to use an investment firm, the first sign of their professionalism is how they communicate. If they take forever to get back to you, red flag! If they avoid answering some of your questions, red flag!

4. Review your portfolio

  • Do this regularly.
  • Review against changes in financial markets.

Financial markets are always changing. Be in the know by reading, watching business news, and having conversations with people who can break down what the changes mean to your investments.

  • What’s happening to interest rates?
  • Which new laws have been introduced in the sector?
  • Where have the share prices moved to?
  • Are there opportunities you should be taking or should you be cashing in investments that now seem to be performing badly going forward?

These are key question during this pandemic. Act.

For example, if you decide that you will need a higher income while retired, you should put more money in your retirement investment.

You can use these as a checklist. Since there’s a reason we call it personal finance, you can add more. The goal is to have a pool of investment knowledge that you use as a base when you need to make investment decisions. And yes, you can gradually learn enough to make most decisions.

Since the days of Babylon people have been coming up with investments, mostly to sell to other people. There’s a strong financial incentive to make these investments complex and mysterious.But the simple truth is this: the more complex an investment is, the less likely it is to be profitable. — JL Collins

The above 4 stages are a cycle that overlaps. In all the stages you can onboard and offload investments opportunities.

Also, do yourself a favour and read that guy’s book. A Simple Path to Wealth by JL Collins. It’s so good that my bestie and I refer to him as ‘our guy’ because he literally opened our brains when we read it.

Originally published at on May 28, 2020.