Analyst Warns Low Yields Could Impact Investor Returns

Economic Analyst Emmanuel Boateng has stressed the need for sustained economic stability and improved investor confidence to encourage longer-term investments that can drive growth and development.

Speaking on Business Breakfast on Zed 101.9FM, Mr. Boateng explained that most investors naturally prefer to avoid risk, with only a small segment willing to take bold financial decisions.

He noted that a majority of investors in Ghana are increasingly risk-averse, driven by economic uncertainty and past market experiences.

According to him, these tendencies are partly shaped by individual personality traits but are largely influenced by broader economic conditions.

“Investors are generally rational, and the typical investor profile is risk-averse to risk-neutral. Only a few are risk-loving,” he said.

He stressed that historical economic performance and prevailing uncertainty in the market have significantly shaped investor behaviour. As a result, many individuals now favour short-term investments, often expecting quick returns within weeks.

Mr. Boateng highlighted a growing trend where investors prefer to commit funds for shorter periods due to fears about economic instability. “People want to invest their money and retrieve it within a short time because of uncertainty and past experiences,” he stated.

He stated that global developments are also playing a role in shaping local investor sentiment. Tensions involving countries such as Iran and the United States, he said, are being closely monitored by Ghanaian investors, who factor such risks into their decisions.

According to Boateng, these external and internal factors combine to reinforce cautious investment strategies, which could have implications for long-term economic growth, including Ghana’s GDP performance.

The analyst also raised concerns over declining yields in Ghana’s short-term government securities, cautioning that investors may soon demand higher returns if current trends persist.

He indicated that despite strong demand for instruments such as Treasury bills, yields have not increased correspondingly. He pointed to the 91-day T-bill, which currently offers a yield of about 4.7 percent but when annualised, translates to less than 2 percent return over the period.

“This is a critical issue,” he said, noting that even the uptake of emerging investment options, including crypto, remains very small and unlikely to offset the low returns on traditional securities.

Mr. Boateng further explained that slightly longer-term instruments, like the 182-day T-bill, offer around 6 percent annual yield, effectively just 3 percent over six months. Two-year securities provide 8 to 9 percent over the full period, but he emphasised that these rates are still modest given prevailing economic conditions.

He added that while short-term rates have risen slightly, it is too early to make broad conclusions about a sustained upward trend.