- Frankline Miswa 13th Aug 2017 12:13:45 GMT +0300
Most people spend their 20s messing up their money, their 30s trying to figure out what they did wrong, their 40s trying to dig themselves out of the hole, and their 50s trying to prepare for retirement.When it comes to making profitable investments, there are no hard and fast rules that work for everyone. To quote the economist and diplomat John Kenneth Galbraith: “There is nothing reliable to be learned about making money. If there were, study would be intense and everyone with a positive IQ would be rich.”Instead, you have to learn the basic financial principles – such as spending less than you earn or creating multiple income streams to manage your expenses – to make the right choices for yourself, regardless of what others are doing.
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Here are a number of investment ideas to consider.1. Pay down your debtYou might find this investment strategy surprising, but think about it for a moment … having debt is like the opposite of having an investment. Holding onto debt is often more costly than investments are profitable.
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The money you save on interest by not having debt is better than any return you could possibly get by investing that money in the stock market.2. Invest in fixed-income instruments
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These include corporate bonds, and Treasury bills and bonds, including M-Akiba.A bond is a debt investment in which an investor loans money to an entity (typically a corporate or a government) that borrows the funds for a defined period at a variable or fixed interest rate. Bonds are used to raise money and finance a variety of projects and activities.Treasury bills are short-term debt instruments issued by the Government to raise money to finance various projects and activities.Investors can buy the 91-day, 182-day or 364-day T-bills. The 91-day and 182-day bills are sold weekly, while the 364-day bill is sold monthly. T-bills are attractive because they offer a low-risk way to earn a guaranteed return on the money that’s invested.M-Akiba is a unique opportunity for Kenyans to save money and invest, while at the same time earning an attractive interest of 10 per cent, tax-free, from the Government.
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Fixed-income investments are suitable for risk-averse investors looking for a place to safely invest their cash, and you’re unlikely to lose money unless the company or government defaults on its payment – like what happened with Argentina.The South American nation has defaulted on its debt eight times in its 200-year history, with five defaults in the past century alone – the most recent being in 2014.The bottom line is that nothing is certain in the investment world and, to pick from investment management firm Oaktree Capital’s mantra: “Move forward, but with caution.”3. Invest in unit trustsManaged collectively by a fund manager, these instruments pool investors’ resources and invest on their behalf in fixed income, cash or stock assets.
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Fees vary from fund manager to fund manager – I would recommend you pick a firm with asset fees of under two per cent.Each month, the investor earns interest, which is added to the principal. Examples of unit trusts include money market, and balanced, bond, equity and fixed-income funds. I personally use the money market fund as a parking spot, while waiting for buying opportunities in the stock market.This, in my view, is the best option for new and average investors, as it is low-risk and invests in short-term instruments. The key takeaway, however, is that investors should watch these fees closely.4. Buy a Real Estate Investment TrustMy hack for becoming a real estate owner is to get a share in a Real Estate Investment Trust (Reit).This is a way for you to become a landlord by buying part ownership through shares in a company that develops real estate. An example is the Stanlib Reit that is listed on the Nairobi Securities Exchange.Reits come in two flavours: development Reit (D-Reit) that focuses on construction of real estate; and income Reit ( I-Reit) that buys high-value property which earns the investor an interest.5. Time is your biggest (money) allyMost 20-somethings that I interact with say they can’t afford to invest right now. But if you start from the first day of your first job, you’ll end up having to save a lot less to retire comfortably.If most people aren’t financially successful, then it makes sense to stop doing what most people do. Just because everyone else is getting a car every five years doesn’t mean you should.Finally, if you focus on money now, you’ll avoid having to focus on money later.
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