The first step in starting an investment is to start saving. If you have developed this habit, congratulations, you can be an investor too. You don’t need to be a millionaire to be called as an investor. You can invest money even if you have a few dollars. Explore how this is possible by reading the recommendations below.
Fixed deposit accounts:
You can open a fixed deposit account with any bank nearby. This is an investment account in which a customer deposits a specified amount of money for a certain/fixed period of time. eg in Cooperative Bank of Kenya This period ranges from 1 to 12 months. The customer is paid a competitive rate for the period the money is held in the account. According to Coop Bank the interest rate is 6.65%. This means if you invest kes 1k today you will have 66.5 in 12 months. If you have 1million you put in the account you will have an extra 66.5k at the end of the year. This is money that you gained by just putting money in the account.
Start putting your savings into it. Because you have not dropped the saving habit. Soon you will have a handsome amount to buy an asset (An asset is anything that brings money into your pocket).
This is, again, another platform for you to grow your money. You can invest low capital, and the fund manages it. The team of professionals invests the amount of all mutual fund shareholders in large projects. Here I am specifically advocating for money market funds. This is because of their unique characteristic of compound interest. An example is the CIC money market fund which gives an interest of about 9.69% interest. If you put 1k for 12 months you will have an interest of 101.32. If you put 1million for 12 months you will have an additional interest of 101.3k. If it were the regular interest for a fixed deposit account your 1million would have an additional interest of 96.9k for the same period. So you want to have your money in a money market fund because of it’s compounding effect.
Buy shares in the stock market:
A share is a unit of ownership in a company. Today you can own Equity bank or Facebook or Amazon. C.E.O Mark Zuckerberg can easily work for you and so can C.E.O James Mwangi of Equity bank. The stock market provides a lot of investment options. This is where you have the chance to buy into the best companies in the world. With shares, you will get two benefits. One is the appreciation in the share price eg. The price of Safaricom shares when it went public was Kes 5 in 2008. It is now 2019 and the price is Kes 27.50. So if you bought 10k of Safaricom shares at Kes 50k they would now worth kes 275k. This is money that you got by just waiting.
The second benefit is the dividend which a company offers on these shares. Safaricom, for instance, paid a dividend of 1.25 in 2019. More on that on business daily. With 1mill shares, you would have earned Kes 1.25million for 2019. Don’t you think it is possible to never work again for the rest of your life?
One of the easiest ways I have found to buy company shares in Kenya is using Abacus platform. You can start with a free trial here.
Make James Mwangi your work for you today
Invest in Rental properties:
Don’t worry if you don’t have enough money to buy a rental property. You can take a loan from a bank, and the installments will be paid by the rent of that property. And after a few years, the property will be all yours. The sale price of that property will be huge in the future. Also, the rental amount appreciates every year or so. You can still rent it out or use that property for self-residence after retirement. Or even convert it into an Airbnb. The choice is yours.
You can choose any of the above 4 options to invest money. Better start with the first two when the amount to be invested is low. When you become able to take risks, go to the stock market. Because you can still sustain any possible losses at this time. When the stock market grows, you can buy a rental property by selling the stocks at boom price. So the rents will not go to banks. They will directly add up in your pocket from the first month. So your investment plan is now ready. Let’s get started.