By Charles Katongole

As 2023 steams ahead, global and local inflation seem to be potentially peaking. Advanced Economies, Central Banks especially in the US are generally indicating that the tight monetary policies (painful as they were) are containing the inflation challenge. 

The macro-outlook into 2023 is certainly for continued volatility in financial markets, potential recessions in some advanced economies, cautious recovery in others – a tale of two varying sides of the coin.

With that backdrop, one’s long-time journey to protect and build wealth cannot stop. There will be opportunities in financial markets for those with the discipline and resources to grow.

Some of these opportunities offer attractive returns but with high risks and others offer lower returns with low risks.  Some of the investment avenues available for Ugandans in 2023 will therefore include:

1) Government securities:

If Covid-19 lockdowns taught us one thing; it's that a truly passive income should be part of one’s asset portfolio. And there is nothing more passive, with a steady income flow stream than government securities.  There are two kinds of government securities – Treasury Bills (364d, 182d and 91d) and Treasury Bonds (2yr, 3yr, 5yr, 10yr, 15yr and 20yr).

In 2022, yields on these have fluctuated between 16%- 18% on the longest tenor bonds and 12%-15% on the 364d TBill. The best thing about government securities is that the minimum entry amount is Ugx 100,000/= with minimal to very low transaction costs and to this add the easy of liquidating. They are also generally considered “risk-free” instruments.

2) Mutual funds / Managed Investments / Unit Trusts

One of the fastest-growing passive income streams in the country. With these, the investors pool funds under an umbrella (could be monthly contributions or one-off or irregular deposits) which a selected fund manager invests in various instruments and pays a return to the unit holders.

They tend to be flexible both in entry and exit and best of all is the tax benefit that they currently enjoy. Most unit trust in the country accrue interest daily and at the month end this is added to the principal and reinvested.

They generally offer moderate returns of about 10%-13% post the fund manager’s fees and one can withdraw their funds in a matter of days.

Recently Standard Chartered Bank Uganda launched an offshore Mutual Funds product which will enable its clients enjoy access to hundreds of underlying equities or bonds from Blue-chip companies in the US, Europe, UK, Asia and emerging markets in different sectors like healthcare, technology, real estate and ESG or green investments. They are good way to save up cash for use in the near future.

3) Bancassurance Products

These are mix of traditional savings products that have been infused with insurance solutions to offer both a return on investment with cover of a selected risk.

Currently, most are structured for endowment leaning toward protection. One pays a premium (monthly, semi-annually, annually) that protects them against a particular risk event (e.g. death or incapacitation) for which the insurer will pay out if the event materializes.  Or if the event does not materialize, at the end of the selected period; the insurer will refund the premiums with a bonus or return.

A policy owner can choose to have a policy with a term of between 9 and 16 years with a maximum sum assured of 950 million.

4) Real estate or property investment

Real estate is a great hedge against inflation and volatile financial markets. Over time it might offer great capital gains assuming one liquidates but is usually very low on cashflow and yield. Like all investments, one must take time to research (lots of time with brokers) to find that right piece of real estate. Options range from bare land to premium properties depending on one’s pocket depth and investment time horizon.

Transaction costs are high in comparison to other investments and its not easy to liquidate once one wants out.

In 2022 prices have generally come off given the economic situation but this option is still one that most people gravitate toward. And as infrastructure (roads/power / water) improves, capital into property development increases; there are still gems out there.

5) Equity Stocks also referred to as shares.

These represent ownership in the particular company and offer a relatively high potential for capital appreciation, relative to most traditional investment avenues. Equity investing is normally considered to be an excellent route to generating higher real returns over the long term approximately ranging from 15-50% annually.  However, the risks associated with this investment route for example volatility of returns, capital preservation over the shorter term are higher. You can buy or sell Equity stocks or shares at the Uganda Securities Exchange.

As Standard Chartered Bank, we have a range of local and global options for clients that don’t require them to leave the country. We are the only Bank in the market that offers foreign currency corporate bonds and one can open any international account to trade in foreign options with the help of our wealth specialists and Relationship Managers.

At whatever stage of life you are at, we’ll match the right investment for you while maintaining the right balance of return and risk.  Be Life Ready and grow your wealth.

The writer is the Head, Financial Markets – Standard Chartered Bank Uganda