Financial tip: Don't hold money, invest it

By Admin

Added 5th December 2017 04:16 PM

Use your savings to acquire assets that will generate cash on a regular basis.

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Saving money without investing it is the number one reason many people are not financially independent. Money loses value due to inflation, plus you are likely to use any idle funds for ad-hoc expenditure, donations and emergencies.

Use your savings to acquire assets that will generate cash on a regular basis. Investments to consider include real estate, businesses that generate profits, company shares (earn dividends), long dated company and government bonds (earn coupons), yield enhancement products offered by banks and insurance companies etc.

Take time to research and fully understand the dynamics of your chosen investment vehicle. Learn from mistakes; yours and those of others in the same
investment. If you are investing in treasury bills or bonds, make sure you become familiar with the factors that infl uence interest rates.

For investment in shares (or business), look for businesses with an enduring competitive advantage — those that could raise their prices tomorrow and not lose customers.

Once you find such a business, buy shares if the price is right and do not sell. (Warren Buffet’s approach.) One of the biggest mistakes investors make is frequently buying and selling stock, incurring high transaction costs. Before you invest in shares, talk to an investment adviser to help you navigate the

Real estate is another good way to secure your money, as it is an investment that appreciates over time. If you are looking to make a regular income from the real estate, you will need to invest in property you can rent out. Otherwise, you only make money on real estate when you sell or borrow against it.

Advice by Grace Makoko. Makoko is a career banker with over 20 years of experience in the banking industry in East Africa.

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