Simple investing guide for you.

We've attended forums, Sacco meeting, hired personal financiers just to tell us how to spend our money. Don't get me wrong, all this is most appreciated but the best person to guide your finances is YOU.

There was a buzz on investing especially in NSE, Bonds plus other avenues. This mode of investments caught Kenyans by surprise. We rushed to our piggy banks broke them open just to buy Safaricom, Kengen shares. Some years down the line we're still broke.Moreover, we're on debt considering we bought the shares on credit from the banks.

We are not afraid of investing but where do we start? If you’re this type of person, then here’s a simple investing guide for you.

Savings Account
Before thinking of becoming an investor, first be a saver.

The Richest Man in Babylon: Now Revised and Updated for the 21st Century
I’ve always believed that more investment builds from savings unlike economist notion of 'spend more and make more'.

Having a savings account has three purposes.

First, to build your emergency fund. Second is to teach you how to control your spending. And third, to help you appreciate the value of being frugal.

Time Deposits / SDAs
Time deposits and special deposit accounts (SDA) are your next investment considerations. In my opinion, once you have around three months worth of monthly expenses in your savings account, then it’s time to funnel the rest of your emergency fund to a TD or SDA.

How much should you put in these investments? I’d say another three months worth of your monthly expenses, but it can be more. 

Low Risk Investments
That's right, you’ve covered your very immediate future.

At best, no financial emergency will be bad enough to break you. And because of that, it’s now time for you to face a money saver’s greatest enemy 'inflation'.Insurance, treasury bills, low-risk bonds and some mutual funds, are just some of the things where you can invest on.
These instruments will more often than not, give you enough interest rates to at least keep up with inflation.

Medium Risk Investments
Low risk investments are there to help you keep up with inflation, but if you really want to beat it, then you have to take medium risk investments. Balanced funds, selected stocks, some real estate investments and small to medium-scale business ventures are examples of these.

Medium risk investments typically earn money after at least two or three years. So the amount of money you should invest here must be an amount which you’ll never need during that much period from the present time.

High Risk Investments
Medium risk investments will beat inflation, but they will rarely make you rich. Big investment wealth can only come from high risk investments such as large-scale business ventures, foreign exchange, real estate, stocks and aggressive funds.

These investments will typically need at least five years before you can realize profit, some even longer. I know it can be a long time but I will tell you now – it’s really worth the wait.

In Summary…
  • Save money first – track expenses, pay yourself first, make it automatic.
  • Build an emergency fund and put it on zero risk investments.
  • Keep up with inflation through low risk investments.
  • Beat inflation with medium risk investments.
  • Accumulate big wealth by choosing high risk investments.

I'm no financial consultant but for more reading on the same, You can catch
weekly advice on BD on Tuesdays and even sporadically in Daily Nation paper on Thursday.

A joke was told of Kenyans 'if you want to hide anything to a Kenyan, put it in writing'. Don't be in the statistics of Kenyans who don't read

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