Smart investment strategies for long-term wealth

Making informed decisions on where to invest money should align with an individual’s unique circumstances to ensure a more secure financial future.  

Additionally, an individual’s investment options depend on return on investment, risk profile, and term. However, it is advisable that before deciding where to invest your money, an investor needs to understand how it works.

Here are a few smart ways to invest your hard-earned money.

Saving and Deposit options

NCBA has some of the best interest rates in the market, so saving with NCBA can be a smart money decision. As an individual, you can monitor, move and access your money easily through online and mobile banking as you earn daily compounding interest.

Saving your money at NCBA offers guaranteed returns and carries a very low risk.

Invest in yourself

Invest in your growth and expansion. If you own a business or have a business plan, you may consider investing money in it.

You can also invest in online or skill-building courses and sell your services online.

You can also start an online business, as it is easier to set up.

Collective/Community savings

Table banking, or Chamas, is a great way for any investor to grow their savings. In Chamas, people pool money in a common fund, and they can borrow money from the kitty at a certain interest rate.  

The fund keeps growing as new members join the pool and from the interest earned from the loans given out.

With NCBA Bank’s Investment Club Loan, you can take advantage of investment opportunities as they arise. This loan program provides loans to Chamas and other investment clubs and self-help groups to grow their assets as they build their contributions.

Under this, they can access loans ranging from KSh1 million up to KSh50 million with flexible repayment terms.

Invest in government or private sector bonds

A bond is a security debt issued by a government to raise funds. When you buy a government or a private sector bond, you are lending money to the government or the private sector entity in exchange for regular interest payments and the promise that the principal amount will be paid back when the bond matures.

The government usually offers treasury bonds with a payment period of one to 30 years. These bonds can be quarterly, semi-annually or annual. 

Investing in bonds is considered safer and offers a higher rate of interest.

NCBA’s investment arm (NCBA Investment Bank) has a dedicated bonds-trading desk that offers services in both Secondary Market Trading and Government Primary Bond Auctions. The bank facilitates the buying and selling of existing treasury and corporate bonds in the secondary market on behalf of clients on the Nairobi Securities Exchange (NSE).

Invest in Unit Trusts or Mutual Funds

Unit Trust, also known as a collective investment scheme or a mutual fund, is a professionally managed investment fund in which investors’ contributions are pooled together to purchase financial securities, such as equities (shares), bonds, bank deposits, etc. In Kenya, unit trust funds are regulated by the Capital Markets Authority (CMA).

A mutual fund manager or company takes your money and invests it in financial securities that offer a higher rate of return. There are two types of mutual funds: open-ended and closed-ended mutual funds.

In an open-ended mutual fund, an individual can buy and sell units at any time. The price of the units depends on market values. In a closed-ended mutual fund, the individual has to commit his or her money for a certain period, and one cannot withdraw money before the maturity date without incurring a penalty.

They are risky as they are subject to market fluctuations.

Under NCBA Unit Trusts Funds, the bank has an NCBA Money Market Fund, NCBA Equity Fund and NCBA Dollar Investment Fund. The Money Market Fund and the Equity Funds are accessed for as low as KSh5,000, while the Dollar Investment Fund has a minimum investment of USD100.

Invest in the Capital Markets Authority (CMA) through the Nairobi Securities Exchange (NSE)

There are several financial products that one can invest in, such as Shares, Bonds, Exchange-Traded Funds (ETFs), Real Estate Investment Trusts (REITs), and Derivatives, among others.

Each type of investment product has its own risk, and you need to understand how each financial instrument works before investing any money in it. Additionally, an NSE broker can provide guidance.

NCBA Bank facilitates investments at the NSE by providing brokerage services, online platforms, investment advice, and efficient settlement and custodial services. Additionally, it facilitates investments in government securities and ensures compliance with regulations.

Invest in Real Estate.

You can invest in the real estate market through Real Estate Investment Trusts (REITs). An individual can venture into this with a lower amount than what is needed to buy a piece of property. An individual can also exit the investment depending on the terms of the REIT.

Real estate investments offer good returns if market prices are up, but there is a high likelihood of losing money.

At NCBA, the bank offers a variety of services and products to help individuals and businesses invest in real estate, including financing options, advisory services, and tailored investment solutions. The bank facilitates real estate investments through Mortgage loans, Home Equity loans, Real Estate Investment Advisory, Development Financing, Savings and Investment Products, and Real Estate-Backed Investments.

Peer-to-peer lending.

Under peer-to-peer lending, a small group of friends can invest in businesses in return for a share of the profit. This form of lending is common with small business owners because it bypasses traditional banking barriers and gives them better access to funding.

Additionally, this form of investment has lower interest rates and flexible terms, making it an attractive option for entrepreneurs seeking funding.

It helps entrepreneurs build relationships and networks, expanding their business opportunities.

It also empowers women and minority entrepreneurs, providing them with access to funding and support.

Alternative investments.

Other instruments include commodity futures, Over-the-Counter (OTC) derivatives, Contracts for Difference (CFDs), forex trading, and cryptocurrencies.

Equity derivatives are traded on NSE Next, while Commodity & Forex derivatives are available as CFDs or Complex derivatives at major forex brokers in the country.