Start early. If you want to accumulate wealth, time is the most important factor. The longer you save and invest, the more likely you are to reach your goals and build sizable wealth.
To begin, Set aside more money to invest over a long period of time than over a short one. That may seem obvious, but many people never fully appreciate how powerful the effect of time can be on accumulating wealth.
If you start investing early, you have more time to make up for any investment losses that will occur in some years. Investors that start later have less time to make up for any investment losses. Time will permit your investments to rebound in value.
1. Secure a long term job employment
At a young age, it is advisable to start with a long term job employment which pays an amount which can sustain you and enable you to remain with a good amount to save. The more amount you save the more secured your future will be.
2. Open a long term fixed savings account
You can do this with a bank of your own choice. However the interest rates matter especially if you are expecting higher returns. So it is advisable to open a long term savings account with a bank that offers higher interest rates monthly , quarterly , half or yearly.
If you are employed at a young age of 20s, You can start saving as low as ksh. 15,000 per month, this will accumulate to about Ksh. 180,000 at the end of the year. With this amount you can transfer it to a savings account with a bank that offers a good interest rate either quarterly, half a year or annually and . For instance, you can open a savings account with a banks offering 3% -7% interest per half year or quarterly since this will compound faster thereby yielding a high return.
3. Invest in small businesses
Once your returns have attained an amount that can allow you to start small businesses, it is advisable to begin small businesses e.g M- Pesa agent, Food kiosk, barber shop, Beverage shop, car wash. While investing in these businesses ensure you continue making your monthly savings.
For example, if you run a business generating a daily income of Ksh.1,500 , you can to save Ksh.500 per day and at the end of the year youll have saved Ksh. 185,000. With this you can still return to deposit in a savings account while other monthly savings from your salary income are still being generated.
4. Invest in a Macro business
When your savings have become enough , you can combine both your salary and business savings and begin a macro business. However this will take some years depending on how you will have managed your small businesses. Good management of small businesses will yield good returns. Try as much as possible to avoid debts.
Macro business include businesses offering a higher income as compared to small businesses e.g Mini - mart, Soda depot, wholesale, hardware, small rental houses. These investments generate a much more higher income which can allow you to start loaning your money to other small investors at a good interest rate.
5. Buy Stocks/Shares in small companies.
Once you have a good amount of money for stock investment. You can venture into buying and selling of stocks so long as it offers a higher return. When you buy a stock, you own part of the company you invested in. As the company grows, your stock goes up in value. Some stocks will also share profits in the form of dividends. Stocks often grow more than other assets over the long-term but they also have a higher risk of losing value.
6. Buy stocks/shares in bigger companies.
Identify the best shares to buy in bigger companies for instance NSE Kenya (Nairobi Stock Exchange). Research your prospective company’s general health: If you want to invest, let’s say in Safaricom, look for its annual report first. This will give you an overview of the company’s future prospects- you want to buy shares of a stable, growing company.
Evaluate the business further: Hunt for any useful information in the newspapers, the internet, TV, etc. about the company’s shares. Also look for the latest Nairobi stock exchange performance data of the share from the NSE online.
You can also consult an experienced investor or your broker for advice on the best companies to buy shares in Kenya even as you analyze the company’s competition, cash flows, debt levels, and strategic plan.
7. Invest Bonds on smaller companies.
A bond is a loan to a company or government agency. Since the company or agency usually pays a fixed interest rate for the bond, bonds are considered a fixed-income asset. Bonds are considered less risky than stocks and are seen as a way to reduce your portfolio risk but they don’t grow in value as much as stocks do.
8. Mutual Funds Investments
Mutual funds are a group of securities that you can invest in easily. They’re a great way to venture into and get immediate diversification across hundreds of companies.
As these companies innovate and grow, you get a piece of the returns. If a few of the companies have a bad year, you’ll be protected because you’ll have hundreds of other companies to lean on for growth.
Mutual funds have annual fees, and actively-managed funds have higher fees than index funds. Before investing, learn how much your mutual funds charge.
9. Asset Allocation Investments
Asset allocation is how you split your investments across asset classes. In the investing world, this is typically measured by how much you have investing in stock, bonds, and other assets. Coming up with a proper asset allocation depends on your age, investing goals, and risk tolerance. Once you have an asset allocation that fits your investing style, you can use it as a compass for your investing strategies.
a). Real Estate Investment:
Investing in real estate means purchasing property to improve upon – or rent out – for income. It can be a high-risk activity but may help you build wealth quickly. If you want to invest in real estate without buying a house, an REIT (Real Estate Investment Trust) allows you to put money into an investment company that purchases, improves, and rents real estate for you and gives you a piece of the profits. An apartment with 60 units 2 bedroomed houses rented at ksh.10,000 can generate Kshs. 600,000 monthly.
b). Travel agency
You can invest in a transport agency with ksh. 25,000,000 for instance with 5 buses each generating a daily income of ksh. 15,000 can reward you Ksh. 400,000 monthly.
c). Commercial rental Buildings
Commercial rental building business is however beneficial only in urban areas or surburban areas. With 30 units rented at ksh. 20,000 monthly can generate ksh. 500,000 monthly. This however you can only invest in this if you have over Kes. 200M as an individual or as an investment group.
Factors to consider while making Investments
1. Avoid debts or loans since these reduce your investment capacity and also increase the duration your investment time.
2. Always keep some emergency cash for use in times of inconveniences, delay or hardship so as to secure your savings.
3. Investment for massive wealth often takes a longer time and doesn't require faint hearted investors.
4. It is important to do alot of research on whatever investment group you'll want to join before making a step to buy a share or stock.
5. The key factor is to continue saving funds at every level of investment so as to increase in financial capacity required for bigger investments.
WHY INVEST AT YOUNG AGE
Future Time is saved:
Future time is secured when you invest at a tender age which allows you to venture into other areas of your interest e.g Politics, Church leadership which implies that in future you will be financially stress free and focused on your careers.
There will be times in life when you will need urgent money to meet unavoidable expenses. During such times, the investments made at an early age can prove to be very handy and will help you get through the tough times all by yourself. The need for borrowing money from others decreases drastically with early investments.
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