Looking Beyond Equities

Published on 27th February 2007

Decisions over the kind of investment to opt for future gains are tough. Most times, they vary from short to medium and long term.  Consider having to pay rent, mortgage, your children’s school fees, family holiday at the end of the year, insurance, retirement savings, your  Masters in Business Administration (MBA) program, and the unexpected occurrences- especially those of the extended family and close friends.

Such complexities bring in the need to look beyond the short term gains of a life’s solution to financial stability.  Mull over the recent craze in equities.  The stock market craze has seen most counters soar up to all time highs with the indices gaining more than double in three years.  This has seen some Kenyans liquidate their long term/fixed assets to have a share of the Bull Run. 

With time however, huge gains can translate to huge losses- that is in the stock market.  If the current market conditions persist, we are headed for a gold mine; however, a market readjustment could lead to a huge loss.

It would therefore be prudent to consider other investment options beyond equities where a national craze has been pronounced. And although returns may not be as high (remember equities still yield the highest return), that is the direction the market shall take when the equity market becomes all saturated. 

The nightmare that most people face is, “How do I even think about diversifying if my equity portfolio alone holds mint amounts?”

Investors within the Ksh. 250,000 and above salary bracket are able to explore into the financial markets and almost try out on everything an agent has to market.  However, majority who fall below that have had to grapple with the huge margins in equities without guarantee of a future return. 

By contributing Ksh. 5,000 one can enroll into an insurance plan or a savings plan that will yield a good return in say 10 years.  Fund managers have also structured products that cater for the low to medium income earners.

As far as pensions are concerned, private managers are slowly penetrating into the industry.  Eventually, one will not have to be employed to save for retirement.  Moreso, one will have an option of choosing from either the public pension scheme (the social security fund) or a private fund manager.   

For plans that do not need independent schemes, the investment approach could offer endless solutions for the medium to long term investor. For me, the feeling of high exposure in equities has been overcome by forming an investment club.  Within two years, ten of us have achieved our financial dreams even when our ventures looked impossible as individuals.   

Through an investment club and saving up to Ksh. 120,000 per month, we invested all our cash in equities and were able to yield enough returns to consider other investment options- not necessarily high yielding.

Although I may not have claimed ownership to a real estate, we have been able to mobilize enough savings to cater for an initial deposit while the balance is paid up in shorter monthly payments over time.  With all projections going right, the plan is to afford a housing unit for each of us. Thanks to the joint investment plan. 

The problem with most people is that they have given the responsibility of planning for their future to the stock broker.  A broker will only help you as long as the hype lasts; and when its all gone, you are all alone. Always consult an advisor before committing your funds to any investor agent.


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