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Ten years ago, when Standard Chartered Uganda had just launched wealth advisory services, the first client I met said “Diving into the world of investments is like trying to solve a Rubik’s cube blindfolded.” I found this analogy particularly amusing because several trials later, with my eyes wide open, I still have not succeeded in completing one.
Just like with my client, investing is still a dilemma for many Ugandans: where do you even begin, and what investment option should you choose?
Meet 32-year-old Rose.
Rose works for a corporate firm in Kampala, from 8:00 am to 5:00 pm daily. After her eight-hour shift is done, she moves on to her other job, managing a clothes’ shop she owns in the city. Between them, Rose and her husband earn enough to meet utility bills, school fees for their three children, and groceries; and are servicing a loan they took to complete their house.
“I want to be able to give my children the life I never had: good schools, nice clothes and the occasional family holiday. I needed to supplement my income to afford me the life I want,” she says of the decision to start her business or side hustle, as these jobs are commonly known. While the side hustle brings in some extra money, Rose finds herself struggling to balance the demands of a full-time job, running her side hustle and being there for her family.
“It involves a lot of after-hours and weekend work,” she says, “sometimes I end up having to miss family events.”
Getting Rose back on track
Rose is not alone. Having a side hustle has become common in our culture, with a Uganda Bureau of Statistics (UBOS) National Labour Force Survey estimating that about eight per cent of the population in employment have multiple jobs.
Having a side hustle is not the problem. But given Rose’s hectic schedule, is there a way she could make money another way? What are the low-risk options that could afford her a passive income and buy back her freedom?
Investments are the answer to Rose’s, and possibly your own conundrum.
World over, several investment options exist that have eased the process of wealth creation. These include stocks, shares ownership in a company, also known as equities; bonds which are essentially loans to the government or corporate entities and paid back after a certain number of years; and mutual funds.
But, with every investment avenue promising the moon and the stars, how do you know which one is the real deal?
As your financial advisor, we at Standard Chartered Bank get it. We’re here to cut through the noise and bring clarity to your investment journey. We know that each of you is unique, with your own dreams, fears, and goals so will take a personalised approach aligned to your priorities.
Here are a few tips to help get you started.
Keep it simple
If like many people you are just starting on your investment journey, navigating the investment landscape can be overwhelming; especially in today’s digital world where the amount of information, financial terms and options can be overwhelming. The key is to keep it simple; seek proper guidance and knowledge from reputable sources and experienced financial advisors to enable you to make the best money decisions. Once you identify your investment plan, commit to it and keep the discipline of regularly building up to your investment(s) of choice. Avoid emotional buying and selling and remember to regularly review and rebalance your portfolio.
Set your timelines: Long-term vs. Short-term Goals
Your investment strategy will depend on your goals, how much money you need to reach them and your time horizon. Rose, for instance, has both short-term goals like going on holiday, but she is also thinking about retirement, which is a long-term goal. If you’re saving for a short-term goal such as a holiday, or to cater for any emergency, you will need options that allow liquidity so you can access your funds when you need them. Short-term goals will also be served well by flexible approaches such as mutual funds/unit trusts.
For the longer-term goals— periods of five years and more— you can go with options that are less liquid and lock in your money, for instance, bonds and equities. You may also consider saving in different currencies to meet your financial goals. For example, while local currency investments yield a higher return, foreign currency also provides hedging against inflation, especially where your long-term goal involves overseas connections like an education abroad.
Weigh the risk!
Once you decide how to invest, you’ll need to choose what to invest in. Every investment carries risk, and it’s important to understand how much you are willing to take on based on factors like your age, your current financial obligations, your knowledge and experience of financial products and your individual preferences. Some investors may prefer more stable and less volatile assets like treasury bonds if they are risk-averse while an aggressive investor seeking high returns will likely explore more volatile options such as equities.
Many eggs, many baskets! Allocate your assets wisely.
Once you have fully understood your risk profile, and aligned your goals and objectives, you can now move on to allocating funds to different investments. This involves spreading investments across various asset classes, currencies or even geographies. Diversification help you to build a well-balanced portfolio to weather market fluctuations. A well-balanced mix of mutual funds, local currency and foreign currency bonds can help spread your risk, as each asset class responds differently to varying market conditions.
This approach ensures that when one asset class is underperforming, another may thrive, thereby balancing your overall returns. Your risk appetite will change as you move through the various life stages. Hence review your risk appetite regularly to ensure you have an appropriate asset allocation on your portfolio.
Sounds too good to be true? It is too good to be true!
We have all heard of at least one scheme or other that promises unusually high returns, usually for minimum investment. “Invest this amount and get 50% returns in 6 months”! Sounds familiar? Be wary of such get-rich-quick schemes. Investment is one area of your life where FOMO, ‘fear of missing out’, getting caught up in the hype and following the crowd should not apply! It is critical that you research and exercise due diligence; seek advice from financial experts before making investment choices. Consider factors such as whether the investment scheme is regulated. For example, The Capital Markets Authority regulates all investment schemes in Uganda so if that “hot new investment” your friends at the bar are raving about is not regulated, run the other way!
Time in the market vs timing the market
‘Timing the market’ refers to the act of entering and exiting the market at specific moments, with the hope of getting good returns. ‘Time in the market’ means investing with a long-term view and not trying to guess when the market is at its lowest or highest point. Market selloffs can be difficult to predict, and timing your exit and re-entry is challenging.
Stay ahead of the curve
Remember we are all part of an interconnected global village! Keep an eye out on what’s happening around us, including financial news from reliable sources and guidance from experienced financial advisors. Learning is a lifelong journey. The more you know, the better equipped you’ll be to make informed decisions.
Protecting your wealth is as important as creating it.
Protecting the value of what you have, and what you will generate in the future, is very important to help you manage and grow your wealth. An untimely critical illness can disrupt your income, medical bills can prove to be a burden. Protection (in the form of insurance or savings plans) can bring stability to your finances in times of uncertainty. By adding protection to your wealth plan, you can provide financial coverage to tide your family through hardship. An endowment plan, for example, requires you to contribute a manageable amount each period in return for a lump sum pay-out after 12 years, but will also provide emergency payouts for any diagnosis of a critical disease, disability or loss of life.
You’ve come to the right place!
At Standard Chartered, our team of certified advisers and relationship managers will discover your priorities, propose solutions, and track your progress for generations to come.
Get started today by contacting our Investment Advisor Gorretie Kigongo on +256784577292 orUganda.InvestmentAdvisory@sc.com.
We are here for you; we are here for good.