You might have started your chama a year ago or you might have spent several months saving and now you are ready to invest. Research suggests that the right time to start investing as a chama is after your group has been in existence for at least one year – ideally meeting regularly, and members interacting well. The logic for waiting one year is that members will get to know each other well, and will have time to settle down into the chama, plus you will be able to save up some money as well for investment during that time. Once you are ready to invest, you must have an investment plan here are 5 keys to help you.
1. Main Purpose
Investments must be chosen with a main goal in mind: safety, income or growth. The first thing you need to decide is which of those three characteristics is most important. Do you need current income, growth so the investments can provide income later, or is safety your top priority.
2. Time Frame
Establishing a time frame you can stick with is of the utmost importance. If you need the money to buy a school bus in a year or two you will create a different investment plan than if you are putting money into a mutual fund on a monthly basis and won’t need to use the funds for fifteen years or so. In the first case, your primary concern is what the account will be worth in a year. In the second case, it is irrelevant what the account is worth in a year; of greater importance is positioning the account for growth so it is worth more fifteen years down the road.
3. Account For the Level Of Risk You Are Comfortable Taking
Some investments entail a level five investment risk; the risk that you can lose all your money. These investments are too risky for most people. One easy way to reduce investment risk is to diversify. By doing so you may still experience large swings in investment value, but you can eliminate the risk of a complete loss.
4. Specify How Much You Will Invest, and How Often
Many investment choices have minimum investment amounts, so before you can lay out a solid investment plan you have to decide how much you can invest. Do you have a lump sum, or are you able to make regular monthly contributions? Some local mutual funds with companies such as Old Mutual and CIC Insurance allow you to open an account with as little as Kshs.5,000 and then set up an automatic investment plan starting with as little as Kshs.1,000 a month which would transfer funds from your chama account to your investment account. If you have a larger sum to invest, obviously more options are available to you. In that case you’ll want to use a variety of investments, so you can minimize the risk of choosing just one.
5. Understand The Choices Available
Too many people buy the first investment product presented to them. Better to lay out a thorough list of all the choices that meet your stated goal. Then take the time to understand the pros and cons of each. Next, narrow your final investment choices down to a few that you feel confident about.
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