Here’s How a Chama Can Invest while Waiting for Member Consensus

Each member of a Chama would like to see a change as they go out to invest their money.  Some groups hold back their money out of fear they may lose as they search for investment options. For a group that has not identified what it needs to invest in, a Unit trust fund is the best short-term option as they agree on investment options.

Unit trusts are money vehicles’ that enable investors to pool their money together with the same objective. Money is managed by fund managers who make decisions on behalf of the group. Money is invested in several portfolios such as shares, bonds, and money market instruments or other authorized securities to achieve the objectives of the funds.

Essentially there are two types of unit trusts: money market funds and market equity funds.

Unit trusts in Kenya are operated by generally by the leading insurance companies, so your Chama members can be sure that the money the group has invested is in safe hands. But there is the need to know the difference between a unit fund and an insurance policy!

Features

1. The income that the funds earn is from the investment in the form of dividends, interest income, and capital gains.
2. The earnings are calculated every day; Monday through Friday, and the daily rates are published in the newspapers. Investment options vary from as little as five thousand shillings and scale up to one million shillings to open an account, but after that, the group can withdraw as much, and the balance will continue to earn interest.
3. Furthermore, the interest is compounded on a monthly basis. That is, group money earns interest every month. In banks, most savings accounts earn interest after three months, and fixed deposits operate on simple interest.

Benefits

Diverse

Investors in unit trusts can access a broader range of securities than they could when investing on their own.

Liquidity

There is ease in buying and selling the units. In comparison to investing directly in shares of companies, where prices and opportunities to transact depend on the supply and demand at the time of investment.

 A broader array of investment options

Fund managers can trade in investment products such as government and corporate bonds, which may be restricted to institutional investors.  Some of these products are purchased in bulk, which limits the individual investor even when he has the opportunity.

Considerations

1. The fund’s investment objective and strategy, investment limits, its current portfolio, and any commentary on its recent performance.
2. Check the past performance of the fund.
3. Look out for good and consistent performance over the longer term
4. Look for any specific features and constraints which may conflict with your group’s needs or preferences.
5. When deciding which fund to invest in, look for information on the shareholders, board of directors, and key management staff of the fund manager.
6. The Chama officials should be able to assess the financial strength, track record, and expertise of the company and its staff.

There are a variety of firms that offer the unit trust investment. The most pronounced are Old Mutual, Stanbic Investments, Britam ,CIC, African Alliance Kenya, Commercial Bank of Africa, ICEA, Suntra Unit Trust and Zimelea.

Categorised in: CIC Insurance, General, Growing, Old Mutual, unit trust

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