The right place to put your money this year

By Odhiambo Ocholla

Your money needs to keep pace with inflation, which currently stands at 18.93 per cent. Though we are looking at tough economic environment ahead, there are still a lot of opportunities where investors can still put their money.

Yes this is an election year with different mix of players, but everybody is assuming that 2012 will solve all of our problem. Sadly, it won’t.

Investors with free cash flow have the opportunity to manoeuver in these difficult times. There are a lot of great opportunities out there ranging from real estate to the stock market.The past year saw some investors gain and other loose depending on where they had invested their money.

INVESTOR LOSSES

From equities to real estate, diversification is the key to finding top returns. We continue to live in volatile times. Obviously no one knows for sure what’s going to happen in the second, third or fourth quarter of the year because so many unpredictable variables are at play. At the beginning of the year it’s especially important to start off strong and find the investment areas that will firm your portfolio and add wealth to your profits.

I’m immensely bullish on stock market as an investment destination despite the market ending the year on a disastrous performance and amounting to investor losses in excess of Sh 200 billion. While many people fear the stock market, there are many shares to choose from, that offer different levels of risk.

The low share prices appear to have made stock market the best investment choice so far. But be prepared to reap the benefits of share appreciation in 2013. Investors should hope for better returns this year as share prices looks attractive as measured by low price-to-earnings ratio.

If there’s one thing I know, it’s that people have to spend money. We’re a consumer-driven economy. And whether money is being spent on necessities or luxuries, the bottom line is it’s being spent and that fact won’t be changing anytime soon.

So its high time investors bet their money on the retail sector shares like re-listed Uchumi Supermarket Limited.

Despite the damning reports on the irregular and massive fraud in land transactions, the abnormal appreciation in houses and land prices makes real estate’s still the best place to put your money.

But for those investors who want to invest in this sector need to be wary of land-related fraud, as recent land reports in Athi River district documents. Property is a great thing to own, because it generally gains value, and you can make even more money by building a business on the property, turning it into a rental property, or perhaps even selling it.

Buying houses with intent to sell it for profit is probably the most popular, because it seems to net a great deal of profits while allowing you to show your creative side. It is advisable to follow due process when buying real estate properties.

The fixed income markets offer investors an ideal opportunity to diversify their Investments in an area traditionally viewed as a low risk-low return investment opportunity.

ASSET PRICES

Investors have the liberty to pack their money in the 91-day Treasury bills which currently price at 19.91 per cent. This is far much better than leaving your money with commercial banks to earn an average deposit rate of 5.75 per cent.

The minimum investment in the Treasury bill is Sh 100,000. Alternatively if you cannot make much money using your own money, then you can of course make more money by borrowing someone else’s money.

To my knowledge, there’s evidence that borrowing money and betting on the direction of various markets has a reasonable probability of working out for you. In fact, most of the time it works out pretty good for savvy investors.

But you have to be careful with excess debt because it can put you in a mess. But it’s advisable to borrow modestly within your means and use that borrowed money to bet on the direction of asset prices.

The writer is an Investment Banker. Email: [email protected]