Financial investments: Where do women go wrong?

According to Rina Hicks, who is also a certified coach and author of the book Money Wise: Create, Grow & Preserve Wealth, women tend to be more risk averse than men. She adds that there is no such thing as a guaranteed return when it comes to investing.

In your over 13 years of experience in this industry, where would you say women go wrong when it comes to financial investments?

Generally I find that women women are great savers, especially because they are mindful of their family’s future security, and this is a great advantage. However, I would encourage them not to fear investing and to understand the opportunities available and how they work. Research actually shows that women make better investment decisions and female portfolio managers have made more stable returns on their portfolios.

Further, many women are socialised to think that finances and investing are a male role and so they wait for their fathers, partners and husbands to make the decisions where investments are concerned. The belief that women don’t make good money managers is a myth.

How can a single woman invest wisely?

She shouldn’t wait to begin investing. I have spoken to some young women who don’t think about investing and spend what they earn because they expect that their future husbands will provide for them once they get married.

Young women have several amazing advantages: they are in an era of freedom – no husband to consult, no children and other heavy responsibilities, which means they are in a position to make significant savings on their earnings and invest.

Investing early will be advantageous, irrespective of how much money they are putting away due to the power of compound interest. When they re-invest their principle amount and earnings from whatever investment they make, they will compound their earnings and can experience phenomenal growth if they are consistent.

Singlehood is the time to lay a foundation for the kind of lifestyle that one desires to live in the future. Please ignore socialites and their wannabe lifestyles; focus on your goals. Craft your own path and stick to it. You will be happier that way.

How does a woman earning Sh20,000 plan that money so that she multiplies her finances?

Let’s assume she is 22 years old and can save Sh2,000 (10 per cent) from the Sh20,000 every month. She can find an opportunity to invest in a product that gives her a 10 per cent a year, such as a money market fund, treasury bond (like M-akiba), or other investment. If she re-invests her interest every time she receives it and finds additional opportunities that will give her at least 10 per cent a year, she will have Sh13,153,295.35 at age 65 (assuming the money compounds annually).

The best way to ensure this happens consistently is to automate this process by placing a standing order with your bank. No matter what you earn, you can grow your net worth using simple principles and consistent habits.

I saw something written somewhere some years ago: Wealth = Income (of whatever amount) + time + good management; I totally agree with this concept.

What consideration can a woman make to grow her streams of income?

-  Be and do extra; when you perform well in your roles at work, or in the service to your customers, more opportunities for earning additional income will come.

- Do you have expertise in a certain area? Start a blog (Bikozulu, This is Ess, BlessedNjugush), set up an online course (Chef Raphael), tutor/teach over the weekend or proof-read, transcribe, research, edit etc.

- Seek and grow passive income streams like rental income, a side business, dividend income (investing in shares of a business), interest earnings from a long term bond, royalties (music, film, a book, etc), renting out unused space (using apps such as Airbnb, for example,) and putting together an online course.

What is a smart way to invest on any budget?

Spend less than what you earn. That’s where it begins. You need to live below your means but within your needs. So if your current income does not meet your needs, find an additional income stream.

There are many kinds of investments that are available for any kind of budget, including starting a business, investing with your SACCO or buying stocks or shares. The smart way to invest is to begin by investigating the opportunity, understanding how it works, assessing the risk you are taking and ensuring you don’t put all your savings in one opportunity.

I met someone who put all their savings in a SACCO that promised a return of 12 per cent per annum guaranteed. They were excited about this return and proceeded to invest their life savings. Unfortunately, it was a scam and the SACCO collapsed. They lost everything and, for a season, could not even afford to meet their family’s daily needs. There is no such thing as a guaranteed return. All investments come with an element of risk and it is important to understand that risk before you invest.

What is good debt and when is it necessary?

Good debt is debt used for the purchase of an asset that is expected to gain in value and/ or generate an income. It is also debt that has a low interest rate and pays for itself.

One should only take debt to buy assets, and should that opportunity not work out, they should be able to repay the debt from another income source comfortably.

Examples – working capital for business, to fulfill an order to supply some goods, for a mortgage for a rental, and so on.