It is said that for every dark cloud, there is a silver lining. The Covid-19 pandemic has in part come with massive job lay-offs. It has not been business as usual, literally. These changes, though unplanned and unprecedented for many, as far expectations at the beginning of the year go, could also be a blessing in disguise.
This week, Caroline Njoroge speaks to a financial consultant on how to multiply the little or much you have, highlighting the different platforms that women can invest in this period.
When Joan Ruto lost her job as a communication skills coach, it was time to think quick. Times have changed, requiring quick adjustments that will ensure survival. “I took some avocados from my aunt on credit, posted some photos on WhatsApp advertising that I was selling and delivering avocados in batches,” said Joan when speaking to Founders Connect, a Youtube channel that shares stories on entrepreneurial ventures.
That is how her business was born, she adds that all the extra time that came with the season gave her room to really think about alternative channels of income. “Selling avocados is working for me. I used the opportunity that came with the shift and with this, I presented something to God that he could help multiply for me,” says Joan.
The pressure presented by the changes in this season has meant dusting ideas off the shelf and giving them proper consideration and planning. It has meant the onset of new businesses. Some, however, have felt like what they have is too little to start them off on a new path. Rina Hicks, a Director, Faida Investment Bank and Certified Professional Coach on matters finances, speaks on how to ride the wave successfully.
1. One of the question we keep seeing, especially on social media, is what business options are there with less than Sh10,000 capital?
Sometimes, when others talk about where and how much they invest, we look at our current situation and tend to feel discouraged. We forget the truth; that majority of us come from humble beginnings. With determination, the right resolve, and consistency you can do amazing things.
Sh3,000 in a month can sound like little but it’s a start. You can use it to do several things: pay into your Sacco as a saving, put it in a money market fund or in an M-Shwari account with the aim of accumulating the funds to save towards an investment.
You can also invest the funds in a small business, for example a clothes business. You could buy practical well styled second hand children’s clothes from Gikomba for between Sh30 to Sh100 a piece, clean them up and resell in an up-market area for double to triple that price.
2. Is pooling resources together in order to invest a good idea?
The coming together of friends or colleagues with common interest to save and invest as a group is very common. These groups can be amazing places to invest and save if you put your money together to invest in assets and projects that you couldn’t do alone.
I am not talking about merry-go-rounds; I mean groups that come together with a view to invest members’ funds in lucrative opportunities that leverages on the power of many as opposed to just one individual. As Tony Wainaina, the Managing Partner at Fanisi Capital Limited says, investment groups can become practical and reliable retirement plans for you.
However you must ensure that you come together with like-minded individuals who are committed and who share similar values. Create formal structures, systems and a clear strategy. We have examples of many groups that have come together and significantly improved the financial circumstances of its members.
I spoke to a pension administrator who shared that if we rely on the formal or mandatory pension schemes that exist, we will only receive an average of 15 per cent to 20 per cent of our pre-retirement income when we retire.
This is a sad reality. Investment groups that are well run can provide opportunities for us to be disciplined and save. They have an in-built accountability mechanism that will compel individuals to invest for the future.
3. With all the changes that the pandemic has brought, what are the best platforms for investing?
In this season that is characterised by a lot of uncertainty, it would be best to invest in safe, liquid, low risky assets. You do not want to invest your money in opportunities that may result in significant losses and your goal in this season should be to preserve your capital.
I would encourage everyone to begin by building an emergency fund. You do this by calculating how much you spend on essentials a month, and multiply this number by at least six. Invest in Treasury Bills, money market funds that are licensed by the Capital Markets Authority, fixed deposit accounts with banks, and even hard currency.
Save as though your life depended on it. Cash is king in this season.
Lastly, beware of investments that promise high consistent investment returns with little or no risk, where they are secretive about how they are making money.
4. What are some of the standard considerations that a woman should make before investing?
Research reveals that while women have less confidence in their financial knowledge than men, this is not matched by poorer investment choices.
In fact, a large sample of almost half a million private portfolios studied by the German Comdirect Bank shows that in 2007 and the financial crisis year of 2008, women did 4-6 per cent better than men in their investments on average. This is encouraging!
My request to every woman, single and married, is to participate and be involved in all decisions that concern finances. Some of the things that you can begin to do to grow your confidence where managing your finances is concerned, is to firstly clearly define your goals so that you know the reality of how much you will require and when.
Next, track all your expenses and then list down your total household income. Prioritise your expenses and cut down on things you can do without so as to save and invest. Lastly, grow your financial knowledge by reading widely and speaking to financial advisors about the different savings and investment options that will match your goals, time horizon and ability to take on risk. Speak to more than one expert; in an abundance of wise counselors there is victory or success.
While it may be a laborious process for some, learning how to evaluate investment opportunities can be fun too and will be of great value to you, and your family. It will also equip you to manage your resources well and secure your financial future. After all, women are naturally great investors! That’s a fact.
5. What are some of the fears you have seen women express as far as investing is concerned?
Many women share their feeling of inadequacy as far as handling finance is concerned; they think it’s too complicated. I have had clients who prefer putting their millions in a savings account because it keeps things simple, and safe in their view.
Some women prefer to leave all the decision making to the men in their lives – fathers, or husbands, because they feel reassured that since the men in their lives are so good at what they do, they don’t need to bother themselves getting involved in the intricacies of financial planning for their family.
Some feel that someone else, a professional, should take care of their money. They end up trusting the said professionals and take on their suggested products in full trust. This emanates from fear of incompetence; the thought that money is a mystery that they can’t and will never understand. They are generally anxious about financial decision-making and don’t feel like they’re up to the task.
This is a misconception, one that should be dealt with. It is important for women to understand how the concept of growing money works, that way they will easily capitalise on available opportunities.Would you rather see the future or change the past?