Investing is an effective way to put your money to work and potentially build wealth. Since it is a long-term game, if you do it early, you have the most to gain. College and university students who invest can therefore grow towards financial independence even if they start with a modest amount. Add this to the fact that most of them have few financial obligations and the time to learn and make mistakes, then failing to invest is a mistake. Nevertheless, not all investment options are suitable. If you are a student considering investing, here are a few options to consider:
1. Money market fund (MMF)
MMFs are a perfect investment if you have with a low risk appetite or little capital. With a minimum initial investment of even Kshs 100, any student over the age of 18 can invest and earn returns of 5-9% p.a. The know-your-customer (KYC) requirements are also easy to meet and signing up could be as simple as dialing a USSD code on your mobile phone. Thus, an MMF account is a must have, not just to earn a return but also to build investing discipline.
Another investment option for students is investing in the stock market. In order to start this, you will need to create a CDSC account through a registered broker. The minimum number of shares you can start with is 100, so the amount you end up investing will depend on the share price of the company you choose. The broker can also advise on which shares to trade. Alternatively, you can do this yourself having learnt to observe stock market movements. The profit margin tends to be small for short-term trading, so it is advisable to buy stocks and let them appreciate over the long term.
3. Investment club
Students can an investment club. This is a group comprising individuals who pool their resources together in order access investments which would have been out of their reach as individuals, for example stocks, mutual funds and real estate. If you join such a club, ensure your involvement is contractual to ensure all funds are handled according to a binding agreement.
4. Fixed income account
An alternative investment option is investing in fixed deposit accounts or mutual stocks, instead of placing your money in a savings account. Fixed deposit accounts offer a fixed return of around 6% p.a. with no limits to the initial investment. Mutual funds and government bonds are also a feasible and low-risk choice. The government created a new affordable bond, M-akiba Bond, through which you can buy bonds worth at least Kshs 3,000 and you can earn a 10% annual interest.
In conclusion, Kenyan youth should start investing to safeguard their futures. While the investment may feel inconsequential in the beginning, they have time working in their favour and it will grow over time as will their financial discipline.