Investing for now and the future Co-opTrust Investment Services Presentation by Lydia Muchiri 26 June 2010
Outline Saving vs Investing Key Considerations before starting Stages of life and investing Set goals Diversification Asset Classes Choosing an Investment A case of the NSE Conclusion
Saving Vs Investing A savings to one person may be considered an investment to another. Saving - putting aside a sum of capital or cash that remains constant while earning a low, guaranteed rate of interest. Investing - putting capital where it can increase or decrease in value, but where neither interest nor dividends are guaranteed.
Key Considerations before starting Before you start investing, first establish an emergency kitty 2 to 6mths of your take home Have Insurance Protect what you already have Determine your Stage of life Where am I? Set goals why do I want to invest? Where to invest?
Stages of life and investing Age Saving Capacity Inclination Risk profile Bachelor 21-27yrs High Low High risk Newly married 28-32yrs High High High risk With children 35-50yrs High Medium Moderate to Low Pre retirement 50-57yrs Low High Low to Zero Post retirement 60+yrs Low Low Very Low
Set goals why do I want to invest? Ask yourself: What are my top financial goals? Retirement, House, Holiday, Education,etc When do I hope to reach those goals? How much money do I need to invest? Rule of 72 How do I want to approach investing? Disciplined/Adhoc Find out what kind of investor you are How comfortable am I with the idea that I may sometimes lose money if I want to grow my savings faster?
Where to invest - Diversification What types of investments do I understand and want to buy? Some types of investments grow faster than others. A good mix of different investments will help you get enough growth, while keeping losses in balance. Am I comfortable choosing my own asset mix? If not, get some expert advice
Asset Classes Through asset allocation, you can spread your money across different classes of investments, including: Cash and cash equivalents Low risk, low return Investment Clubs Enjoyable, Educational, Slow Fixed income investments: T-bonds, T-bills, corporate bonds Fixed steady income. Can be eroded by inflation Equity/Shares investments Offer the potential to make far more than either a fixed income investment or cash equivalent. Affected by company growth, Economic growth Business ventures Very high returns, Expertise, day to day management, Real Estate Appreciates with time,illiquid, large capital outlay
Choosing an Investment Speculative Investments Undeveloped land Aggressive growth stocks Moderate Risk Investments Blue chip companies Quality growth stocks Low risk Investments Government bonds Corporate bonds Cash and cash equivalents
11-Aug-08 21-Apr-09 23-Dec-09 30-Mar-07 03-Dec-07 14-Nov-05 25-Jul-06 A case of the NSE 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - NSE 20 Share Index Trend 24-Jun-97 06-Apr-98 30-Dec-98 09-Sep-99 19-May-2000 26-Jan-01 03-Oct-01 14-Jun-02 21-Feb-03 24-Oct-03 02-Jul-04 09-Mar-05 02-Jan-92 08-Sep-92 14-May-93 17-Jan-94 19-Sep-94 29-May-95 30-Jan-96 01-Oct-96
Conclusion Keep track of your investments Take advantage of Tax benefits and compound growth Keep good records of your investments so you will know how well each one does. If you have an adviser, check that he or she is following your investment instructions. Start NOW!!
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