You can invest (2)

The challenge for some people is not savings but what to invest their saving on. While there are a host of investment options available, the reason for investing should guide your decision. For example, if your aim is to invest for children school fees, it is advisable you choose an insurance linked investment.

Yes! An insurance linked investment. This is because such investment, in addition to offering some returns on the money invested also offer guarantee for the children’s education in case of death or permanent disability of the parent doing the investment.

This is better and offer more confidence than investing such money in stocks, treasury bills or bonds.  Remember, your aim is to make sure that your children can still continue their education irrespective of what happens. Insurance linked investment is also good for money invested for retirement purposes or to ensure your family does not suffer when the unexpected happens.

However, if the aim is to create a pool of fund that would serve as shock absorber in the event of unemployment or family emergencies, it is advisable to invest in a tenure bank deposit.readmore.........

This is because when such emergency occurs, you need money you can easily access within 24 hours. This can be very difficult if you invest in stocks, treasury bills or insurance linked investment.   An example is the case of a young man, whose car was involved in a fatal accident, and he tried to access money invested in shares to resuscitate his car. It took more than two weeks before the shares were sold and the cheque issued to him by the stockbroker.

But if your aim is just to save in order to earn good returns over a period of five years and above, you can invest the money in stocks, treasury bills, or bonds. Irrespective of what happens in the economy, or even in the stock market, your money and the expected returns are guaranteed.

Now some people make the mistake of putting money in banks’ Savings Account, and call it investment.  This is not investment; you are just providing your bank with cheap money to trade with. At best, the bank will pay four percent (4%), but it will lend the same money at 25 percent. Meanwhile, if you withdraw from the savings account more than twice in a month, you lose the interest for that month.

Finally, if your aim is an investment option for regular small savings (e.g. N2000 and above per month) so that overtime you can invest the accumulated fund in something big,   a   Savings Account is good, but   a reliable open ended mutual fund is better. There are many of such reliable mutual funds in the capital market, with different investment focus i.e. money market, stock, bonds, etc. The good thing about such funds is that they are structured in a way that allows the investor make monthly contributions or investment as capable, while he can also access his money whenever he choose