Investment has often been perceived to be a sole perverse of the rich and prosperous. However, it does not need to be so, one can simply employ whatever resources are available to them to make more money.

Doing Business spoke to   Himanshu Arvind Kapadia, a Certified Forensic Accountant and Consultancy Partner at JALI Partners Ltd on tips to get started on investments.

Excerpts;

Many people don’t invest simply because they think it is for the rich or for those  that have established businesses. Does one’s job or business status determine how one invests?

Investment is important for everyone irrespective of their level of income. It gives financial security and support during stages of low income and after retirement. Return on investment not only grows wealth but also gives additional income stream. It protects us in the event of financial emergency, gives freedom to pursue dream career, long term security, and pays for large purchases, and avoids debts, financial independent. Investments can also support in big event of life like marriage, education.  So the bottom line is there is countless reasons to invest money.

When one is planning to save, does any amount they start with matter?

You can start with any amount of money, long term or short term. Before we start investing, it is important to do some basic calculation and understand fundamental. Prepare a budget on how much money available to invest after settling monthly living expenses, keep a close eye on debt with high interest rates like credit card balances, loans and other liabilities, then work on basics to give an idea of what and how much money someone needs in the future.

Please understand that you don’t have to wait until to become 100 per cent debt free. Start investing after keeping provision for repayment of interest and principal of debt if any. Start investing two percent to five percent of your monthly income in investment plan with secured return. The amount of investment will increase in proportion to your increased monthly income.

If someone is new to investment, are there easy hanging and safe opportunities?

The safest way to start investing is to deal with local financial institution or bank. Build a recurring bank account. Whatever your income is, deposit certain amount in bank recurring account every month. It doesn’t matter whether amount is in hundreds or thousands, what is important is consistency and you need to believe that this money is untouchable. Let’s say you start saving Rwf 20,000 per month just for three years, with compounded six percent rate of interest, you will get Rwf 790,656  at the end of three years.

Fixed deposit and saving scheme. These are most popular and reliable option available for investment. This is offered by local banks, financial institutions and micro finance. These are different in terms of types, interest rates and tenure. Fixed deposit has a certain locked in period but returns are little more than saving accounts.

You can also try the national pension scheme, this is a saving scheme that mainly aims at providing monthly income after the retirement of the investor.

For someone that has no idea on how investment works, how long should they wait to earn return on their investment?

Different investment has different returns on income. Like if one goes to a mutual fund or to buy government bonds or debenture than it has fixed return for a certain period of time. The best way is to check different option available and compare return on investment. This is a bit complicated task and one may have to take consultant advice. This is just to make sure you’re investing money at the right time and right place. Usually, return on investment is between six percent to 12 percent depending on schemes and options available.

Briefly take us through investment  tips that can increase wealth and provide financial security

Set aside for retirement this is very important to maintain the standard of living even after retirement.

Settle debt. Any debt on which you pay interest more than seven per cent per annum is a bad debt and you need to settle that as soon as possible. Once you pay off the debts with the highest interest rate or settled smallest outstanding balances first, you will be having more money to invest. This is also important because most investment gives return between five to six per cent  and not settling a loan with interest rate more than seven percent will disturb the cash flow.

Save for emergency or something you want. Always keep a total of at least three months income in fixed deposit for any emergency or to pay high purchases. This will avoid borrowing any loan which has high rate of interest. Once you reach at the stage where you settled all your debt and have enough months to cope up emergency, work on creating an additional stream of income.

editor@newtimesrwanda.com