As a general rule, people prefer to manage their finances on their own. Everyone does it in their own way, regardless of the compelling reasons behind each investment. In general, creating an ideal “investment basket” that suits your personal needs is of utmost importance, hence the importance of seeking investment advice from professionals, which will help in choosing the right products for the planned period.
Money market funds are collective investment schemes that invest in short-term, high-quality securities such as government and corporate securities, and typically outpace inflation rates, providing a better chance of preserving the real value of investments.
Unlike traditional savings options, money market funds invest in foreign currency denominated instruments, providing a hedge against currency depreciation.
These products are often highly valued due to their low risk, stability and easy access to funds for short-term needs. For example, CIC Asset Management’s MMF product starts from Sh5,000 with an average interest rate of 13 percent compounded monthly while providing flexibility and access to your funds when needed.
Mutual funds allow you to build a wealth basket while taking a proactive step towards financial security in today’s volatile economic times.
In money market funds, investments are spread across different assets, including bank deposits, treasury bonds, and cash holdings, reducing your exposure to any one asset class or market risk and thus keeping the fund stable and providing a balanced return on your investments.
Compounding interest makes it a good investment alongside monthly contributions. This interest is reinvested into the principal, ensuring your money continues to grow.
Liquidity is a major concern when it comes to investments. In most money market funds, this is easy as you can get your money back within a short period of time, ensuring that you have access to your money whenever you need it. Additionally, the fund also protects you from inflation as it allocates your investments across different asset classes including bank deposits, treasury bills, and cash-like holdings.
To make the most of these opportunities, monitor the fund’s performance and choose a fund with a good mix of investments and short-term investment terms to minimize risk. Put safety first by choosing a fund that invests in safe debt, such as government bonds, and consider a company with a good reputation in the market.
Drawdown is a way of receiving your pension as a regular income (monthly, quarterly, semi-annually or annually) after retirement while your pension balance is reinvested, for example in a pension fund. It is an arrangement whereby a member chooses to access their pension benefits as a regular income through an investment fund from which pension benefit payments are drawn.
Income withdrawals, especially CIC, offer the individual member flexibility in terms of investment choice, frequency, timing, and amount of these income withdrawals.
The minimum withdrawal period is 10 years from the withdrawal start date, as determined by the Pensions Authority. In addition, the member may withdraw up to 12 percent of the outstanding balance on the member’s account annually, leaving the invested balance to ensure returns based on prevailing market trends.
After the minimum 10-year period has elapsed, you are offered the option to continue with the income withdrawal arrangement.
Purchase a pension using the funds or convert the funds into a lump sum for withdrawal.
Pensions are financial products designed to provide a ‘fixed’ income over a guaranteed period or for the rest of a person’s life. They are typically purchased with a lump sum of money that is converted into a series of payments, which can be paid monthly, quarterly, semi-annually, annually or as agreed in the contract.
This strategy is typically used as a retirement income strategy to ensure a steady cash flow after retirement from regular employment. One can structure their payments so that they are paid on a fixed basis or make them variable as desired.
One of the main benefits of a pension is its ability to provide a reliable source of income during retirement or other stages of life where a steady cash flow is essential and thus plays an important role in a person’s financial security.
In conclusion, diversification across balanced mutual funds can help achieve a balanced portfolio that aims for growth while managing risk.
Regularly monitoring macroeconomic trends and making necessary adjustments will ensure that your investments continue to align with your financial goals and market conditions.