Thursday 11 April 2024

With almost 11%, This Can Be An Alternative Source of Income


Photo by Tech Daily on Unsplash

By Arthur Moses Opio

I read something profound this week on social media. Livingstone Mukasa said, "I explained to him that 10% interest is better than 100% consumption any day, anytime."

Livingstone was talking about how, "What percentage of your money do you put to work for you?" He talked about a lady who has worked for the bank for 15 years and all she has is NSSF which will give an interest when it’s declared this year. He also talked about another person who earns 6m UGX but takes home 1.8m saying, "His Mercedes Benz C Class is about to be confiscated by the Moneylender." and that "He is now looking for a pastor to pray for him. He thinks he is cursed!"  - He isn’t cursed, he just has a money management problem not an income problem.


The statement 10% interest is better than 100% consumption was towards the man who earns 6m and "thinks one should save when they get a lump sum." - We can never have all the money, wealth is gathered little by little (Proverbs 13:11)


A friend once said, "I am paying the price of regret. It is a huge price. I remember having lots of money in my bank account. Had I at least put it in the Unit Trust, I would have enough to carry me through this rough patch."


You see when you are in a desert, the camel that’s used as your transport must be fed. If it’s not fed. It dies and so do you.  I learnt from Reno Omokri "that the camel is your future." He then stated "As you make money today, don't eat all. Feed the future. Invest money for tomorrow, or you may die before your time."


Remember, Proverbs 21:20 "The wise have wealth and luxury but fools spend whatever they get." Verse 17 of the same chapter says, "Whoever loves pleasure will be a poor man; he who loves wine and oil will not be rich."


So Why Unit Trusts?

  • Unit trusts give you a passive income
  • Unit trusts offer you risk-sensitive options
  • Unit trusts give you liquidity 
  • Unit Trusts are structured for security
  • Perks of Scale  
  • Professionally Managed
  • Tax-exempt Income
  • Flexibility 

Source (My Xeno)


I will share with you performances of two CISs/Unit Trust Funds (XENO and UAP)


XENO offers goal based investing. You can dial *165*5*7# and start investing with as low as 10,000 UGX. Through the USSD, you will just sign up because they have an MOU with MTN and this makes it easy, you don’t need an ID or Passport Photo but via web myxeno.com or APP, you need to provide those other details and within 2 days, your account will be active.





XENO invests your money in four asset classes (Bonds, Money Market Funds, Regional and Domestic Equities) as show in the picture above. The last two are volatile and because many are risk averse, a little percentage of your money is put in that asset class.  Annnual management fee is 1.5% p.a for Money Market Fund and 2.0% p.a for the Bonds.


UAP saves money in Bonds, Commercial papers, Fixed Deposits, Offshore investments, Local Stock Market. They have three funds, Money Market Fund(MMF), Umbrella Trust Fund and Balanced Fund. For the Umbrella Fund, their main objective is capital preservation and generation of consistent income with low to medium investment risk. You need a minimum of 100,000 UGX. Annual management fee is 2% p.a.


XENO Performance in the last 6 months:

  1. Feb, 29, 2024 ( MMF - 11.16% Bond - 14.79%)
  2. Jan, 31, 2024 (MMF - 11.70% Bond - 15.20%)
  3. Dec, 31, 2023 (MMF - 11.51% Bond - 15.62%)
  4. Nov, 31, 2023 (MMF - 11.76% Bond - 15.70%)
  5. Oct, 31, 2023 (MMF - 11.93% Bond - 15.62%)
  6. Sept, 31, 2023 (MMF - 11.92% Bond - 15.33%)

MMF




BONDS




  • On average, some one gets around 13% from XENO with some exposure to the volatility in regional & domestic equities.

UAP Performance in the last 6 months:

  1. Feb, 29, 2024 - 11.02%
  2. Jan, 31, 2024 - 11.21% 
  3. Dec, 31, 2023 - 11.49%
  4. Nov, 31, 2023 - 11.02%
  5. Oct, 31, 2023 - 11.24%
  6. Sept, 31, 2023 - 11.07%



  • On average someone gets 11%


There are other Funds like ICEA, Sanlam, etc. that are doing the same. These are alternative investment vehicles. 


This is low risk, so guys who are heavily involved in business will say, "ah! That money is too little for me." They are indeed right. Where the risk is high the profits are also quite high and business is one of those areas. You might be the type who says, "I can’t do business for now", but you want to participate in owning shares or lending to government - this can be a good alternative. The key is to invest for long term to benefit from compound interest.


In conclusion, in your investment portfolio, consider having Unit Trust Funds, rather than having money in your bank account where you earn 2% interest against inflation of 3.4%, you are basically earning 1.4% that means your money has lost value and you have no purchasing power. What worsens the situation is our depreciating shilling against the dollar. Keith Kalyegira once said, "When money is seated in the bank, it shows that you are not thinking." So put your money to work, that shows you are thinking. You are the commander in chief and your monies are the soldiers, you can have different battalions - battalion 1 (emergency fund - defence), battalion 2 (investments - freedom fighters).

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