I’ve been Retired. How do I invest my money?

“Dear James, I have been working with a known brand name in Uganda for many years. Recently, I was retired under mutual consent and given a severance package. However, I do not know exactly what to do in order to ensure that my money does not fade away. I still have a young family and need to continue earning somehow. Please help!!”

The tone of the email vividly showed me that Gusaga (name not real) was crying out for help. As opposed to most cries I get of people who lack money, this time round, he has the money but is scared about losing it all.

You too are probably having a time of your life in that job guaranteeing you certain basics as well as promising you much more in future. However, one fate that awaits you for sure is retirement. One day, as sure as night follows day, you will be sent packing. What do you do when that time comes?

Gusaga is an accomplished professional who has put in a great effort in his career and is now at crossroads. Faced with the scenario of a lifestyle change from the 8am to 5pm job routine, the frequent meetings and travel, the corporate hobnobbing that has seen him mingle with the crème de la crème, the feeling of power and importance managing a team, company supported holidays to exotic destinations for his entire family, guaranteed education for his children in elite international schools among others, he begins to wonder what lies ahead. However, in this article, we shall stick to his concern, the money. How can he keep it and ensure that it multiplies?

First and foremost, for the money to multiply, Gusaga needs to seriously consider becoming an investor of sorts. It is only by sowing that money in various opportunities that he will realise the growth he yearns for.

He needs to establish his personality for starters. Is he a risk taker or risk averse? Investment ventures are driven by that foundation in individuals. In most instances, carefully thought out but risky ventures tend to pay significantly more than their non risky alternatives. Money lending is one of those slippery businesses where you swing to either extremes, from a good kill to a total loss. With a personality portfolio in place, he can then start considering opportunities accordingly.

In Uganda, some of the safe investment opportunities are;

Fixed Deposit: This is a financial instrument provided by banks which gives investors a higher rate of interest than a regular savings account, until the given maturity date. You might have UGX 10,000,000/= (Ten Million) and choose to fix it in a bank for a year at an interest rate of 10%. This will guarantee you UGX 11,000,000/= (Eleven Million) by the end of the transaction period. You get to make a profit above the average rate offered for savings accounts. This kind of opportunity is good if you are in a situation where you do not have a clear plan of action for the money you’ve acquired. The time it spends away from you should allow for a more sober assessment of opportunities.

Company Stock: Uganda has a vibrant stock exchange called the Uganda Securities Exchange (USE). It is basically a market area where investors can buy and sell shares of companies. You might be a great admirer of a leading business brand that happens to have listed on the Stock Exchange. Your dream of part ownership can easily be realised through this market. Two benefits for holding company stock are; first, as a part owner of the company whose shares you bought, you are entitled to a share of the profits which come in the form of dividends. Secondly, your share value is also likely to increase in financial value over time. A share you probably bought for UGX 500/= might go for UGX 750/= within a year or two. However, some care is needed when choosing the companies to invest in as the possibility of losses also exists.

Government Securities: It is normal procedure for the Government of Uganda to borrow money from the public (Public Debt) in order to fund its activities. This is done through the issuance of Treasury Bills and Bonds. What about them?

Treasury Bills are issued when Government is borrowing money for the short term i.e. not lasting more than one year. They are issued for periods of 91, 182 and 364 days.

Treasury Bonds are issued when Government is borrowing money for the long term i.e over one year. They are issued for periods of 2, 5, 10 or 15 years.

Depending on the targets you have, you can settle for the most appropriate security. By offering a predictable interest payment, these securities are risk free and hence very ideal for the risk averse. The Bank of Uganda is responsible for issuing these securities on behalf of the Government.

Other investment options do however exist especially if you are ready for the risk involved. You can consider either starting up from scratch or buying equity in an existing concern. Some business opportunities commonly pursued in Uganda include;

Real Estate: This entails property, which consists of land and the buildings on it. You can opt to invest some of your benefits in purchasing of land and selling it off after a while for a profit.

Alternatively, construct rental structures on the purchased land. This requires studying the location where the land is situated in order to put the appropriate structure that will easily win over customers. Many make the mistake of setting up large bungalows targeting high end tenants who are very limited as opposed to small apartments or units (trains) that target the medium and low end market that is much more readily available. When completed, rentals guarantee you a steady flow of cash on a monthly basis. While at it, do not forget that Uganda Revenue Authority has begun taxing landlords.

Consulting: You have worked for a good number of years and have a skill that has been perfected over this period of time. This is your chance to get into the consulting arena and sell your skillset as a speciality. Take the example of someone who has been handling tax matters for a company and got to know the intricacies involved, why shouldn’t they consider becoming a Tax Consultant upon being retired? Now that you do not have an employer expecting to take up your time from 8am to 5pm daily, you can partition that time among many smaller customers whose aggregate pay leaves you smiling your way to the bank.

Building a client base is usually the challenge here. However, if marketing is your problem, then consider joining an existing consulting firm as a partner.

Farming: Yeah right!!!! I know this is the buzzword for the average corporate in Uganda lately. No talk of achievements is complete without one saying, “I built a house and have a farm!” The rapid urbanisation coupled by an ever increasing demand for food is a great sign about the future of farming. This profession requires love, patience and honesty with yourself. Many have jumped into it and come out crying foul. As the owner, you need to be ready to love the farming activities and thereafter be active (telephone farming has messed up many due to the unprofessional conduct of most farm hands). Patience is also key because while a crop my fail you in one season, you could very easily register a bumper harvest in the subsequent season.

However, it is also worth noting that some enterprising people have come up with a cooperative approach to farming where you contribute money to a pool and this pool is utilised by someone to actually do the farming (e.g. chicken rearing) only for them to remit an agreed upon interest at the end of the season cycle. The principal amount is again ploughed back into the next farming cycle until a time when you choose to pull out of the initiative.

Technology: The technology field has generated many business opportunities over the last decade. From hardware provision, supply and installation to software development. Many Ugandans are active in the development of applications with the aim of getting a slice of the market. It is worth considering getting into this field even when you are not technically skilled. There are a number of youths out there with brilliant ideas that lack resources to pursue them. Teaming up with them could lead to a win-win.

The biggest danger I have noticed with these youthful entrepreneur wannabes is their lack of professionalism, consistency and vision. They tend to dwell so much on the belief that they are too good and everything in the business rotates around them. So, a good understanding of how to deal with them is crucial prior to committing resources.

Tourism: Uganda over the past few years has consistently topped the charts in the tourism realm globally. At one point we are being praised for being the best destination and on another note, for being the most hospitable country among many other accolades. All these are indications of how pregnant the country is to embrace tourists. You want to be able to tap into this market before it gets saturated.

One of the key challenges for this business venture is the initial investment required. Depending on the level you want to start at, it can be significantly high.

Education: Schools are a worthy investment. If you assess the demand for decent schools in the central region alone, you’re most likely not going to hesitate setting up one. While chatting with an Ex Member of Parliament who happens to be a teacher and school owner, he told me that Primary schools are some of the easiest to set up and yet also have a very fast pay back. Since they do not need exorbitant facilities like Science Laboratories, they are a safe bet when joining this industry. I would also include Nursery schools or day care centres in this category of quick pay back.

In case you do not have prior experience in the industry, it is advisable you piggy back on existing industry experts.

Supermarket: The era of small shops has been overtaken by supermarkets. Nearly each residential area has some sort of supermarket lately. This is one easy to set up business considering that the largest investment is in renting the building, branding, setting up shelves, installing Point of Sale system and hiring staff. Products to be sold are usually got on credit from the suppliers who are then paid after sales are done.

You however need to be aware of the pitfalls that come in through product pilferage. Workers and sometimes customers tend to steal from supermarkets hence creating income shortfalls.

There are many other possible business ventures for you to attempt. Take time and do your own assessment of the environment you are in. The trick is to always look out for the problems afflicting people, there-in lies a business opportunity.

Finally, I advise you to invest in multiple opportunities, something we usually term as balancing your business portfolio. There are investments that give you returns within a month or two, others a year or two and some five to ten years. Each category of business has its merits and demerits. Since you do have a substantial sum of money, identify two to three business ventures and invest not more than 40% of your severance package. This is aimed at ensuring that incase you backfired in any of them, the loss will not send you under.

What advice do you have for Gusaga?

James Wire is a Small Business and Technology Consultant based in Kampala, Uganda

Follow @wirejames on Twitter

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2 responses to “I’ve been Retired. How do I invest my money?

  1. Very educative. Thanks James.
    Gusaba should note that he has to tone down a little and be involved. So many “corporates” come by with a lot of “Lukoprate” which doesn’t work in the real world.

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