By Godfrey Kenneth Gobba
The concept of investing our money in financial assets like Stocks, Treasury Bills and Government Bonds is still very foreign to many of us and remains subject to public skepticism.
Historically, the only assets we knew were land and houses, but here are three reasons why I believe that you need to start embracing financial assets.
Contrary to public opinion, financial assets are very affordable. You only need a minimum of UShs100, 000 to invest in a Treasury bill or a Government bond.
The stock market is even much more affordable because even as little as Shs10, 000 can be used to invest in shares. For the price of a kilo of meat you can become a shareholder in a profitable corporation worth billions like a commercial bank or a manufacturing company etc.
Can you buy a plot of land with Shs50, 000? Can you construct a house with Shs500, 000?
Financial assets are very liquid compared to land and houses. You can easily recover your money when you need it back and you can easily buy and sell financial assets when you need to.
To sell your plot of land, it could even take you up to three months to find a buyer willing to pay your desired price. So if you need the cash urgently, you could end up stuck with your land.
Whereas if you wanted to sell your shares, it could take you between two to five working days or even less.
With “oil money” coming into the picture, we should even see increased liquidity levels in our financial markets due to increased public participation as well as increased market making activity by financial institutions like banks and insurance companies.
What this means for you is that you will be able to buy and sell financial assets instantly or within just a few hours without worrying about the availability of buyers or sellers.
So as you acquire more land and houses, you should consider diversifying into some financial assets for liquidity’s sake.
How long would it take you to find the perfect plot of land that you can buy?
Buying land involves surveying several plots of land before finding a suitable purchase; surveying the land to make sure it’s the right dimensions, conducting checks to make sure the land title is legit and problem free etc. This could take anything between two weeks to three months or more.
Buying financial assets like shares only involves finding a stock broker, opening up a free of charge Securities Central Depository (SCD) account, depositing your money and finally placing your order.
This process will cost you less than 30 minutes to fill in the necessary forms, and between two to three working days before you can place your order, making financial assets much more accessible compared to land and houses.
We cannot undermine the importance of owning land and houses, but neither should we undermine the importance of financial assets to the wealth creation and preservation process.
We need a mindset shift in our country. We cannot keep on investing like our grandparents because we are living in a different economic environment from what they enjoyed.
Land is a beautiful asset to own, but so are shares. Rental income from houses boosts our financial security, but so does assured interest payments from government bonds.
My appeal to you is that you should start investing some of your money in financial assets like Stocks, Treasury Bills and Government Bonds. Now is the time to start.
The author is CEO, African Investor Academy