Investing isn’t as hard as it may seem. Young investors have more time to grow wealth. Compound interest and reinvesting dividends are proven ways to build long-term wealth.
Young investors can start by considering these options:
Money Market Funds
Money market funds will provide safety and liquidity for your idle cash. Money market funds are one of the ways to earn compound interest. To create an emergency fund that covers at least three to six months of expenses, use a money market fund.
SACCOs savings
Saccos are beneficial for financial security and long-term growth. As a Sacco member, you will earn interest on deposits and dividends on share capital annually. If you’re looking for cheaper loans and Sacco dividends, this is an ideal option.
Dividend Stocks
Dividend stocks are those that pay dividends to shareholders on a regular basis. Standard Chartered, BAT Kenya, Williamson Tea, Kapchorua Tea, I&M, Stanbic, Co-op, and ABSA are dividend-paying stocks that have a higher dividend yield than inflation.
Reinvest your dividends and buy more shares. Asset accumulation is key for building wealth over time.
Consider putting as much of your savings as possible in stocks. Younger people like to invest in high-risk areas, such as stocks, while older people are quite conservative.
Infrastructure Bonds
If you buy a 30-year infrastructure bond, you will be earning interest every 6 months. Several bonds, issued at different times and with different maturity dates, are available for purchase. That means that if you buy three, you will receive six interest payments per year in retirement.
ETFs
Investing in exchange-traded funds (ETFs) that track the market and allow dividends and gains to accumulate typically outperforms short-term stock trading strategies, especially over a long period like your working years. ETFs have very low fees and offer strong returns.
Retirement savings plan
If you’re still young, your most valuable financial assets are time and compound interest. Investors in their 20s have at least 40 years to accumulate retirement savings.
A Ksh5,000 monthly contribution can result in millions of extra shillings at retirement.
Individual pension plans and employer-sponsored retirement plans are excellent ways to start saving for retirement.
Employer-sponsored plans often provide matching contributions, and this can give your retirement savings a tremendous boost.
