Make your money work for you, they said

Make your money work for you, they said

‘Make your money work for you’ is one of those clichés that will almost make your ears bleed from overuse. But, we can ascertain that those who have followed it have gone on to create unimaginable wealth. As you consider an investment option, here are the pros and cons to think about. Stocks Read More

Stocks are stakes of ownership in a company. In Kenya, when people talk of having bought some ‘shares’ especially in a listed company, they are mostly referring to taking a slice of the company and receiving part of the company’s profits as a proportion to their invested amount.

Pros: Like any other product, if you buy when the price is low, there is a possibility of the share price going up and, depending on the number of shares bought, you can ‘flip’ them for a profit . You can then reinvest either in similar stocks either in the same company or elsewhere.

Cons: Stocks are unpredictable. A company doing well today may face unforeseen turbulence that shakes the share price sending it on a downward spiral. This is what has happened to many firms owing to the ongoing Covid-19 pandemic. On the other hand, a company may not always pay you a divided even after making a profit. It may want to reinvest the cash by perhaps expanding the business through introduction of a new product and alter the business strategy. To make good money, a person needs to have a long-term view of the stock market and hope for a rebound.

Bonds

To the uninitiated, stocks and bonds might be confusing. While a stock means you own a slice of a company, a bond, in lay man’s terms is more of a debt that an entity enters with an investor. The entity promises to pay you back your money together with interest accrued during a specified period of time. In Kenya, the government normally issues bonds to finance big projects such as infrastructure or other capital-intensive projects.

NB: If you have been keen on the business news, you will know that government bonds are currently a safer bet compared to corporate bonds

Pros: Bonds operate on fixed terms thus guaranteeing you returns over a certain period of time. The interest paid on your ‘debt’ is also fixed and not affected by interest rate fluctuations. Thus, as an investor, you can plan for the cash […]

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