In one of our previous blogs, we discussed some contemporary investment opportunities. The article elicited quite some reaction. We hope that it gave you some further insights into the products.

In today’s blog, we look at more opportunities and discuss their viability for investing.

Insurance

Insurance companies have over time sold education policies and life insurance products as investments.

These products are also referred to as endowment plans.

The insurance companies receive payments referred to as premiums over a long time in exchange for a lump sum pay out at an agreed-upon time or compensation to beneficiaries in case the product buyer dies before this agreed-upon time.

So, are these insurance products investments? Well, the reality is that insurance is more for protection rather than investment. In other words, the value of any insurance product is that you get compensated in case of a loss. For these life insurance products, for example, the real utility is the “peace of mind” you get -- That in case you die before the agreed-upon period, your beneficiaries will receive a cash pay out.

However, in terms of investing, these products will give you a very low return on your investment. They are therefore not advisable for someone looking purely to invest.

SACCOs

SACCOs have over the years been a major source of funds for personal improvement and development. Kenya owes a lot of its development to SACCOs. From agricultural SACCOs to employee SACCOS, these institutions have provided pooled funds that have been used for both personal and national development. However, the question we are asking today is this: Are SACCOs a good investment opportunity?

SACCOs are a major source of funding due to the ease of debt. Members borrow up to 3 times their savings without the need for security apart from a guarantee from other SACCO members. Debt processing is also easy and fast and the interest rate is relatively low. 

However, the reality is that SACCOs are ideally not for investing but rather for accumulating funds towards taking a loan. For this reason, SACCOs will avoid members withdrawing their saved funds (shares) and rather encourage members to borrow money against these funds. Furthermore, very few people who receive dividends from SACCOs re-invest these dividends; therefore, the SACCO account savings do not compound.

Running a Business

Many investors believe that starting and running a business is a way of investing. They will invest their money in a shop or a matatu. Are businesses good for investing?

Businesses are an ideal source of income as opposed to being an investment. Businesses in most instances require more of your time and effort as opposed to your capital. You will need to actively manage your business for you to make money. 

It is for this reason that we advise business owners to have alternative investments apart from their business to separate their income from business and their investments. This way, their investments are shielded from business risks. 

Multi-Level Marketing (Network Marketing)

Multi-Level marketing (MLM) also referred to as Network Marketing or Referral marketing is another contemporary opportunity. The MLM business model allows members to join a business at a low initial cost. The business will be selling products such as health products, ornaments or services such as travel. Once you join the network, you get to profit every time you refer someone to join the network or buy products from the network company.

Multi-level marketing has enabled many individuals to make substantive profits by simply referring others to use products or services. It is therefore a worthwhile source of income as opposed to being an investment opportunity. You can therefore consider MLM as a side hustle or alternative source of income and then channel funds made from your MLM to investment products that will grow your funds.

Other “Investment Opportunities”

There are other products or opportunities that always come up in our market promising to give good returns to investors. Some of these investment opportunities are indeed credible and you could profit. However, some fraudulent or bad investment opportunities would easily lead you to lose your funds. In our subsequent article, we will review how you can tell whether an investment opportunity is worth considering.