There are lots of different investment products.  Investments such as unit-linked funds, shares and the stock market offer potentially higher returns than savings over the long term, but these plans usually involve some capital risk and the risk of poor returns.

Lower risk options include Treasury bills and bonds, which are offered by the government. A Treasury Bill is a paperless short-term borrowing instrument issued by the government through the Bank of Uganda (as a fiscal agent) to raise money on short term basis – for a period of up to 1 year. Treasury bills are issued in maturities of 91, 182 and 364 days. Treasury bills are sold at a discounted price to reflect investor’s return and redeemed at face (par) value. Treasury Bonds on the other hand are medium to long term debt instruments, usually longer than one year issued by the government to raise money in local currency. Maturities of Treasury Bonds that have been issued so far range from 1-30 years.

3 TIPS ON INVESTING LIKE A PRO

If you believe you possess the desire, time, knowledge and temperament to manage your own portfolio then these four tips will help you lay a solid foundation for investing successfully.

These “tips” are not shortcuts, get rich quick schemes or can’t miss investment opportunities.  To execute them successfully, each step will require an investment of your time, building your investment knowledge while testing your true desire to invest.

1. 1. Start with a Plan Baseball philosopher Yogi Berra once said: “If you don’t know where you are going, you might wind up someplace else.” Having a clear idea of where you are and where you want to go financially is an important first step. Your plan should address how you expect to achieve your goals as well as contingency plans, such as carrying adequate insurance, for unforeseeable events that can derail the best laid plans.There are resourceful websites that contain useful resources including articles, videos and planning tools to help you create your own plan. If you find the process too daunting, look to a quality financial planning professional for help.
   2. Focus on Philosophy. Before thinking about how to allocate your assets or researching individual investments, take time to develop and articulate your personal investment philosophy. These core beliefs about investing will guide your approach and help keep you on course over time. Investors lacking a philosophy are more easily drawn to overhyped investment opportunities only to be burned when they subsequently abandon these investments near market lows. Buy high, sell low is obviously not a viable philosophy but one far too many investors unwittingly follow. My best advice for developing an investment philosophy is to read and listen to the philosophies of successful investors. As you do this, take notes and remember this observation from legendary hedge fund manager George Soros: “When the chips are down, philosophy is the most important part of my life.”
   3. Develop a Disciplined Investment ProcessYour investment process emanates from your investment philosophy. It will address how you will build and maintain your investment portfolio. From the allocation of your assets to its implementation and monitoring, your investment process will define how you go about investing with the discipline of a professional.

INVESTMENT RISK

Before you decide to invest, consider how you would feel if your investment lost some of its value in the short-term. Investing is usually for the medium to long-term so your investment has time to increase in value.

Usually, the greater return you want from your savings and investments the greater the risk you have to take. It’s important to talk to a financial advisor about the level of risk you are prepared to accept and what it will mean to the returns you can expect.

Main types of risks:

There are several main types of risks with investments:

Inflation risk – the risk that your investment will lose value or buying power over time. Even a modest inflation rate of 3% will mean that USD100 will be worth only USD97 after one year.

Return risk – the risk that your savings or investments will not perform as well as hoped or expected. Most investments do not guarantee a set return, so you are exposed to return risk.

Capital risk – the risk that you could lose all or part of your original investment.  Before you invest, you should ask about the risk to your capital (money) and consider how losing all or part of your money could affect you. Most savings and deposit accounts are low-risk, investment products vary from medium to high in capital risk.

Currency risk: You are exposed to a currency risk if you are investing in a different currency to your own local currency. So for example if you are investing euros into a US dollar investment fund, the value of your investment will move up and down in line with currency changes.

You need to be comfortable that the level of risk you are taking suits your circumstances. You should not invest in a high-risk product if losing some or all of your money would seriously affect your financial situation.