Why open a savings account for 7% interest when there are better deals?


Financial freedom is a term thrown here and there but what truly does it entail? An investment is a risk, what we mostly are exposed to are news headlines of individuals losing millions of shillings at the bourse or through pyramid schemes. What we never realize is that investors do make great returns and have learnt the art of seeking financial knowledge from trusted sources.

Mercy, 20 years old, for example, had been promised a car by her father. But when the time came, her father chose instead to deviate from the original promise to something else that at the time left his teenage daughter both confused and distraught. He took Mercy to the bourse and purchased her shares with Sh300, 000 that was supposed to be a down payment for the promised car. In a span of three years, Mercy was told, she would be able to purchase a car of her choice. She was not amused, as a millennial, for the postponed gratification.

Months into purchase of various stocks, her initial investment dropped by 30% but a year later recovered to make a gain. Interestingly, what pleases her dad was the fact that Mercy quickly developed keen interest in trading at the bourse. Her desires for owning a car waned as those on investment waxed.

Losing or gaining money during investment is all opportunity to learn. Stephanie Onchwati, investment analyst Cytonn Investments offers some insights:


If an investor sought a bank loan, they would get it at an approximate interest rate of 18% going by the current interest rates commercial banks are charging. So, what if you, the individual investor, foregoes depositing your money with a bank for an annual interest of approximately 7% and give the cash to an investment institution like Cytonn Investments and then get a guaranteed interest of 18% p.a? In short, you act as the financial institution to them. This is the thinking behind the Cash Management System.

This product is called a fixed income structured product where an investor is required to invest a minimum of Sh1 million depending on the investing company you choose and you can subsequently top up with amounts of Sh100, 000 depending on how much money you want to put in them.

The investor is guaranteed a fixed return of 12% in one month, 15% in the second month, which rises to (16, 17 and 18) % in the 6th, 9th and 12th months respectively for the case of Cytonn Investments. As aforementioned, saving with a commercial bank would earn you around 7% returns annually. This cash management solution earns you 18% return on your principle investment of Sh1 million. Depending on the investor’s choice of liquidity, they can start withdrawing their interest quarterly or choose to get it at the end of the investment period alongside the principle or even roll onto the next year and continue investing. Makes sense?

The Cash Management Solution allows you to pull your funds alongside other investors. Once the resources are pulled, they are channeled to a custodian account (Standard Chartered Bank for the case with Cytonn Investments) and the investor signs a partnership agreement. No cash payments are allowed and the funds are transferred via a bank for security purposes to help curb money laundering by unscrupulous individuals. The investor provides their identification numbers as provided in their passport or identification card and Kenya Revenue Authority (KRA) PIN to ensure their tax compliance and enable Cytonn, in this case, to do a background check.

From the custodian account, the pooled money is moved to an investment account where the knowledgeable investment team will then invest for instance in real estate, bank deposits or equities. This is done for the investor bearing that not many of us have the investment knowledge to seek out viable investments.

Important notice on this product, the cash management solution, is that Cytonn Investments acts as a guarantor and so in case the investment does not yield a positive return, the investors still get their fixed return on their investments alongside their principle remaining intact.

The craze amongst Kenyans to invest in real estate is not fading anytime soon. While direct investment in the same by individuals is financially prohibitive due to the huge initial amounts required, Kenyans can still seek out products from the available investment institutions and get a piece of the pie. One such product is the Project Notes, whose underlying investment is real estate.

In 2017, a Cytonn Investments report on mortgages revealed that only 22,000 Kenyans actually went for a mortgage. In a country of close to 44 million individuals, that is a meager 0.05% of the population. This is a drop in the ocean for a population that greatly values property.

While high prices have been the sole barrier to mortgage uptakes and the capping of bank interest rates has not helped, Kenyans can still partake in real estate through Project Notes.

This investment instrument is slightly long term in comparison to the Cash Management Solution. Investors here do not enjoy the luxury of choosing a direct project to have their investment rather the investment company spreads these risks to several projects which they analyze and settle on based on their industry expertise to spread risk.

While the minimum investment amount is varied amongst various providers, with Sh1 million being common, it enables the investor to partake of real estate cake, which in its place would require a huge initial investment. The fact is, reputable investment institutions that employ well informed investment analysts to shop for good investments for the investor and thus reducing risk is what any would-be investor with their hard earned money seek.

Next time you pass a massive project being undertaken by some real estate developers, realize that your money could be there earning you interest as the project continues without you having fully paid for the entire project. This pooling of resources is the idea behind project notes.

The country is awash with get rich schemes; any investor who does not seek financial knowledge on a product from a certified investment analyst is similar to one gambling.

Both the cash management solutions and project notes offered by Cytonn Investments and other investment companies not only offer attractive interest rates but should also attract you to seek expert opinion on matters investment.

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