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Benjamin Cheruiyot, an investment advisor at Abojani Investments has shared how a monthly contribution of Sh6,000 can generate Sh500,000 in five years.
In a post shared on X, Cheruiyot shared the idea of investing a unit trust fund. He revealed that a unit trust fund with a 12 percent returns p.a would generate about Sh500,000 in five years for someone investing Sh6,000 monthly.
He further shared ideas on how to use the money for more returns. According to him, purchasing a hatchback for taxi business or buying a 50×100 plot for own residence or rental units would be great investment ideas.
Other viable investment options for Sh500,000 according to Cheruiyot are investing in a special fund for 18 percent annual interests, and buying half an acre land for poultry, vegetable, dairy goat or cattle farming.
Understanding Unit Trust Funds
Unit Trust Funds (UTFs) are investment schemes that pool money from various investors and are managed by professional fund managers who invest the pooled money in a portfolio of securities such as stocks, bonds, and other money market instruments or other authorized securities to meet the objectives of the fund.
The pooled money in the Unit Trust Fund earns income in the form of dividends, interest income and/or capital gains, depending on the asset class the funds are invested in. Investors in a unit trust fund are usually issued with units, which act as a portion of the underlying portfolio of securities, in exchange for the amounts invested.
Unit Trust Funds in Kenya are governed by the Capital Markets Authority and regulated under the Capital Markets Collective Investments Schemes Regulations, 2001.
Unit trusts have a variety of investment vehicles with different risk exposures and returns. The most common funds include Money Market Funds, Equity Funds, Fixed Income Funds, and Balanced Funds.
Depending on the level of risk appetite, an investor can choose to invest in a unit trust fund which best suits their investment objectives. Some of the advantages of investing in UTFs are:
Investment Security
The investor is assured of the fund’s security as each fund is supposed to have a trustee who oversees the overall operations of the fund. Despite the risks involved in any investment, unit trusts are well regulated by the CMA which bars fund managers from taking certain risks.
Attractive Returns
Unit trusts offer considerable returns as compared to traditional investment products or bank deposits and have overtime proven themselves to beat inflation.
Investment Diversification
UTFs ensures diversification through investment in a variety of asset classes through which they provide an avenue for small scale investors to get exposure to a wide range of investments which would otherwise require one to have a lot of capital to access.
Liquidity
UTFs ease the process of buying and selling units compared to investing directly in shares of firms whose opportunity to transact depend on the supply and demand at the time. Additionally, investors do not have to wait for a buyer of their units since the scheme can issue new units or redeem existing ones at any time.
