How to build a UGX 700 Million value using a monthly UGX 300K Investment
September 4, 2024
And if you are a couple, with each managing to invest 300K per month, then you would be on your way to UGX 1.4 Billion and making close to UGX 200 Million per Year in returns.
It’s all about the Discipline and building the Habit to play the long-term game
Friends,
Many of you have asked to restructure the conversation with the use of Unit Trusts or Treasury Bonds to build a financial nest that that can compete with investing in Investing in a house.
This was premised on the conversation, that not many have UGX 30 million in one go to invest at once and majority can afford between 300K- 500K per month off.
In this example, I will compute and show you the path of investment in the Unit Trusts & Treasury bonds using small amounts like UGX 300K and the commitment power of compounding in a long term.
If you're 25+ years old, with the ability to save UGX 300K per month, investing in bonds and committing to this investment for a year could yield great results. This commitment would result in a total investment of UGX 3.6 million in principal. Within the first year, you are expected to earn a minimum of UGX 270K in coupon income.
For a Young person, time is your greatest asset to Maximize Investment compounding. Play the Long-term game. So, invest like you will need that Money 20- 30 Years from now, invest like you are investing for your Grand kids.
Furthermore, if you're younger, you still have a substantial amount of time left to make such investments. My advice would be to invest primarily in long-term bonds lasting 15 years or more, offering high coupon rates and only charging 10% Withholding Tax (WHT). (Bonds of 10 years plus offer the highest coupons and charge the lowest tax, thus giving you an opportunity to maximize return)
Alternatively, if you desire more accessible funds (Liquidity and emergency Investment goals), invest in a Unit Trust. For the past decade, these funds have yielded an average return to its investors of about 11% per annum.
If you dedicated yourself to investing that 300K monthly in a Unit Trust, you'd have invested a total of UGX 3.6 million by the first year and would have earned a total of UGX 211K in that same year.
Assuming you begin your investment journey on your 25th birthday, by the time you're 26, you'll have UGX 3.87 million in the Bond or UGX 3.81 million in a Unit trust.
If you consistently continue and invest UGX 300K for the next 15-20 years, your valued investment will grow from as little as 3 million in the first year to over UGX 500 million as seen below, and what’s most importantly, you can easily withdraw your money whenever you are ready whether after 5 years or 10 years and deploy it in other ventures as you so wish.
Treasury Bonds
To build a robust portfolio in treasury bonds, reinvest all the coupon payouts, you can do it annually or monthly with your UGX 300K top up. Continuing this investment habit, by your 27th birthday, you'll have UGX 13 million in bonds.
Continue with the UGX 300K monthly, for the next 10 years and by 2035, you will have over 80 million in value and making more money in a year than what you invest, and if this is your retirement package of building a bond portfolio only using 300K, BY THE time you are 50 years, you will have over UGX 700 Million and making close to UGX 100 Million per year.
And if you are a couple, with each managing to invest 300K per month, then you would be on your way to UGX 1.4 Billion and making close to UGX 200 Million per Year in returns.
Yield of the 10-year bond for the last 5 years consistently being above 14% and projected to remain so in the next 10 years. (For the past 10 years, The 10 year bonds have offered coupon rates above 14% and it’s anticipated to continue to be the same for the next 10 years, so this has factored into the projections)
The Choice
The choice between bonds and Unit Trusts often boils down to your liquidity needs. If liquidity is a critical factor for you, Unit trusts are a superior choice, as you can access your money within 24 hours from most Unit Trust funds in Uganda. Conversely, if your main goal is to maximize returns, you'll be better served by investments in Treasury bonds as those above 10 years might even help you make as high as 14% per annum in returns.
This is the power of compounding while Investing in the capital markets; a testament to the astonishing results a disciplined investment approach can yield.
Please share more light on available treasury bonds in the market and their interest rate and how often they can be accessed..
Hello Alex, from reading many of your articles I have gained knowledge on trusts and many examples have been shared. However, when it comes to bonds. I have quite a gap from e am not sure what bonds are presently open and on market.
Which ones to invest in either.
If you can help shade more light on this I will be greatfull