Concept Advisory Services

• Why You Should Have A Website

  Posted: May 14, 2008, 7:51 pm by admin

  I decided to come up with a website after much interaction with prospective clients and all I was hearing is… why have I not heard of this before? Where can I find such info? This is timely! And a lot of other interesting answers. This website and blog was created with the public in mind where anyone could access personal finance articles and be able to make a decision in as far as better management of their finances goes. I am happy to see that I have achieved this goal if the feedback from readers is anything to go by.

   Even though majority of you do not like putting comments on the actual articles, many of you have written directly to express gratitude at finding the website and more so the blog. And yet, some of you have become clients courtesy of the website.

  Initially I was hesitant on the whole idea of a website. I knew that we Kenyans are fond of visiting websites where politics is the main theme or social sites like Mashada. Even popular sites like stockskenya.com have had to provide a forum where people can discuss other things apart from investments. So, for someone running a ‘serious’ website what chance did I have of succeeding! However, as I continued to interact with prospective clients, the more confident I became that a personal finance website would work.

   My first negative experience as far as getting a website was concerned was the person I initially gave the task to develop. Despite being a reputable firm and having a sizeable clientele, the firm was a disappointment. I had been warned to avoid ‘cheap’ developers but no one had told me to do a due diligence and that price is not the only factor. I had talked to the owner of the firm who had promised heaven only for the project to fall behind in months. A website that should have been online in October had not been touched by 1^st of November. I finally talked to one of the technical people, an insider by then, who did a superb job.

  
  My feeling is, for anything technical, have a chat with the real people handling the task. It is only after talking to one of the technical guys that I realized what was going on and I managed to avert further loss of money and time.

  
  In the five months the site has been operational, I have not conducted major publicity like advertising in the newspapers. I occasionally contribute to stockskenya.com and much of the traffic comes from this direction. There are other bloggers who have added CAS to their blogroll and I am grateful for the gesture.  The blogs are relevant to what I do hence there is no mismatch. It just goes to show, whether you have the greatest product on earth or something that will save mankind and yet no one knows about it, then it is of no consequence. Many thanks for those who have added CAS to their blogroll. There are also visitors who introduce the website to their friends through the online form in the main website. Kudos to all.

  I normally visit other blogs…check my blogroll, many of whom started way before mine. When I constructed the site I had not considered that it’s such an exciting yet demanding undertaking. Sometimes I would log into one of my favorite blogs and if there was no new content, I would be so disappointed.  However, I now understand. Between serving clients and keeping informed on the investing world, it is very easy to forget to post new content. This is especially the case when most of the time is spent answering emails. Do not read me wrong, am not complaining here but rather very humbled by the overwhelming number of emails I receive. In the near future, I plan to be posting the answers to the common questions on the website. This way, hopefully, you can always look forward to new content which touches on the lives of the majority of Kenyans

   The advantage of having a website is on the number of people you are able to reach. I have made many friends and it all started with an email. I now have important contacts hailing from our neighboring countries to as far as Romania. A website is a truly great tool due its wide reach.

   If you are thinking of a having a website and you are not sure of its importance then know it works. The only requirement is to have a website that has your clients in mind.

   

• How To Fund Your Child’s Education

  Posted: May 9, 2008, 7:55 pm by admin

  (As interviewed by the standard Newspaper dated 5^th May , 2008)

  My name is Douglas Mutiso and i am 38 years old with a family of three children. I work with a local manufacturing company in a managerial position where i take home a net salary of Ksh 90,000. I also earn Ksh 20,000 from two servant quarters i took a loan to construct. I do not pay for rent since I live in my own house, but am repaying the loan at Ksh 35,000 a month. I also pay Ksh 10,000 a month to my personal pension scheme. My employer doesnt provide this. My eight year daughter was recently detected with asthma, and i spend approximatley Ksh 7,000 for her medication a month. I also pay school fees amounting to Ksh 25,000 a month for my children in classes one, three and five. My wife takes care of the other home expenses from her salary as a secretary, but i chip in about Ksh 10,000 a month.

  I would like to take up an educational fund for my children too and secure my family’s future. How do i achieve that and still be comfortable with my other responsibilities.”

  Mr. Mutiso, the key to funding your child education is to start planning and saving now, no matter what your child’s age. It is a good thing that you have already identified this major financial goal and you are willing to develop a plan to achieve it.

  There are various ways that you can meet this goal. A good place to start would be for you to come up with a spending plan that will help you identify areas that you can cut on spending or seek alternative means that will save you money. For example, instead of paying k’sh 84,000 towards your daughter’s medical bill from the pocket, I would recommend taking a medical cover for the same amount in premiums but with a limit more than 10 times the amount. This will afford you cover for all the members of your family and would come in handy if an emergency arose.

  Mr. Mutiso, in your break down of expenses you have not mentioned whether you have an emergency fund. An emergency fund cushions you against a financial calamity. This may include loss of job, illness, or making a major purchase. With an emergency fund, you can access your money in a short notice. Generally, it is recommended for an individual to put 15% of one’s income after tax in such a fund. The best place to have an emergency fund is a high yielding savings account without many restrictions on withdrawal. Your personal pension fund may not meet your emergency obligations due to the restrictive laws governing such schemes. When the funds grows to a certain amount, say a year’s saving, you can invest this money directly in the stock market or engage the services of fund mangers who operate unit trust schemes.

  Having put k’sh 16,500 (15% of k’sh 110,000) in an emergency fund you’re left with k’sh 6,500. This is the amount you need to work with in setting an education fund.

  Various options exist in setting an education fund. You can open a children savings account with any of the banks. Normally, the account is in the child’s name but the parent operates the account. The interest is usually higher than your average savings account. Greatest advantage is you can pull out anytime and there are no penalties. The only charge is for closing the account.

  But with such an account, you may not fully realize a good return on your money. Savings accounts provide minimal return and will not protect you from inflation. Ultimately by the time your child is of school going age and you want to liquidate your savings, the savings may not cover the cost fully. Again, a savings account may not require your disciplined effort to save. It’s possible then to lack motivation and hence find yourself no longer being motivated to carry on this noble goal.

  My advice would be for you to consider taking a unit linked education policy with any of the insurance companies. With a unit linked policy, a larger part of your savings is invested, say in the stock market and the remaining option affords you an insurance cover. Thus, as an investor you are guaranteed better than average returns in the long term. The returns in the long term can be higher than the rate of inflation in a similar period hence preserving the value of your money. And with the mandatory life cover, you can sleep well knowing that even if you are not there the family will be provided for.

  A unit-linked policy affords you monthly contributions, with a low of k’sh 3,000 and an option to vary your contributions upwards or downwards depending on current circumstances. Upon inception, the requirement is to put a direct debit in force. With this arrangement, the amount of premium is debited from your account and remitted to the insurance company on the time you have specified. It’s advisable to put the direct debit falling close to the date you receive your salary. This would remove the temptation to withdrawal the funds before paying the premium as the bank will already have remitted the cash. A unit-linked policy is a long term savings machinery with a minimum period of ten years. This would require a disciplined effort on your part. It will also call for a sacrifice on your current consumption where you will do away with non-essential purchases.

• Monkey Business

  Posted: May 7, 2008, 8:42 pm by admin

  Once upon a time in a village, a man appeared and announced to the
  villagers that he would buy monkeys for k’sh 500 each.

  The villagers seeing that there were many monkeys around, went out to
  the forest, and started catching them. The man bought thousands at k’sh 500
  and as supply started to diminish, the villagers stopped their effort.
  He further announced that he would now buy at k’sh 1000. This renewed the
  efforts of the villagers and they started Catching monkeys again.

  Soon the supply diminished even further and people started going back
  to their farms. The offer increased to k’sh 1,500 each and the supply of
  monkeys became so little that it was an effort to even see a monkey,
  let alone catch it!

  The man now announced that he would buy monkeys at k’sh 4,500! However,
  since he had to go to the city on some business, his assistant would
  now buy on behalf of him.

  In the absence of the man, the assistant told the villagers. “Look at
  all these monkeys in the big cage that the man has collected. I will
  sell them to you at k’sh 3,500 and when the man returns from the city, you
  can sell them to him for 4,500 each.”

  The villagers rounded up all their savings and bought all the monkeys.
  Then they never saw the man nor his assistant again, only monkeys
  everywhere!

  How many of us whose stock trading imitate that of the villagers? You buy and dispose shares on mere hype and publicity.

   Share your experience on a stock you bought cauze of the hype and what was the outcome.

• Thinking Of Investing? Steps To Follow

  Posted: May 2, 2008, 7:45 pm by admin

  1. Figure out your goals.
  When you first start thinking about this, it seems nebulous. It’s often hard to tangibly state what your goals are, especially if you’re young and single. However, you often find that they day you get married, it feels like a flood of goals hit you at once - buying a house, having a child, and so on.

  Here’s what to do to get started. Take out a sheet of paper and list every financial goal you have in your life right now. What are you saving for? What would you like to be saving for? Things that might wind up on this list are retirement, your children’s education, a house down payment, complete debt freedom, a car, “walk away from your job” money, money to start a business, and so on. Some of those will be important to you, some won’t, and you may have some that aren’t even listed there.

  Then, take that list and rank them by importance to you (or to you and your spouse). Don’t worry about what society says, but I will say that younger people tend to undervalue the importance of retirement. Other than that, it’s really about what’s important in your own life - not in what society thinks or what someone else sees as being important in life.

  I tend to argue in favor of focusing on the top two to four goals. This way, an average person can actually reasonably accomplish those top goals in a reasonable timeframe. Figure out that time frame for those top goals. How much time is it before you reach that goal?

  This doesn’t mean that your goals are set in stone. Everyone’s life changes over time and your goals may in fact change. The point is that your investment decisions are led by your goals, so before you even start investing, you should have a good grasp on what your goals are.

  In my own life, I have several goals: retirement (targeted for age 60), my children’s college education (targeted for about seventeen years down the road), a new car (targeted for 6months-1 years from now), and a new house in the countryside (targeted for about twelve years from now). Each of these have a different investment strategy, which we’ll get to in a minute.

  2. Know your risk tolerance.
  One major piece of the puzzle that people don’t address before they start investing is their risk tolerance. Often, they overestimate their risk tolerance, then find themselves in an investment situation that leaves them feeling very nervous about their financial position.

  Spend some time thinking about this. Would you not worry if you woke up and found out that you had lost 5% of your investment if you knew in the long run it would build up in value? How about 20%? If you had k’sh 100,000 in stocks, and then over a very bearish month, k’sh 20,000 of that vanished, how would you honestly react? Would you take your money out?

  The reason this is important is that it is extremely dangerous to be invested in something that exceeds your risk tolerance. If you find yourself waking up in the middle of the night nervous about where your money is, you’re likely to make an emotional move, like taking your money out when it’s about to rebound.

  As a general rule of thumb, if you feel nervous about losing money at all, you probably shouldn’t be invested in stocks. Keep it in cash, in either your bank account or in certificates of deposit. Don’t feel weird - my best friend is in this camp.

  On the other hand, most people have some degree of risk tolerance, though, and if you find that losing 10% or so won’t make you scared and ready to pull out, then you should dip your toes into stock investment. We’ll get to the specifics later.

  3. For short term goals (less than two years or so), keep the money in cash.
  That means store it in a savings account or perhaps fixed deposit account at a bank - whichever option gets you the best interest rate and enables you to have cash in hand on the day you need it.

  Why? Keeping it in cash means that it won’t be exposed to the up and down nature of the stock market. Quite often, over short term periods like two years, it’s quite possible that not only will you not turn a profit, but you might actually lose a piece of your invested money.

  4. For medium term goals (two to ten years), diversify at your comfort level.
  If your investment window is more than two years, the odds that you’ll come out ahead on the stock market start to get better, but it still comes with some risk. The stock market is never a guarantee, and past performance is never a guarantee of future returns.

  Another factor to consider: how much is your life relying on this money? It makes sense to be more conservative with retirement money than with, say, money you’re saving for a new car. That’s because a downturn in your retirement can force you to work for years longer, while a downturn in your car savings just means you might have to continue to drive an older car for a year longer. The more vital that money is to your life plans, the more conservative you should be with it. If you’re not sure, be more conservative than less - keep plenty in the savings account and just dabble in the stocks.

  5. For long term goals (ten years or more), stocks are a pretty good place to put your money.
  Over the history of the stock market, almost every period longer than ten years has seen a profitable return in a broad stock investment. Even better, during many ten year stretches, the returns are quite impressive. Because of that (even though past performance isn’t a guarantee of future returns), it generally makes sense to put long term money heavily in the stock market.

  6. The best place for first-time stock investors to put their money is in a unit trust
  There are several reasons for this.

  First, the  fund allows you to be invested in a lot of stocks at the same time. That way, you’re not affected by the ups and downs of a single company just as you are getting your toes wet in stocks.

  Second, a low cost fund means that the investing house isn’t eating much of your money. Look for a fund with a cost less than 2%. That way, the gains go into your pocket, not in the pocket of your investing house

Blah blah blah

Fish cakes

Alas a fish cake.

Yet more fish cakes

Guess what ... yeah ... fish cakes.

The end of the fish cakes