7 Ways to Beat the Banks (Low Savings Interest) | By Ofomaja Joshua
If you have been following me, you would know I preach against putting your fund in a savings account and I gave my simple reason which is because the interest you get from a savings account would make you lose money in the long run to inflation.
I get the question “If we should not save what should we do?”. So this post in the bottom line is to try to give you a clear path to follow on how you can reasonably do what is far better than putting your funds in a savings account.
So, I am going to talk about seven ways to do this and I will categorize them to what investors call risk off and risk on.
Risk Off Investment is basically an investment that is perceived to carry little or “no” risk but with little returns.
On the other hand, Risk On investments are investments that perceived to carry more risk but have the potential of high returns.
1- Money Market Mutual Fund
This is one of the safest forms of investing your money to get a bit better than what you would get from just storing your money in a regular savings account.
Money market mutual funds are basically a pool of investors giving their funds to a fund manager to buy only money market securities that are usually well diversified.
This type of investment is usually open-ended; this means you can withdraw your funds anytime just like a savings account but the upside is you would usually earn more living your money in a money market fund than in a regular savings account.
2- Bonds Mutual fund
Buying bonds simply means borrowing money to an entity, this is usually government and corporate borrowers and it is considered a really safe bet for your money.
On like money market securities which take at most a year to mature bonds take a least over a year to mature.
If you borrow Naira to the Federal government of Nigeria, it’s considered a very safe investment because “las las” FGN can print Nigeria but if you borrow them dollar you may get a high return but your risk has increased because FGN cannot print US Dollar.
I recommend buying a mutual fund of bonds because your fund manager can help create a well-diversified portfolio than you may have the resources to create on your own both financially and technically.
And yes It’s usually open-ended too.
3- Stock indices
This is basically buying grouped of ranked stocks. The major once globally are the Dow Jones Industrial Average (30 companies with the highest market capitalization in the New York Stock exchange), the NASDAQ (100 technology companies with the highest market capitalization in the NASDAQ).
In Nigeria, we have the All Share Index, NSE30 and some other sector-based indices in the Nigeria stock exchange.
Over the long run, the stock market as a whole is likely to increase in price, rather for a novice investor to try to buy a particular stock it may be better to buy stock indices because it helps you diversify cheaply as it would be hard for you to pick individual stocks to invest in.
4- Partner with a growing business
This is one way to earn good money. You can just partner with a business that is doing well but need capital to expand, it may not necessarily be a public company, it could just be that guy in your area.
With this kind of investment, you can earn a good return over the lifetime of the business. Personally, if I see a business that is doing well and wants cash for equity to grow, that’s a gold mine not a lot of people get that opportunity.
Note I am not talking about ideas oh, it’s good the business is at the growth stage to get your money in a less risky investment.
5- Buy GOLD
This is usually a part of the portfolio of global investors although investors like Warren Buffet and his partner Charlie Munger are not in support of buying gold as an investment.
However, the data that is available proves that holding gold over the years is far better than holding cash. Buying gold is not risk-free as some people may feel, you can buy today and tomorrow the price can just drop dramatically due to forces you practically have no control over.
I would only recommend you buy gold only for the long run if you are new to investing or just trying to find an investment to hedge against inflation.
6- Learn to Trade and Invest
This is the ultimate skill you can have when it comes to money (my personal opinion). The skill of trading and investing will serve you for life.
It’s basically knowing how to properly manage and compound your wealth buy knowing how to find a good investment, protect your capital and then capitalize on the investment opportunity.
If you can’t do this already fear not just like any other skill you can learn it, with good education and great practice. A lot of books are out there but one I would love you to read to have a head start is The Intelligent Investor by Benjamin Graham.
Take your share out of Capitalism. A lot of people are trying to be socialist in a society that is legally capitalist. If you are like that, you may end up poor, rather don’t fight capitalism partake in it.
7- Partner with a good money manager
This I will only recommend to high net worth individuals find a good private equity partnership and be a partner.
If you don’t know how to trade and invest you may want to partner with someone who knows how to do it but you will need to be clear with your contract with the partner.
Tell them the maximum loss on your capital you can take and know to some extent how they plan to manage your money and manage risk properly.
I hope this few points have helped enlighten you on what you can do rather than give the bank your savings.
Any opinion you get from me are solely for educational purpose, they do not take your personal circumstance into consideration. Thank you.
ABOUT THE WRITER
My name is Joshua Eriaborosan OFOMAJA (JEO) I solve Money and Marketing/Business problems for individuals and businesses.