Collective Investment Schemes – an investment option for busy professionals!

The Money Engineer

Many people working formal jobs find themselves in a dilemma were the salary is barely enough to sustain them and would like to diversify their income but simply don’t have the time to start a business or project.

As a busy working professional finding the time and energy to run a separate business is quite difficult. Many times I find myself waking up at 5.00 am and getting back home after 8.00 pm from Monday to Friday. The weekends end up being quite busy as well.

In a bid to diversify my income I have been researching and experimenting with a couple of investment options for busy people who wish to invest in something sensible without having to dedicate a lot of time and energy. This search has led me to an interesting investment vehicle called collective investment schemes!

A collective investment scheme is basically a way for several individuals to pool their resources and invest with a common aim of making a profit. Usually the pool of resources is managed by a separate person and the the individual investors are not involved in the day to day management of the scheme. In Uganda these schemes are regulated by the Capital Markets Authority (CMA) through the Collective Investment Scheme Act of 2003. It is important to note that pension schemes, insurance contracts, Saccos, investment clubs, and investment in shares are not considered collective investment schemes according to the Act.

The most common type of collective investment scheme is the unit trust scheme. The most common licensed operators I have dealt with are STANLIB, ICEA, and UAP. Most offer different schemes with variable rates of return ranging anywhere from 5% to 15% per year.

It is quite a simple process to set up one. Simply do some research on your preferred scheme and provide some sort of identification and proof of income like a bank statement to open an account. You then deposit some money on their bank account usually a minimum of UGX 100,000 to activate your account. Thereafter simply deposit some money consistently and then sit back and relax as you watch your money slowly accumulate.

Saving and investment is a difficult habit to master for many people. Many studies shows that the most effective way for a habit to stick is do it several times over and over again. Also if one breaks down the savings task to a very small amount chances are high that it will be done. In this case 100k is probably what someone might spend in a bar or give as a wedding contribution to some long lost acquaintance! Also to make the habit stick you need to commit in advance to save and invest this money before the salary arrives. Personally I have set up a standing order which automatically transfers money from my salary account into the investment account. So I don’t touch the money and I then adjust my spending accordingly. Currently I am saving and investing about 15% of my salary this way.

The beauty with this is that it is hustle free and it is is fairly safe because it is regulated by the CMA. I hardly spend any time and energy to earn 8 – 10% as everything is fully automated. Also the returns are tax free. Once my investments reach a certain predetermined amount I will then transfer it to another investment option.

So if you have at least 100k to spare per month why don’t you consider opening up an investment scheme of your own?