Government bonds or a snack business. What is the best option for our investment club?

Let us say there is an investment/savings club with Shs 100 million. You decide to invest it in government bonds for a year at 13% interest rate which translates into Shs 13 million.

Deduct 20% Withholding tax and you are left with Shs 10.4 million.

If you are a club of 20 people and you share this money, each member will take home Shs 520,000 a year, which is roughly Shs 43,000 per month.

Of course there's no risk that you will lose your money. The government may not have money to pay when they have to and reschedule the payment like it happened a few months ago. That's the worst case scenario.

Now I am not saying that's not investment, it surely is but the returns are really paltry and if you're fine with them its okay life is about doing what makes you happy and fulfilled.

If that does, go on with it brother/sister. I have always felt we weren't fully utilising the power of our savings or investment clubs. I know certain investments, like business, come with high risks but truth is they're a worthwhile risk.

Imagine every year you have Shs 100 million and identify two business to give Shs 30 million each. That is 60 million and you keep the Shs 40 million for other risk free ventures.

Even if you lost the money and kept doing this for say five years. In five years you will have invested Shs 300 million in 10 businesses.

The chances are one of them is likely to do exceptionally great it could bring back 10 times the money you invested in all the 10. Two will do fairly well and maybe bring back 2-3 times what you invested. Another two will be there, there and lets assume five will fail totally.

You will however have made back your money from the ones that worked and they will continue generating residual income.

That's the kind of investment that would make sense for big money pools like investment/savings clubs.

The residual returns would then be put in other low return ventures like real estate, bonds and stocks in already established businesses or long term investment like big factories or growing trees.

The key though is in having a mechanism that allows you to identify those promising businesses and work with them in a way that ensures they reach their full projected potential. I personally know a few of them.

You can identify others through your networks or open calls for investment where they apply and you critically asses one by one to pick the ones you are comfortable injecting your money into.

Jaluum Herberts Luwizza is a Speaker, Writer and Business Columnist with the Nile Post.He is also a Business Consultant at YOUNG TREP East Africa's No.1 Business Management and Consultancy firm that helps people start and grow profitable businesses.

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