Great ideas are about customer value creation at the lowest cost possible. It is not easy to be innovative without contextual understanding. And that is where many motivational advisors on Twitter, etc get it wrong. To earn big, you need skills, discipline, and consistency.
The Internet is full of ideas. Amazon is full of books with great success stories. Facebook, Google, Apple, etc are great stories in the motivators toolkit. Without context, however, it is sleep dreaming. A winning idea in the US, or Europe, for example, is sure to scale or attract outstanding investors because of the supporting infrastructure and ecosystem present reward innovation, risk-takers, and outliers. Even more, such markets have global media to get the winning idea story to the right people with resources to transform it. Facilities like the entrepreneurship development fund are available on merit. Such may not always be the case in our Uganda or Kenyan context.
In Uganda or any African country, you must struggle on your own unless you embrace shortcuts in the name of deal-making, which even is not sustainable as shortcuts are not bankable. It is so frustrating when people who are beneficiaries of corruption stand on the podium to give motivation lectures.
I got concerned by a tweet (reproduced below) on March 23rd, 2022.
“If you start saving 100k per month from the age of 20, in a fund with a modest return of 10% pa, you will have nearly 200m in your retirement pot at 50yrs. If you start at 30yrs, you will have less than half of the ones who started at 20. The younger you start, the better.”
I responded. Some people have mastered the art of shameless plagiarism which also risks sharing toxic advisory due to the lack of context of such advice as they try to hide their sources so that they may appear brilliant. When you copy an idea, and tweet about it, provide a link to the detailed source. I think such makes one more exposed, sophisticated, and brilliant.
Of course, I got reactions in the form of name-calling. To set the record straight, I took time off to elaborate. After the reactions to my tweet response, I tried a quick Google search and found a detailed article by Investopedia on the subject. https://www.investopedia.com/articles/personal-finance/040315/why-save-retirement-your-20s.asp
I recommend you read the article in full as it provides the right context, especially for someone in developed markets like the US, Europe, or Asia where secondary markets are developed, and the compounding effect makes sense since the saver can have the discipline to invest monthly for more than 30 years to benefit from the power of compounding.
Below are some facts on investments in Uganda
Any investor in Uganda can invest in income securities like fixed deposits (savings account), 90-day Treasury bills, 365-day treasury bills, or in higher-risk investments like mutual funds and real estate or entrepreneurship – a small business. Which one can you invest Ugx.100k monthly?
Time deposits with financial institutions. Comprise of Fixed Deposits and Savings. It is annualized, earns about 13% per annum. Subject to 15% withholding tax on interest income earned. Withdrawn at a cost. Liquidity exposed to bank charges and other fines in case of a quick withdrawal. Exposed to systematic risk. High exposure to inflation. Given the inflation rate, compounding Ugx. 100k deposit would yield a negative return, see the fixed income bubbles in Uganda and how they wipe-off value. Only folks like banks, fund managers, etc with huge money to invest in treasury bonds, earn big. With your 100k, I would suggest that you go slow.
We could go on and on the 91-day, 182 day, and 364-day TBs, the fact is such classes do not accommodate compounders. You buy only when TBs are offered. This leaves mutual funds as your best investment option.
Available data as of December 2021, shows that the Kenya Mutual Fund has consistently performed better in the region, as shown in the above figure. You can consider monthly investments in the fund to optimize the compounding effect. However, there are some hidden costs like forex exchange risks, brokerage/ dealers’ fees, transaction charges, etc. Mutual funds collect a lot of money and invest in ‘big’ investments which an individual investor would not have managed. With that, they can make a decent return on investment. Most importantly, can play at a bigger scale in the secondary market especially trading in treasury bills due to a huge pool of funds at its disposal.
In the end, entrepreneurship has high risk because it gives very high returns. And folks early in their 20s find it most attractive. At that age, you have the drive, energy, dynamism, and the need to try and error. Using your monthly UGX 100,000 to start a small business is the best-recommended advice in a market like Uganda or anywhere in the world.
It is because of this, I say, the twit advising you to save Ugx. 100k monthly in a fund with a modest return of 10%, is misinformed and misleading in a market like ours where transaction fees are high, the inflation rate is high, reliability of cashflows to sustain monthly saving is low, and there are lots of opportunities in going bare-knuckle as an entrepreneur and testing the waters.
Advice: if you have Ugx. 100k consider the following:
a) Go to any place in Uganda. Find a piece of land. Bargain and pay a deposit using that Ugx. 100k. Start planting trees, fruits, and coffee. Be consistent and disciplined.
b) OR go buy baking materials and start baking some chapati, pancakes, or mandazi. Try to save it to accumulate it to Ugx. 1,000,000. Go to any design school and ask to speak to any student. Try to become their friend and ask for help with branding designs. Print good packs and be neat.
c) Use the money, to go to church and ask the priest that you clean and repair photos. Try to volunteer and clean for free all photos hung in the Church (depicting the way of the cross). And ask Priest to introduce to Christians that you can help with old cleaning photos, repairing them, and bringing life to them to look like new. Use the Ugx. 100k monthly for transport.
d) Go attain specialized skills like designing, graphics, painting, or advanced micro-soft office skills and charge a fee for your services. You can do self-study and use the Ugx 100k monthly to market yourself.
I could go on and on. The secret is a success is about discipline. No one can have the discipline to save Ugx. 100k monthly into a fund for 40 years, if they lack the discipline to lay their bed, brush their teeth, and press their clothes with consistency. First, develop winning habits, wealth will follow.
Copyright Mustapha B Mugisa, Mr. Strategy, 2022. All rights reserved.