amana_hni breakfast presentation 9feb2013.pdf

�A Guide to Personal Financial Planning

Presentation by Hardy Pemhiwa Managing Director HNI Breakfast – Serena Hotel 9th February 2013

Funds Grow • Accumulate • Preserve

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What is available for you to invest in: the risk reward matrix

What type of investor are you?

What we will cover

Saving vs. Investing

Example portfolios for different life stages

Barriers to successful investing

Funds Grow • Accumulate • Preserve

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An overview of how to make successful personal investment decisions

An understanding of how age, family situation and income level impacts the type of investment portfolio a person should have

What you should get from this workshop A clear understanding of why personal financial planning is important for your well being

An understanding of the various investment instruments available in the market, their risks and potential returns

Funds Grow • Accumulate • Preserve

Wealth Creation...

‣ What is personal wealth?

‣  The total value of your accumulated assets LESS accumulated liabilities

‣ What is wealth creation?

‣  Accumulation of assets

‣  Careful Investing usually over a long period

‣  Goal = create a passive income stream

‣ Why create wealth?

‣  Quality Lifestyle

Funds Grow • Accumulate • Preserve

Saving vs. Investing

‣  Savings

‣  Money in your bank account which is readily available in need

‣  Must cover 3 - 6 months of your expenses [Emergency Fund]

‣  Readily available to deal with emergencies

‣  Investments

‣  Money set aside for long term growth

‣  Usually value of investments may go up or down

‣  Your savings are part of your investment portfolio

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What is available to invest in?

‣  Cash

‣  Fixed Income Securities ‣  Treasury Bonds & Corporate Bonds

‣  Treasury Bills

‣  Commercial Paper

‣  Real Estate

‣  Shares/Stocks ‣  Public Listed Companies e.g. Kenya Airways, Bamburi Cement, etc.

‣  Private Companies e.g. your own business

‣  Commodities ‣  Coffee, Cocoa etc.

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The Risk-Reward Matrix

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Wealth creation 101

‣  To create wealth you need to have an investment portfolio

‣  Your investment portfolio is the mix of assets you own:

‣  Bank Deposits

‣  Bonds

‣  Shares

‣  Real Estate

‣  Your portfolio must be diversified

‣  By asset type

‣  If possible by geography as well

‣  The returns from your portfolio must be higher than inflation

Funds Grow • Accumulate • Preserve

Investment Basics ‣  Diversification is key to managing investment risk

‣  Unit Trusts are a good and efficient way to achieve diversification

‣  Investing in the Amana Shilling Fund, Amana Balanced Fund & the Amana Growth Fund gives you immediate diversification without needing large amounts of money

‣  You need a Systematic Investment Plan

‣  A wealth-building strategy where you invest a certain amount of money at regular intervals over a long period

‣  It is NOT how much you earn but how much you regularly invest!

‣  Rule of thumb – 10% of all that you earn should be invested for your benefit

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What determines your Investment Portfolio?

‣ Age

‣ Family Circumstances

‣ Financial Goals

‣ Investment Environment

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What type of investor are you?

‣ Young Professional

‣ Working Family with Young Children

‣ Peak Earner with Older Children

‣ Empty Nester

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Types of Investment Portfolio

‣ Aggressive

‣ Moderately Aggressive

‣ Moderate

‣ Moderately Conservative

‣ Conservative

‣ As you grow older your portfolio should reflect your age

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Our lifecycle...

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Young Professional

‣  Investment goal þ Maximize long term growth

þ Take advantage of time for investment planning

þ With no dependents you can afford a relatively high degree of risk.

‣  Growth Funds to maximize long term growth

‣  Money Market Funds to maximize income on savings

‣  Automatic monthly investment plan should be started NOW!

30%

70%

Amana Shilling Fund Amana Growth Fund

Funds Grow • Accumulate • Preserve

Working Family with Young Kids ‣  Investment goal

‣  Long term growth with moderate risk

‣  Need to build asset base whilst meeting current obligations

‣  Growth Funds to ensure capital growth

‣  Money Market Funds to maximize safety and income.

‣  Continue or increase automatic monthly investments.

50% 50%

Amana Shilling Fund Amana Growth Fund

Funds Grow • Accumulate • Preserve

Peak Earner with Older Children ‣  Goal is to achieve high current income &

long term growth

‣ With older children in university, there is a need to maximize current income

‣ Take advantage of high earning years to accumulate assets for retirement

‣  Invest equally in Amana Growth and Amana Balanced Funds to maximize growth & income.

‣  Invest the balance in Amana Shilling Fund to create a cash reserve

20%

40%

40%

Amana Shilling Fund Amana Balanced Fund Amana Growth Fund

Funds Grow • Accumulate • Preserve

Barriers to successful investing

‣ Lack of knowledge

‣ Emotion/Sentiment

‣ My friends & neighbours are all doing it!

‣ Procrastination/Inertia

‣ You know but you will not act!

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Time... Your best friend

Investor A starts investing 10 years earlier. Assumed returns = 8% p.a. compounded monthly

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So where do I start...

þ Start with an investment goal – what do you want to achieve & by when?

þ Invest various proportions of your money into the Amana Shilling Fund, Balanced Fund & Growth Fund as a way of optimizing your portfolio’s risk vs. desired returns

þ We all desire high returns with minimal risk but…

þ ALL investment choices involve a trade-off between risk and return. ‣  A higher % investment in the Amana Growth Fund generally increases risk but also

increases the probability of a higher return.

‣  A higher % investment in the Amana Shilling Fund & Amana Balanced Fund will reduce risk and likely result in a similarly reduced return

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Question & Answer Session

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