Today, more than ever, more and more people are realising the importance of investing your money wisely. With inflation on the rise and the value of money decreasing day by day, investing is the best solution to ensure that your hard work does not go to waste as the years go by. Most Sri Lankans still believe in saving their money in savings accounts and fixed deposits which carry minimal interest rates compared to investment instruments. If you wish to grow your money or simply retain its value, investing is one of the best things you can do.
Here are some of the best investment options available right now:
1. Governments Securities
Government securities are investment options issued by a Central Bank on behalf of a nation’s government where they “borrow” money from the public to fund national expenses; after the agreed-upon time period, the government will pay back this money to the public with interest.
There are two types of government securities:
Treasury Bills are more short-term government securities, with tenures from a few months to a year. Returns on investment are not interest-based but generate returns by being initially offered at discounted rates to the public.
Treasury bonds are more long-term government securities, with tensures starting from a year minimum. They generate returns through interest which is paid semi-annually.
Throughout time, they have generally been considered one of the most secure ways to invest your money; however, if a country’s government ever mismanages funds and runs out of money, they will not be able to pay back government securities.
2. Mutual Funds
Mutual Funds are also known as Unit Trusts in Sri Lanka where a fund manager pools together money from several investors and creates a portfolio of investments across various entities. The main benefit of investing your money in a mutual fund / unit trust is that the investment is managed by a professional money manager, meaning you don’t need to put in a lot of time, effort or knowledge into investing. As mutual funds are generally dispersed across various investments, the risk is reduced as well. Mutual funds are a great way for a novice to begin their investment journey.
3. Listed Debentures
Listed debentures are securities offered by listed corporate entities on the Colombo Stock Exchange. They are assumed to carry more risk than government securities although the level of risk greatly depends on the particular corporate entity issuing the debentures. The higher level of assumed risk also means that they carry higher returns than government securities as well. All debentures are mandatorily assigned a credit rating by a credit rating agency through which the risk can be evaluated. Anyone can purchase listed debentures through a license stock broker.
4. Listed Shares
Company shares are basically ownership offerings which the company issues to raise funds for the company. Company shares are listed on the Colombo Stock Exchange which the general public can buy and sell as they wish. If the perceived value of the company increases (which happens when more and more people buy), the value of a share will also rise, thereby increasing the value of the shares held by a particular person. Share market investment is extremely volatile as it depends heavily on many factors such as socio-political, economic and environmental.
5. Fixed Assets
Investing in fixed assets generally means the purchase and improvement of tangible items, usually land or real estate. Real estate investments are long-term investments with minimal liquidity but with the potential to increase in value and generate cash along the way if managed properly. They require a massive amount of initial capital investment, usually tens or hundreds of millions of rupees. Great care has to be taken to ensure that you invest in real estate that will increase in value and not simply be a sinkhole for your money. You need to consider whether you purchase in an area that is increasing in value as well as things like easy access to roads, water and electricity supply, effects of environment (e.g. flooding, earth slips etc.) and so many factors before making the decision to purchase a land or a house. If you need to invest a lot of money on maintenance, your investment might not be worth it. Buying a house which you can then rent out is also a great way to invest in a fixed asset as it can generate revenue for you while you retain ownership as well as the entire value of your initial investment.
While longer-term investments might hinder you if you ever find yourself in a situation where you need cash today you can either visit OnCredit.lk or a good investment can generate much higher returns than most savings schemes. Investments into legitimate assets could also act as collateral if you ever need to take our private loans or money loans, so you don’t need to worry too much about liquidity in case you need a large sum of money in the future. It’s never too early to start investing. Start small and, with experience, you can work your way up to more fruitful investments with great returns.