WhyInvest


Why Investing
We are stewards of the resources we have and are expected to invest them for growth. God has given resources which may include talent, skill, ideas and financial resources to manage and ensure growth. It is therefore critical that we invest these resources to ensure growth. God will ask for us to account as to how we managed and grew the resources that He placed in our hands. We therefore invest in order to be diligent and faithful stewards of those things which God has placed in our hands.
We also invest in order to generate and accumulate wealth. Many people forget that the cash that flows through their hands is not wealth as it is just flowing through. Wealth is how much is generated and retained using the cash that flows through one’s hands. Investing therefore allows a person to use current resources to generate wealth. Investing enables a person to create multiple revenue streams rather than depend primarily on their main source of income. For example if someone invested in real estate, if the property is made available for leasing – this enables anew revenue stream called rental income. Similarly an investment on the stock exchange will result in passive income in terms of dividends when these are declared. I love to have multiple streams of revenue rather than be dependent on one source of income. That is why I love investments.
Investing creates capital growth that enables you to meet future expenditure demands. For example in 2001 my mother in law retired from the public service and was given some paltry retirement package in Zimbabwean dollars then. I advised her to purchase a small property in a small town juts as a nest egg with 45% of her terminal benefits. The purchase value was about USD20,000. Right now the value of that property is close to USD45,000 with rental income of about USD120 per month. So though she is retired she is getting passive income that is almost 70% of current active civil servants in Zimbabwe. At the same time she could choose to dispose of that property and generate significant income which is actually higher than the full pension she got. There has therefore been some very significant capital appreciation on her investment. An added bonus is that since she is above the retirement age, if she was to dispose that property under current Zimbabwean laws she would be exempted from capital gains tax. So by prudently investing part of her terminal benefits she has outperformed any pension scheme that she was a part of.
Many people invest heavily either in their own professions or businesses. This results in concentration risks. For example if anything happens to your business, then you are done. Making investments in other people’s business through the stock exchange allows you to benefit from the principle of leverage. I am aware that I am not the smartest person on earth and so my ability to grow my business and money is not the very best. I also realize that by investing in listed businesses I benefit from the skill and wisdom of others. I accelerate my wealth creation mechanism by linking to those who are more skilled in growing businesses. These kinds of investments create the possibility of passive income from the labour and efforts of others.
Investing sometimes even on the money market allows your money to generate more money before you consume it. For example if I had surplus cash which I would need in 30 days instead of keeping it in my bank account, I could invest it in a 30 day money market instrument so that it bears meaningful interest before I need to use it. Sometimes the returns may be small but at least they help offset bank transaction charges.
Considering all these benefits of investing I encourage you to start small but all the same start investing. You will be glad that you did.

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4 thoughts on “WhyInvest”

  1. Now I am your disciple Sir.I love this piece.Robert Kiyosaki’s Cashflow Quadrant is rather too American. You meanwhile, Have given me a practical aspect to my Zimbabwean situation.Thank you Doc.

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