The Miracle of Compound Interest!

Too many investors want to see a quarterly interest payment!

I completely understand why, particularly if it is a first investment, people like to see a return on that investment. From a an adviser´s perspective we also like client´s receiving regular coupons because it puts their minds at rest…….and they are usually prompted to invest more  as soon as they see a return. But mathematically and financially it makes little sense.

The average first investment by our Ugandan clients is around $20,000 and the average return is around 11%. If an investor opts for a quarterly coupon this means they will receive $550 quarterly – about 2m UGX or the equivalent of 660,000UGX per month. And as soon as that coupon arrives in Uganda it will go into a current account where it will be spent or sit inactive – making no further return.

One of the investments that I like most at the moment offers capital protection and an increasing interest rate over a 3 year investment: 13% year one, 16% year two and 20% t¡year three.

And if you compound the interest, which is paid every six months, then this is what happens:

Amount Invested:         $25,000

Value end year one:      $28,355.63

Value end year two:      $33,074.00

Value end year three:   $40,019.54

Total gain:                       $15,019.54

Secured against property, managed under English Law by a security trustee on your behalf, and a 10 year record of repaying clients in full.

And if you factor in the depreciation of the Ugandan Shilling against the US Dollar then in real terms you will nearly double your UGX money over three years.

This particular investment will be filled some time in April so if you want to find out more then get in contact.