From Grandpa

My Grandpa is headed to 90 years, was trained as a teacher, joined the Mau Mau freedom fighters, quit teaching to be a farmer and investor. He has no formal finance training, he doesn’t understand stocks analysis, doesn’t know anything about pension plans, real estate bubbles, or the stock market crash. This is what he had to say to me some 4 years ago about investing:

• Land: Look for a small piece of land somewhere out of town that’s not too expensive and buy it. I know you finance superstars have a lot to say about these investments but trust me on this. We are Africans, we value land. You will not regret buying that piece of land 10 years from now.
• Stocks: I don’t know how to calculate all those numbers about stocks, but I know how to tell if a company is good or not. For example, Barclays Bank has served me faithfully for the last 50 years, that way I can tell it’s a good company. He gives several examples of companies whose products he’s used over time. These are the shares I have bought.

You’re better than me in that you’re able to make the calculations. Use your knowledge to make the right decisions about which stocks to buy. Stocks should be your retirement plan. Instead of looking at the prices daily, pick 5 companies you like and each month, invest a small amount of money in these companies. Do not  change your strategy unless something extraordinary happens. 20 years from today when you’re ready to retire, you will thank me. You have no business selling the shares you buy now. If you need more money, go out there and work, after all you have the energy. The mzee can live off his dividends from investments he made in the 80s.

• Work: It’s good you dream of starting your own business. For now you’re called to serve. The only way God will reward you with success and good employees is if you serve your employer with the same zeal you would apply to your business. Stewardship.
• Debts: Stay away from bank loans and credit cards. They’re easy to get and therefore encourage frivolous spending. Join a Sacco (Savings and Credit Cooperative), save up, then you can borrow 3 times your savings. When your borrowing is secured against money you’ve saved, you will be more careful on why you’re borrowing. In addition, your Sacco savings earn you a dividend, which reduces your cost of borrowing.

That’s my grandfather for you. Like any other rebellious child, I didn’t follow his advice fully because after all I’m trained in finance. I know these things!

With age however, I realise he made loads of sense.

The stock market crash and  the real estate bubble are only relevant if you are investing for less than 5 years.

‘Cheap’ unsecured loans are not so cheap after all. Interest rates have gone up and we’re paying more than we hoped on them.

What do you think about my grandpa’s financial advice?