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A Guide to Personal Financial Planning

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

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What we will cover

Saving vs. Investing What is available for you to invest in: the risk reward matrix What type of investor are you? Example portfolios for different life stages Barriers to successful investing

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What you should get from this workshop

A clear understanding of why personal nancial planning is important for your well being 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 An understanding of the various investment instruments available in the market, their risks and potential returns

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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

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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 diversied

By asset type If possible by geography as well

The returns from your portfolio must be higher than ination

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Investment Basics

Diversication is key to managing investment risk Unit Trusts are a good and efcient way to achieve diversication

Investing in the Amana Shilling Fund, Amana Balanced Fund & the Amana Growth Fund gives you immediate diversication 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 benet

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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 reect your
age

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Our lifecycle...

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Young Professional

Investment goal
Maximize long term growth Take advantage of time for investment
planning

30% 70%

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!

Amana Shilling Fund Amana Growth Fund

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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

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Peak Earner with Older Children

Goal is to achieve high current income & long term growth 20% 40%

With older children in university, there is a

need to maximize current income

40%

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

Amana Shilling Fund Amana Balanced Fund Amana Growth Fund

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

Invest various proportions of your money into the Amana Shilling

Fund, Balanced Fund & Growth Fund as a way of optimizing your portfolios risk vs. desired returns

We all desire high returns with minimal risk but 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

OUR CONTACTS

Saachi Plaza Block C, Unit C5 " Argwings Kodhek Road, Kilimani" PO Box 9480 Nairobi 00100" T. (020) 235 1738/41/42 M. 0721 700 076" [@] www.amanacapital.co.ke [e] info@amanacapital.co.ke