Saccos are democratically owned and member-controlled financial institutions that play a pivotal role in Kenya’s financial services economy.
These credit cooperatives more often than not provide a wide range of products and financial services to their members, including but not limited to savings, loans, insurance and investment.
Saccos can play an important role in assisting their members with investment diversification decision-making processes.
Based on their ability to offer a wide range of investment products and services, Saccos can basically facilitate their members towards reducing their risks, increasing their returns and to a larger extent, achieving their financial objectives and goals.
Investment diversification
In a nutshell, investment diversification is the practice of spreading one’s investments across different asset classes and sectors of the economy in an effort to maximize returns from those investments.
This more often than not scales down one’s investment risks; if one asset class or sector underperforms, the other investments may still perform well.
Why investment diversification?
Saccos assist their members on investment diversification due to the accruing benefits that are not only limited to the following:
Risk reduction
Having one’s investments spread across various economic spheres or across different asset classes and sectors reduces risks of losing all your money if one asset underperforms during a certain period of the investment cycle.
Increases your returns
In most cases, a diversified investment portfolio is most likely to generate higher returns as compared to a portfolio that is concentrated in one asset class or sector of the economy.
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Achievement of financial goals
Having a careful selection of one’s investments and diversifying portfolio can easily increase chances of achieving financial goals, particularly retirement or savings.
How Saccos assist their members’ diversification
Saccos assist their members to achieve their investment diversifications through the following income streams and investment avenues:
>Savings accounts with competitive interest rates,
>Investment accounts that allow members to invest in a variety of asset classes, such as stocks, bonds, and mutual funds,
>Insurance products that protect members against financial losses,
>Investment advice and guidance.
How Sacco members can invest in a diversified portfolio
Qualifying to invest in a diversified portfolio, Sacco members should at all times in their investment decisions consider the following factors:
>Their risk tolerance: In this case, one must ask themselves how much risk they are willing to take in pursuit of their investments.
>Their investment goals: It is critical for the Sacco members to set their goals right whenever they are making investment decisions. They should have one question in mind: What am I saving for and when do I need to access the money?
Their time horizon: Before venturing into any investment portfolio, it is equally important for the Sacco member to interrogate the period of investment and what they are investing for.
By Ben Oroko
The writer is a communications practitioner and correspondent based in Kisii.
benoroko2000@yahoo.com
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