MONEY TALKS: The Saccos versus stock market debate

If you make a loss on an investment now, you have the time and energy to learn from the loss. PHOTO| FILE| NATION MEDIA GROUP

What you need to know:

  • Seek to have control over your investment and know what goes into it – be the one to determine how much more you’ll make that month.
  • You don’t have to let a fund manager or indefinite market forces make those decisions for you.
  • Do you have feedback on this article? E-mail: [email protected]

I’m genuinely thrilled and surprised that you (the readers) are writing in with your questions and comments.

It’s truly validating for a writer so don’t stop!

Today, I would like to tackle a question sent by Martin. Here’s what he asked in his email:

Hi Bett,

Lately I have been very interested in investing in the stock market and unit trusts but today after reading your article, I think I may rethink my strategy. 

Is it more profitable to invest in Saccos than the stock market? 

Kindly let me know what you think.






I appreciate you writing in, Martin.

I’ll answer your question with a story: So in late 2015, my chama – rather, investment group – decided to invest in the stock market.

We were 10 members at the time (now we’re seven, story for another day) contributing Sh5,000 per member, per month (now we’re contributing more). We had in our Bank of Africa account at the time, about Sh700,000.

We were looking to invest at least half a million in the stock market.


We invited a financial guru to one of our investment meetings: Ex-stock broker now a freelance investment consultant, motorbike rider, Nike and jeans sporty outfit, talked in a rich baritone, something like Barry White.

Sometimes he went off into something of a whisper and we had to lean in to the table to hear him; if still you couldn’t catch him, then you had to watch his lips move.

Anyway, he charged us Sh2,000 to sit in in such meetings. It was a standard fee for an hour of his consultation.


He made a strong case for the stock market. He emphasised that it’s a long-term investment plan, and that it would take years before we began to see some real value on return.

He said, “You have to be patient and keep putting in more money, little by little, go get some handsome dividends. And you don’t only have to invest in the Kenyan stock market, you can invest in East Africa, in Kigali and Kampala.”

So we did: we invested Shs600,000 in the East African stock market.

On the guidance of our consultant, this is what our investment portfolio with African Alliance Investment Bank looked like (rounded up figures):

-          Bank of Kigali shares: 3,100 shares for Sh140,000

-          Umeme Uganda: 4,600 shares for Sh100,000

-          Kenya-Re: 5,700 shares for Sh100,000

-          KPLC: 10,000 shares for Sh160,000

-          Safaricom: 6,200 shares for Sh100,000

We were proud of our decision to invest in the East African stock market; we felt very adult and very smart and very savvy as individuals and as an investment group. The future looked bright.

We carried on with our lives, our hands washed off the investment’s running.

That was end of 2014, beginning of 2015. Which means we’d get dividend income for the year 2015.


In 2016, our dividend cheques trickled into the post office mail.

Here’s what we’d made from our investment of Sh600,000:

-          Bank of Kigali: Sh4,646

-          Umeme Uganda: Sh2,877

-          Kenya Re: Nothing

-          KPLC: Sh6,911

-          Safaricom: Sh4,376

I don’t know where the cheque for Kenya Re went to. It probably got lost in the mail or expired somewhere. But I’ve looked it up on Google – that year Kenya Re gave dividends of Sh0.75 a share. Which means we’d made Sh4,275.

Let’s do the math, shall we? Adding them up means that our Sh600,000 investment with the East African stock market in 2015, made us Sh23,085.

It was ridiculous and slightly insulting, to tell you the truth. That such money and the brains of 10 savvy members, made us such peanuts in an entire year.

We didn’t wait for the returns to get better. Because they wouldn’t . Even if they would it wouldn’t be enough to move the needle and have us wait another full year.

We dragged our feet but gradually sold the shares beginning 2017. I won’t even bother telling you how much we made in 2016.


Guess what happened upon selling? We realised a loss. The market value for all the shares – except Kenya Re and Safaricom – was lower than our purchase price.

We’d bought the shares for Sh600,000 and sold them for Sh455,000 (rounded up).

-          Bank of Kigali: Sh95,000

-          Umeme Uganda: Sh59,000

-          Kenya Re: Sh107,000

-          KPLC: Sh67,000

-          Safcom: Sh127,000


That’s a clean loss of Sh145,000 and peanut dividends.


Unit trusts, like shares, are another form of investment in the financial market.

Think of a unit trust like a layered cake – where you have a layer of shares, a layer of bonds (government and corporate bonds), a layer of property and a layer of cash or fixed deposits.

You as the investor, and your investment, is given a slice of this layered cake i.e. a unit.

I don’t know exactly what goes into making up a unit. I don’t know if any investor actually does.

Different investment companies have different rates of return for their unit trusts.

It usually averages 10 per cent. I’m looking at today’s Business Daily newspaper: Sanlam gives 7per cent, Amana  per cent, Dry Associates 2 per cent.

These rates are almost similar to what you’d get in the stock market, Martin.

I have something of a unit trust with Sanlam. I consider this a savings account, not an investment option.


Anyway, after my chama sold the shares, we immediately recovered from the loss and redirected our investments.

We bought a Nissan Tiida for leasing to a car hire company. We bought it for Sh850,000, we’re making monthly from it cash of Sh40,000. It’s sent to our bank account without fail.

We’ll get our initial investment back in three years and still have an asset with market value for resale. (I explained this to you when I run my own taxi business.)

My chama is not in a Sacco – that’s in the pipeline – but I’m invested with two Saccos. For now. With savings of Sh750,000 with one of the Saccos, I get annual dividends of Sh56,000.

This year I’ll get more because I’d contributed to grow my savings in the last year.

Also, in no one year has the dividends been less than the year before it – it’s been growing proportionally to my savings.


Shares and unit trusts as an investment option is too safe, too hands-off, too lazy, too familiar and too unexciting (I want an investment that makes my blood boil in a thrill and makes me sweat).

It’s also moderately low risk and yields low returns. Plus you also have little control over your investment.

What’s more, the market is too volatile. Share prices yoyo.

The factors that determine these prices – either positively or negatively – are far too diverse to pinpoint, anticipate or prepare for. I mean, look how ironically the market responded after the Dusit terrorist attack.

Then there’s also the question of management controls. Look what happened with government-owned organisations that had shares trading in the stock market, like Uchumi and Mumias. We’re lucky Nakumatt wasn’t listed.

Granted, these are a few of the bad fruit in the sack but they’re worth pointing out.

Saccos are more for borrowing than for investing. The dividend income feels more of a consequence than a goal.


Look Martin, we’re young, aggressive, healthy and have the balls to handle more risk. We can take in more punches, run more side-hustles, invest in businesses in sectors unfamiliar to us.

If you make a loss on an investment now, you have the time and energy to learn from the loss, pick yourself up and redirect your returns into yet another investment, a wiser investor.  

This age – our 20s and 30s – is when we spread our wings and fly, better still if we fly close to the sun. We shall reap the rewards of this risk in our 40s and 50s.

My mum is a retired teacher, she’s in her 60s. She lives in Kaplong (our shagz) with my retired Ol’Man and their six cows – they’re dairy farmers. My mum has shares in KQ and some savings in the money market fund. She stopped running all her other side-hustles a long time ago. She’s happy with her portfolio as it is.

Also seek to have control over your investment and know what goes into it – be the one to determine how much more you’ll make that month. You don’t have to let a fund manager or indefinite market forces make those decisions for you.

I trust that answers your question, Martin.


Do you have feedback on this article? E-mail: [email protected]


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