Financial Freedom: The simple path.

Financial Freedom

So many people say, “I can’t afford to start investing.” 

The truth is, you can’t afford NOT to start investing because time is the issue, not money.

Compound interest is the real silver bullet when it comes to growing your wealth, and the earlier you start, the more powerful it becomes. With compound interest, investing becomes the goose that lays the golden eggs.

For most professionals and entrepreneurs, the ability to closely monitor and follow investments on a daily basis is unsustainable, leaving them with a preference for passive income from financial market instruments.

What is compound interest?

• Compound interest is when the money you earn starts earning money.
• Compounding is one of the easiest ways to become wealthy.
• The sooner you begin investing, the more time your earnings have to compound.

Compound interest is the interest on a deposit or a loan that takes into account both your initial principal and the interest this sum has accumulated over previous periods. You are not just earning interest on the principal amount every period but on the cumulative sum. You will be getting more value for your money!

Compounding is the process whereby the earnings of an asset like an Exchange-Traded Fund (ETF), such as capital gains or dividends reinvested, lead to further earnings growth over time.

The investment will continue to produce earnings from the principal and the earnings that have accumulated over the previous periods. 

For you to make sense of investing long-term, you need to make a connection between your personal goals and your personal finance and investments.

How amazing would your life be if the following five items were paid for so you would never have to work for them again?

1. Rent/ house mortgage repayment
2. Household utilities
3. Food
4. Transport costs such as fuel or bus fare
5. Other expenses, such as insurance payments

Financial security is the ability to meet one’s basic needs even if one loses one’s source of income.

Tony Robbins asserts in his book ‘Money, Master the Game.’ 

“You need to have an annual figure for this.”

For example, Brian is an entrepreneur in Kenya. His basic needs in a month are as follows:

1. Rent – Ksh 20,000
2. Shopping – Ksh 15,000
3. Upkeep – Ksh 15,000

Total = Ksh 50,000

To get his annual financial freedom number, we will take the Ksh 50,000 and multiply it by 12 to get Ksh 600,000.

In Brian’s country, close to risk-free infrastructure bonds give returns of 10-13% tax-free.

Brian would need an infrastructure bond worth Ksh 6,000,000 to earn interest of Ksh 600,000 per annum and support his financial freedom/security dream.

To raise the Ksh 6m, Brian can invest consistently over time in offshore ETFs and take advantage of the power of compounding.

Over time, he can consolidate the earnings generated from the ETF investments and other investments, such as real estate, to invest in infrastructure bonds.

This is one way through which professionals and entrepreneurs can achieve financial freedom.

With such clarity, you should have the motivation to invest and accelerate your journey to financial freedom consistently.

For example, reinvesting your cash dividends to buy more ETFs will compound your returns thanks to the future dividend payouts.

The key thing to remember about compound interest is that it doesn’t matter how much you start with as long as you start now. As we say at Ndovu, it’s not about timing the market; it’s about time in the market.

We have a team of dedicated investment experts ready to help you start on your journey to financial freedom. All you need to do is Get Started! 

Don’t know where to start? A great place to start is by understanding what type of investor you are to determine your risk appetite.

We all have limited time, so the sooner you get going, the more you’ll have your money working for you.

Trust us, you’ll thank yourself later!