Friday, October 2, 2015

6 ways to navigate the shilling volatility Prudently

TWS||Wahome Ngari

Having shared with you some simple strategies that you could adopt to insulate yourself against the foreign exchange risk as a way to navigate the vitality of the shilling, we acknowledge that it is indeed prudent to consider how individuals can navigate the shilling vitality.

Avoid sleeping money

The shilling volatility causes uncertainty in the money markets which has a tendency to induce inflation. The only way to respond is to ensure that one does not have money that can be said to be asleep. Consider money to be asleep if it is giving you no return or if it is giving a return below the inflation rate. It would be exciting to know that the mattress bank has no customers.

5 Simple Strategies to Manage Foreign Exchange Risk

Seek returns that beat inflation

Investments giving a return below the inflation rate are practically generating results that cannot preserve capital. Though it is true that the higher the return an investment promises the higher the risk associated with the investment, may be these are times to have an appetite for a higher risk to survive the volatility.

Foreign Designated Accounts

Just as we have stated for enterprises it is also possible for an individual to hedge the volatility risk by opening a foreign exchange , say US dollar, account and move to it money that may need to be held in liquid for  periods below two years.

Off-shore investments

If the interest is not to hold the money in cash for a while then off-shore investment may be a choice for those who want to invest as they navigate the volatility. There are a number of institutions locally that specialize in off-shore investments and contacting them is not a bad idea.

Increase regular contributions amounts

For those who insist home is best then it will be desirable to increase the amounts of regular contributions, say to the investment club or Sacco to counter the effect of the time value of money which is obviously impacted by inflation originating from the volatility.

Consider having a local taste

In a country like Kenya with a growing middle class it is not uncommon to get people who have an eye and a taste of imported commodities. A dwindling shilling means imports will continue to be more expensive. Unless a person has reason to want to buy more expensively it should be agreeable that our industrial products are world class generally and that explains why they are popular in our neighbouring countries. Having a taste for local products be they clothing, toiletries, construction equipment, food stuffs, beverages and anything else you can think of then it looks paramount that we consider acquiring a local taste. The Kenya Association of Manufacturers has a tag line ‘ Buy Kenya Build Kenya’. What a good time to find our patriotism. Navigating the Shilling Volatility
 
If you need more help, ask us about the Wealth Creation Masterclass where such concepts are taught.

Wealth Creation MasterclassSeason9 Come & See reactions 
29th September 2015
 “ Thought provoking, intriguing and practical content delivered in a well thought out and effective method.”   Julius Mwaniki Nganga
“It was an eye opener. Very interactive. It has really helped me in terms of my finances.” Mary Muthoni Muritu-Mwaniki
“ Great class. Glad I came. Have learnt so much and am looking forward to joining the next class” Lisa Muthoni Kabua
Wahome Ngari – Principal Consultant/ CEO, Citadel Consulting Ltd -wahomengari@citadel-africa.co.ke

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