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FREQUENTLY ASKED QUESTIONS

 


Q. What is the difference between saving and investing?


A. For many people, there is little difference between saving and investing. Among those who know the difference, even fewer know how to invest profitably.

There is a big difference between saving and investing.  Usually, when people talk about “saving” they mean cash in the bank, saving and credit co-operative (SACCO) or under the mattress – cash which is secure and readily available if they need it.

 

Savings are important; everyone should hold enough cash to deal with emergencies.

 

On the other hand, when we talk about “investing,” we are talking about setting aside money with a view to achieving long-term growth. Investments are assets whose value can increase or reduce depending on the conditions in the market. Investing is something that you do consistently throughout your working life.

 

Q. What do I need to ask myself before I invest?


A. The first question to ask is, “am I investing for income, for growth or both?”

It is important that you know whether you need your investment to produce income for you to live off, or if your income will come from other sources or if you are primarily interested in building up your capital.

 

The second question to ask is, “how much can I afford to invest?”

 

To answer this question correctly, you need to have a budget that shows all your income and expenses and how much is available once you have paid your living expenses.  As a rule of thumb, 10% of what you earn should go towards investments. This means almost everyone with an income can afford to invest.

 

The third question to ask is, “how soon might I need to cash in my investment?

 

The answer to this question will determine whether you should invest in unit trusts, treasury bills, property or shares. It takes longer to cash out of property than for example a unit trust investment.

 

The fourth question to ask is, “how much risk am I comfortable with?

 

Are you going to chase high rewards (but risk losing some of your original investment) or do you want an investment that secures the value of your investment or are you in between? Again, the answer to this question will determine what kind of investment is suitable for you.

 

Q. Do all investments carry similar risks?

 

A. Almost all investments contain an element of risk. Generally speaking, returns increase in line with an increase in risk.  The relative “riskiness” of particular investments also varies between individuals. For example, a millionaire and a pensioner will almost certainly view certain investments differently.  It is therefore important that you consider your personal circumstances before you decide on your preferred investment option.

 

In terms of unit trusts, the Amana Shilling Fund which is a money market fund carries very little risk whilst the Amana Growth Fund which usually has exposure to listed shares has relatively higher risk but offers higher returns long term.

 

Q. Should I maintain the same investment portfolio all the time?

 

A. Throughout your life, your financial objectives and needs can change dramatically and your investment portfolio should anticipate and keep pace with those changes. You would carefully consider your financial goals, your income situation and your future financial needs, then determine the investment portfolio which best suits you.

This is best done by consulting a professional investment adviser or fund manager like Amana Capital who are best placed to help you.

 

Q. How should I change my investment style as my age and life profile changes?

 

A. If you are a young professional, you have the advantage of time in planning your investment future.  With no dependents and no need for supplemental income you can afford a relatively high degree of risk.  An investment in the Amana Growth Fund would suit you at this stage of your life.

 

If you are married with young children, then your investment goal is normally long term capital growth with limited risk.

 

Working couples with children need to build assets while still meeting major needs such as a new house, retirement contributions and education costs.  An investment in the Amana Balanced Fund is recommended at this stage.

 

If you are the peak of your career with high earnings and older children, then you must aim to invest for current income and long-term growth of your investments.

 

With older children who may need high school or university education, there is need to maximize current income, while taking advantage of these high-earning years to accumulate assets for retirement.

 

As you get to retirement, safety as well as current income is the priority.  Hopefully, the culmination of your lifetime planning, retirement is a time to enjoy income from your investments but certainly not a time to stop investing.

 

Q. Do I need a pension?

 

A. If you want to arrive at the doorstep of retirement happy, with adequate income to guarantee you a comfortable lifestyle, you must make wise investment decisions through out your life and consult with professional investment advisers and fund managers.  

 

It is also vitally important that you invest in a pension.  

 

Taking control of your retirement planning and making decisions regarding your pension is your responsibility!  If your employer decides not to provide a pension, or you are self-employed, you should still invest in a personal pension plan. The Amana Personal Pension Plan is a good individual pension scheme to join as it has been designed specifically for individuals.

 

Q. If I am offered high returns how can I know if the returns I am being offered are unrealistic?

 

A. In investing, it is good to be guided by what George S. Clason, the author of the book “The Richest Man in Babylon”, said. “Gold flees the man who would force it to impossible earnings or who follows the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment”

 

FREQUENTLY ASKED QUESTIONS ON AMANA UNIT TRUST FUNDS

  1. What are Amana Unit Trust Funds?

The Amana Unit Trust Funds are a family of unit trust funds which allow our clients to pool funds together with other individuals with similar investment objectives.

We have various types of accounts which can be grouped into:

  • Amana Shilling Fund  our money market whose funds are invested in the treasury bills, government bonds, corporate bonds , commercial paper and high yielding abnk deposits.

  • Amana Balanced Fund whose funds are invested in a similar fashion to the Money Market Account together with investments in shares quoted on the Nairobi Stock Exchange and other stock exchanges in the region

  • Amana  Growth Fund whose funds are largely invested in shares quoted on the Nairobi Stock Exchange and other stock exchanges in the region

  • Amana Dollar Account whose funds are largely invested in the Money Markets of other African countries in order to take advantage of differences in interest rates paid by Kenya Government Treasury Bills and similar bills issued by other African governments in East Africa, Southern Africa and West Africa. 

  • What kind of returns do I get?

Generally the higher the risk of investing in a particular asset, the higher the return that one should expect from such an investment.

Therefore, Money Market accounts will generally give a lower return compared to Balanced Accounts which will in return give a lower rate of return compared to Growth Accounts.

However this rule of thumb does not apply in situations where there is high market volatility or where there is a general economic crisis.

  How safe are my funds

All client funds which are under our management are held under a safe custody arrangement with a registered and licenced custodian bank Standard Chartered Bank of Kenya.

This ensures that Amana Capital’s own funds are never co-mingled with client funds and even in instances where we need to recover fees, these have to be transferred by the Custodian to our account.

It is also a legal requirement for unit trust funds approved by the CMA to have a board of trustees or a corporate trustee who represents the interests of investors at all times in providing oversight on all matters pertaining to the management and safe custody of client funds. In our case the corporate trustee is National Bank of Kenya.

In addition to this arrangement, Amana Capital Limited is licenced and regulated by the Capital Markets Authority and is obliged to provide quarterly reports on all portfolios under our management. The CMA regularly undertakes on site inspections of its licencees to ensure compliance with the law and regulations.

 Where do you invest?

We invest in Bank Deposits which we place with local financial institutions, Treasury Bills and Bonds issued by the Government of Kenya and other governments, commercial paper and bonds issued by local and international corporate and shares listed on the Nairobi Stock Exchange and other exchanges in Africa and elsewhere in the world.

 How do I invest my money with Amana Capital?

In order to invest  with Amana Capital Limited, you need to:

  • Fill out the relevant application form which is available from our web site or from our offices at Saachi Plaza, Block C, Office C5

  • Attach a copy of your National ID or Passport

  • Provide a copy of your KRA PIN

  • Provide a passport photo

  • Provide a bank statement / copy of ATM / voided cheque                                                                       


  • How much do I need to invest ?

In order to determine how much you need to invest, you need to consider:

  1. Your current financial circumstances

  2. Your investment goal i.e. what you would like to achieve within a defined period

  3. The minimum amount required for the account you wish to open                                                                           AMANA CHAMA

In case you and your friends or family have been wondering how you may be able to take advantage of emerging investment opportunities in stocks, bonds and even real estate, Amana Capital is ready to help you form an investment club. We will manage your investments professionally and transparently through AmanaChama.

What is an AmanaChama?

AmanaChama helps groups of individuals to pool funds so as to make joint investments according to a set of agreed investment objectives.
 
What are the advantages of joining AmanaChama?

  • Pooling funds increases your buying power through economies of scale;

  • Pooling also helps to diversify risk as more capital allows the purchase of different types of assets;

  • You are able to retain competent investment professionals such as Amana Capital to manage the club’s investment and achieve superior returns whilst reducing the unit costs of such services;

  • It provides an excellent opportunity for members to acquaint themselves with matters pertaining to investments in a social setting; and

What is the ideal number of members required to start an AmanaChama?

Ideally the club should consist of between 5 and 20 people. Below 5 people the club is not viable and above 20 people it can prove difficult to have similar investment objectives.

What form of can our investment vehicle should we use to run the investment club?
An investment club can operate as a Partnership, Society, SACCO or Limited Liability Company.

What are important issues to consider when starting an investment club?

It is very important to ensure that all personal details are always up to date and that members can meet on a regular basis either monthly or quarterly. All members of the club should ensure they have compatible goals for the investment club to succeed. Finally you must agree upfront on an investment approach in terms of investment objectives, acceptable risk and estimated time horizon.

How can Amana Capital help you start your investment club?

With AmanaChama, Amana Capital has made it easy for you to start an investment club. We will make available to you all the documents that you need to start your investment club right away including a sample agreement ready for signature by club members and sample rules of the investment club that you can adopt from day one.

To start investing with your friends or family call Amana Capital TODAY on 020 2351738 / 41/42  or 0721700076 or send us an e-mail on info@amanacapital.co.ke.


FREQUENTLY ASKED QUESTIONS ON PENSION

 MyPension - PERSONAL PENSION PLAN

Are my pension savings safe with Amana Capital?

The safety of your pension savings is made possible by a number of pillars that have been put in place by the Retirements Benefit Authority (RBA). RBA is an autonomous regulator of the pensions industry established by an Act of Parliament. These are:


  1. Licensing  and Regulation


Amana Capital is licenced and regulated by the RBA. Our licence is renewed annually subject to compliance with financial and operational regulations established under the RBA Act.

The RBA requires that Amana Capital files quarterly reports as part of its compliance checks and an on site inspection is conducted at least once every year.

 Custodian

All funds meant for investment in your pension scheme are deposited with and kept under safe custody by a bank licenced to act as a custodian by the RBA. The custodian ensures that your  pension money is not co-mingled with Amana capital funds and that all pension scheme assets are maintained  in the name of the scheme. In our case, our current custodians are CFC Stanbic Bank 

 Corporate Trustee

Every pension scheme must have individual or corporate trustees whose role is to represent the interests of all members as provided for by the Trust Deed establishing the pension scheme.

In the case of MyPension, the trustees for the pension scheme are National Bank of Kenya  through their Trustee and Custody Services Division.

 Auditors

The accounts of the Amana Personal Pension Plan are audited by Grant Thorntorn.

Their role is to check that proper books of accounts have been kept for the Amana Personal Pension Plan in accordance with international financial reporting standards  and to express an opinion to the pension scheme members at each Annual General Meeting.

 Administrators

Each pension scheme must have a suitably qualified pension administrator approved by the RBA. The Role of the scheme administrator is to ensure that all member contribution and withdrawal records are maintained accurately at all times.

Our scheme administrators are Liaison Group.

 Should Amana Capital go under how will I get my money?

In the unlikely event of Amana Capital Limited going under, the assets of the Amana Personal Pension Plan are safe.

This is because all the Amana Personal Pension Plan assets are kept separately from Amana Capital’s assets by CFC Stanbic Bank who are the pension scheme’s custodians.

In such an event, the Scheme Trustees National Bank of Kenya will be able to appoint another fund manager licenced and regulated by the RBA to take over management of the scheme assets.

 When can I access my pension savings?

A member of MyPension has access to his/her own personal contributions at any time  before the statutory retirement age of fifty five (55) years subject to taxation of such withdrawals according to rates set by the Kenya Revenue Authority.


However, if any of your contributions have been wholly or partly paid for by your  employer, then that portion of your pension savings can only be accessed at the age of 55 which is the current age of retirement according to the law.

 Can I transfer my funds to another scheme, will I be charged to transfer

Yes you can transfer your contributions together with all accumulated investment income to any other registered pension scheme of your choice.

There are no charges involved while transferring your accumulated funds.

 Can my accumulated pension serve as collateral for a loan

NO, your accumulated benefits cannot serve as collateral for a loan. However the RBA Act now allows pension savings to be used as collateral for a mortgage. This is however subject to rules and regulations established by the Minister of Finance.

  What rates do you declare

The Amana Personal Pension Plan is unique in that ALL the investment income that is earned through investing members’ contributions is credited to the member’s account.

The only charges which are deducted are those levied by the Fund Manager, Custodian, Corporate Trustee and Auditors.

In this way, the Amana Personal Pension Plan generally records rates of return which are either in line with industry performance or higher.

 How often will I get my statement of contributions and investment income

Audited statements are sent to you annually electronically, however contribution statements are available at any time upon request.

 Should I be unable to continue contributing, what happens?

In the event you are unable to continue contributing as a result of various life changes there is NO PENALTY.

We will continue to invest your accumulated contributions normally until you are able to resume.

 How fast can I access my funds?

Once we receive a written and signed request from you to withdraw your funds, we will prepare a statement which will require your approval. The statement will be forwarded to the Trustees who will check and approve the statement. This process is required to take not more than 60 days in terms of RBA Regulations.

 How do I become a member of the Amana Personal Pension Plan?

You must complete an application form which is available either from our offices at Saachi Plaza, Block C, Office C5.

Once you have completed and signed the application form you will need to provide us with a certified copy of your Passport or National ID and attach a cheque or bank deposit slip for your initial lump sum or periodic contribution.


To start investing with your friends or family call Amana Capital TODAY on 020 2351738 / 41/42  or 0721700076 or send us an e-mail on info@amanacapital.co.ke.




 
 
 
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