How Long It Takes to Double Your Investment in MMF, SACCO, Bond & Land

Doubling your money is a common financial goal for Kenyans, but the time it takes depends heavily on the investment vehicle you choose. Each option comes with its own set of risks, returns, and timelines.

Let's explore how long it takes to double your money in a SACCO, a Money Market Fund (MMF), a Treasury Bond, and through investing in land.

SACCOs

SACCOs offer a stable way to grow your money, often through fixed deposit accounts that provide consistent returns. 

As per the example, investing Ksh500,000 in a SACCO at a 10% annual interest rate will double your money in 8 years. The key to this growth is reinvesting both the principal and the interest earned each year, which allows your money to compound. The projected growth path is as follows:

• Year 1: Ksh550,000
• Year 2: Ksh605,000
• Year 3: Ksh665,500
• Year 4: Ksh732,050
• Year 5: Ksh805,255
• Year 6: Ksh885,780
• Year 7: Ksh974,358
• Year 8: Ksh1,071,794

This is a reliable way to grow your wealth, but remember that the interest earned is subject to a 15% withholding tax. If you also purchase SACCO shares, you can earn additional income through dividend payments.

Advantages of SACCOs 

• Low Risk: SACCOs are generally low-risk investments that provide a predictable rate of return.
• Access to Loans: As a member, you can easily access affordable loans, often at lower interest rates than traditional banks.
• Consistent Returns: The interest rates are typically stable, making it easy to predict your future earnings.

Disadvantages of SACCOs

• Limited Liquidity: Your money is often locked in for a fixed period, making it difficult to access if you need it urgently.
• Lower Returns: The interest rates, while consistent, are often lower than those of other high-growth investments.
• Performance-Dependent: Your returns are tied to the overall performance of the SACCO, especially the leadership. For instance, depositors can lose their investments in cases of malpractice, as was in the Ksh13 billion KUSCCO scandal.

Also read: Breakdown of Ksh13 Billion Kuscco Heist That Nearly Collapsed Saccos in Kenya

Money Market Funds (MMFs)

MMFs are an increasingly popular investment option known for their liquidity and competitive returns. They accrue interest daily and compound monthly, meaning your money grows at a steady pace. The Rule of 72 is a handy tool to estimate the doubling time. This simple formula divides the number 72 by the annual interest rate.

If a decent MMF provides a consistent 12% effective annual yield, you would simply divide 72 by 12, which gives you 6 years. This means your money would double every six years, provided you reinvest the interest. For an initial investment of Ksh200,000:

• By 2031: Ksh400,000
• By 2037: Ksh800,000
• By 2043: Ksh1,600,000

Advantages of MMFs 

• High Liquidity: You can easily withdraw your money with little to no penalty, making it a flexible option for short-term savings.
• Relatively Low Risk: They are considered a safe haven for cash, as the principal value rarely fluctuates.
• Professional Management: The funds are managed by financial experts who handle all the investment decisions.

Disadvantages of MMFs

• Returns Fluctuate: The interest rates are not fixed and can change daily, making it harder to predict long-term returns.
• No appreciation or dividends - When you invest in MMFs, you are not buying shares. Therefore, the only return you will earn is interest on your saved amount. The will be no ownership for you to earn dividends, and cash doesn’t appreciate; in fact, you lose purchasing power. 

Also Read: Where Do I Keep My Savings? Money Market Fund

Treasury Bonds

Treasury bonds are a form of government debt and are considered one of the safest investments available, as they are backed by the government. The interest rate is fixed, providing a guaranteed income stream.

If you invest Ksh250,000 in a Treasury bond with a 14% annual interest rate, you will earn Ksh35,000 in interest each year. Over an 8-year period, the total interest earned will be Ksh280,000. After accounting for a 10% withholding tax on the interest (Ksh28,000), your net interest will be Ksh252,000.

When you add the net interest to your initial principal (Ksh250,000 + Ksh252,000), your total amount becomes Ksh502,000, which means you would have doubled your money in 8 years.

Advantages of Treasury Bonds 

• Safety: They are one of the safest investment options since they are backed by the government.
• Fixed Income: You receive a fixed interest payment, which makes it easy to plan your finances.
• Predictable Returns: The interest rate is fixed for the life of the bond, providing a stable return.

Disadvantages of Treasury Bonds 

• Lock-in Period: Bonds are often long-term investments, and your money is tied up for a long period, typically several years.
• Govt Default: When a government defaults on its bonds, it fails to repay its debt obligations, which can have significant and severe consequences for investors, such as debt restructuring.

Also Read: CBK Reopens 3 Bonds Offering Interest Rates of Up to 14%; How to Bid

Land

Investing in land is a long-term play that offers significant potential for appreciation, especially in fast-growing urban and peri-urban areas. The timeline to double your money can vary greatly depending on the location and market conditions.

According to data from Hass Consult, land values in Nairobi's satellite towns have shown rapid growth. For example:

• Kitengela & Limuru: An acre of land bought in 2015 had its value double in 9 years, by 2024.
• Juja: An acre bought in 2017 doubled in value in just 7 years, by 2024.

While the returns can be impressive, land is a less liquid asset than other investments.

Advantages of Land 

• High Appreciation Potential: Land values can increase dramatically, offering higher returns than many other investments.
• Tangible Asset: Land is a physical asset you can see and control.
• Additional Income: You can generate rental income or farm on the land.

Disadvantages of Land

• Illiquidity: It can take a long time to sell land, making it difficult to get your money back quickly if you need it.
• High Costs: Besides the purchase price, there are significant transaction costs, legal fees, and taxes.

Also read: How to Safely Buy Land in Kenya