On more than a few occasions, I have been told that the lack of investments in Ghana with a combination of high yield and low risk is a huge problem to many would-be investors. However, I do not think that is the case. There are quite a number of investment options that fit that description, at least as far as I am concerned.

In this post I will list such investments as part of my contribution to public financial education following the Menzgold fall out. Before I get to the list, I will like to explain exactly what I mean by high yield and low risk.

For an investment to qualify as having a high return, it should return reasonably more than the rate at which the economy as a whole is growing. This would ensure that not only your absolute wealth (how much money you have) but your relative wealth (how much money you have compared to the rest of the country) is increasing as time goes on. Since Ghana’s inflation rate is almost always higher than its growth rate, I will take the inflation rate as the benchmark for this post.

I consider an investment to be low risk if its failure depends on more than one reputable, well-capitalized private institution failing. In the case where an investment relies on a whole industry failing, then the risk is even lower. Where the investment depends on the government failing i.e. the collapse of the state, then its risk is so low as to be considered risk-free.

With these definitions in mind, let’s get straight to the list.

Treasury Notes

Treasury notes in Ghana are issued by the government for short-term financing and their maturity periods are usually between 1 and 2 years. They pay a fixed amount of interest each year with the principal repaid at maturity. You can select from a whole range of government notes with different maturity dates and different coupon rates (annual interest payments). Talk to your banker or your brokerage firm to make a purchase.

Government Bonds

The government has a lot of domestic bonds that are currently on the secondary market and more planned for issue. Bonds are similar to notes except that their terms usually last between 3 and 15 years (the recent budget even announced a possible 100 year bond). One can sell the bond before the maturity period. You can purchase one by talking to your broker or your banker.

Stocks

It gets a bit complicated here because it would be difficult for an individual to buy all the stocks in the index and hold them over a period. However, you can get exposure to the stock market by purchasing mutual funds. These mutual funds also have the added benefit of reinvesting dividends, which should mean they should be able to beat the stock index over time (at least before fees). However, note that for stocks to generate their long-term average return, you need to hold them over the long-term. And not every investor would want to do that. Of the three investments, this is the riskiest in terms of the financial definition of dispersion from the expected returns. However, with a wide enough diversification, one would only be exposed to risks to the overall market, not to individual stocks.

In conclusion, no investment is perfect. But these three investments offer good returns for their risk profile and not enough investors are taking advantage of them.