Bond Investment Strategy for full-time Career Professionals

This particular article is directed towards career people who have fairly good jobs and earn above-average incomes. The person I am envisioning has a professional career and is highly educated (with at least a degree or professional qualification). This person is fully employed or self-employed, quite hardworking, and is successful with their career. This person wishes to build wealth but doesn’t have the energy, time, skills, or interest to run a side hustle or business. They want to concentrate on their career while building wealth and they don’t want to take on so much risk.

I have a perfect solution for this person. This perfect solution can tremendously generate real wealth. It is hustle-free, safe, and easy to scale. The investment vehicle I am talking about is treasury bonds. Treasury bonds are securities which are issued by governments through their respective central banks. Treasury bonds allow governments to borrow from the public so they can finance their budgets. In return, the governments pay interest to the people who buy these bonds.

In Uganda, treasury bonds are issued by the Bank of Uganda (BOU) through a monthly auction. Every year BOU issues an auction calendar and invites the public to bid for different bonds. At the monthly auction, only the big banks are allowed to submit bids. Small investors like you and me can submit bids through the big banks or a registered broker. Once a bid is successful the respective investor gets paid interest every six months for the duration of the bond. The investor also gets back his principal at the end of the bond period.

Let us run some numbers on how such an investment would work. Suppose our high-flying professional can mobilize ugx 100m to invest in a 20-year treasury bond at a net interest rate or yield of 15% per year. Let’s also assume that our investor can invest an additional one million shillings every month or ugx 12m per year. Let’s also say that this investor faithfully reinvests their interest in other bonds at 15% throughout the 20 years.

What do you think would be the value of such an investment after 20 years? Well the answer is that this investment would be worth about ugx 2.5 Billion. The chart below shows how the investment would grow over time:

You can follow this link to access the underlying Excel model for FREE.

So, our professional can accumulate way more money than most of the population in Uganda by pursuing a very simple strategy. Invest a large lumpsum in treasury bonds, reinvest the coupons or interest, top up some cash every year, and hold to maturity. The income from this portfolio will amount to over ugx 370m per year (or ugx 30m per month) in twenty years. This income can be used to finance a happy retirement or higher quality education for your children and grandchildren. You can also use this cash to pursue meaningful causes and help family and friends.

Personally, I am following such a strategy and I can already see the benefits and power behind it. I would highly recommend all working professionals to consider investing in treasury bonds!