When making investment, which way is the best to go? 

For many years, real estate has been the go to investment option, while the other options such as bonds have largely been left to financial institutions and high net-worth individuals. Photo / Edgar R Batte 

What you need to know:

  • Choosing the best investment vehicle can be taxing. Whereas there are guaranteed investment vehicles with handsome returns, there are also risky ones which would turn out to be dangerous for an investor

Finding the best investment options can be taxing but also exciting at the same time. 

For a long time, an age-old dilemma has persisted - between real estate, bonds and or unit trusts - which is the best option? 

In the sophisticated realm of investment, bonds have long been hailed as the bastions of stability - a refuge sought by risk-averse investors in times of economic storms. 

But yet the temptation of new investment vehicles such as unit trusts, have offered new leverages. 

Bonds have an allure in the promise of a fixed stream of income, shielded from market volatilities. 

However, the voices that speak for real estate as a better option, are usually too loud to ignore. 

Many argue that in real estate, fortunes are not just tracked on paper but are etched in brick and mortar, a symbol of pride and tangible ownership.

Behind the numbers and market dynamics lies a fundamental choice that echoes through the financial corridors - the decision between the ghostly assurance of bonds and the tangible allure of real estate – which is better. 

Real estate works with the prospect of rental income, property appreciation, and an intuitive connection to one’s investment - a call that resonates with many whose plans are beyond monetary returns.

However, Alex Kakande, an investment and finance analyst, who has a strong bias on capital markets, says there is no ultimate winner when it comes to investments.  

In a newsletter, he states that each has the potential to be successful depending on the particulars and timing, and choosing the best one needs to know its unique dynamics.

In Uganda, when it comes to investment opportunities, real estate has for long been the go-to option. 

Many workers and business owners retire to either - by plan or default - to manage their rentals or apartments. 

However, some analysts have argued that, perhaps such people have not been exposed to other investment options and their only idea of investing is defined by real estate. 

For instance, bonds are a highly profitable investment vehicle yet they have been mostly left to financial institutions, while units trusts, which are relatively a new financial innovation in Uganda, have been left to the middle class and high profile savers.  

However, even with this background, it is important to note that bonds carry a repayment guarantee, periodic interest and repayment of the invested sum at maturity of the bond. 

Therefore, based on the above, it is not a coincidence that many financial institutions, if not all, such as banks have increased their inventories to accommodate both bonds and real estate products. 

By the close of the third quarter of 2023, several banks in Uganda indicated they had modified their loan books to offer mortgages and government debt to leverage annual interest rates that are north of 15 percent. 

For instance, Equity, in collaboration with a land developer, announced a mortgage product in December 2023 that offered customers a three-year payment period for titled land, on which a customer makes a 20 percent down payment of the land value, while the bank would finance the remaining 80 percent at a 19 percent interest on a reducing balance.

However, as Kakande notes, investing through such means could be costly and as an investor, it is “important to do your own research to ensure that you are not overpaying for the size and location of land, as the initial cost will determine the total amount you pay”. 

“If you go through the bank-funded land acquisition process, you will not be able to negotiate the price,” he says, noting it is important to weigh the value of the land against the total amount payable over the loan period.

For instance, if a borrower wants land in a specific location valued at Shs32m, the bank, Kakande says, would finance the land up to a tune of Shs25.6m, which would return monthly repayments of at least Shs938,000. 

“After three years, you will have paid Shs40m. Before you take out this loan, make sure that the land will be worth or more than Shs40m in three years, or else you will have paid too much for it,” Kakande says. 

In the alternative, lets assume that an investor invests in a unit trust that offers a return of 11.5 percent annual compound interest? 

How would the mathematics look?

If you fund the loan for the same length of time and with the same amount of money by depositing Shs12m in January 2024 and Shs1.76m per month for three years into a unit trust.

After three years - in December 2026 - you would approximately have Shs92m plus, which Kakande says is more than the land’s worth and might enable an investor to purchase the same piece of land and even have some extra cash.  

“So before you borrow to purchase land and commit a significant amount of cash for years, first get the estimated value to the point of maturity. Will the value of the land be Shs76m that you have paid or more than Shs92m that you might have got from a unit trust?” he asks. 

Many financial experts urge investors to always examine the compound interest rule when deciding which investment portfolio to invest in. 

The Nobel Prize-winning theoretical physicist Albert Einstein decreed that the compound interest is the eighth wonder of the world because it makes it possible for someone to invest a small amount today to increase returns over time.

It entails earning interest on both initial principals and returns on the investment value.  

Because earned interest gradually adds to the principal, compound interest is sometimes referred to as “interest on interest.” 

Saving vehicles, such as certificates of deposit, typically pay compound interest, which means that for borrowers, interest that is owed is computed based on both outstanding balance and any past-due interest.

In the alternative, if an investor channels Shs12m and the monthly purchase of Shs1.76m into a three-year bond, which offers about 14 percent coupon return, what would be the return? 

If an investor consistently invests in bonds month-in-month with the option of reinvesting the coupons, the total bond portfolio will grow to more than Shs100m in a three-year tenor arrangement, Kakande says.  

The payout, he says, would be enough to buy the same piece of land at the market value or buy two plots at worst. 

“The goal is to estimate how much the land you are getting a loan for will realistically be worth in three years, if, from your projections, it might be less than the money you are getting from a unit trust or a bond, then invest in the capital markets and buy land later,” he says.  

Unit trust 

Investopodia defines a unit trust as a collective investment packaged under a trust deed. The fund manager may invest in bonds or shares on the stock market, and the fund is split into units, which investors purchase. Unit trusts provide access to securities, mortgages, and cash equivalents.

It holds assets and provides profits to individual unit owners instead of reinvesting into the fund. A unit trust is established under a trust deed, and the investor is the beneficiary.                                  

A fund manager directs the investments of a unit trust, and the investor is the beneficiary of the unit trust.


Essentially, according to Investopodia, buying a bond means lending money to the issuer, which could be a company or government. 

A bond has a predetermined maturity date and a specified interest rate. The issuer commits to repaying the principal, which is the original loan amount, on the maturity, in addition to interest at prescheduled intervals. 

Bonds typically have a low price correlation with stock markets, which makes them an effective tool for diversifying investment portfolios. Besides buying individual bonds, investors can access diversified bond portfolios via fund investments.