Tuesday, January 31, 2023

7 investments you can make with Ksh 5,000

By Benson Bundi

One of the reasons most people do not invest is that after budgeting for all bills and expenses and paying for everything, they claim they don’t have enough money left to save or invest.

However, you can start your investment journey with as little as Ksh 5 000. Here are 7 investment options you can try today:

Money Market Funds

You can invest your Ksh 5,000 in money market funds. These are ideal as they give you capital preservation, so your investments gain interest. Also, there is little to no risk of losing your money. They are an ideal way of saving while investing.

Most money market funds in Kenya give you an average interest rate of 6-9%. Before Covid, the rates could go up to 12%.

With ksh 5000, you can invest in any money market fund in Kenya. Some even allow you to invest with as little as Ksh 1000.

Bonds

The second investment you can make with Ash 5 000 is in bonds or fixed-income funds. Here, your money is invested in corporate and treasury bonds.

Therefore, your fund manager will take your money, pool it with that of other investors, and then select bonds that are performing well and invest in them.

You don’t have to go to the bond market and source for investments. The fund manager of the unit trust invests on your behalf.

Balanced Funds

The next option is to invest your Ksh 5 000 in a balanced fund. Balanced funds are ideal if you’re a new investor or want investment options where you can penetrate the market with minimal entry fees.

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A balanced fund provides a balanced portfolio. So, once you give your money to the fund manager, they will invest it in treasury bills, bonds, corporate debt, stocks, and other investments.

Therefore, your money is exposed to a diversified portfolio. There is minimum risk in this investment option, as there is a mix of low-risk and high-risk investments.

Equity Funds

Your fourth option is to invest your money in equity funds. Here, a fund manager will invest your money in the stock market.

The difference between investing in equity funds and going directly to the stock market through the Nairobi securities exchange is that you don’t decide which shares to buy in the equity fund. So, you can’t ask your fund manager to invest your money in specific shares.

The fund manager pools money and resources from different investors and selects the best-performing stocks in the Nairobi Securities Exchange, so you get a mixed portfolio of stocks.

Equity funds are ideal if you’re looking to invest in stocks but don’t know which ones to choose.

Stock Market Investments

With ksh 5000, you can start investing in stocks. All you’ll need to do is open a CDC account, find a reputable stockbroker, and you can start trading shares from the Nairobi Stocks Exchange.

For instance, in November 2022, Safaricom shares were trading at Ksh 25 per unit. With ksh 5 000, you could purchase at least 150 Safaricom shares (after paying the brokerage fees). Supposing the value of Safaricom shares appreciated to Ksh 30 after your purchase, you’d have made a profit of Ksh 5 per share.

Supposing you used your profits to buy more shares, you’d slowly accumulate and build a stock market portfolio from your Ksh 5 000.

Stock investing is one of the best ways to build sustainable wealth in the long term because you’ll be getting passive income as long as the company’s value keeps growing.

Pension Funds

Your next investment option is personal pension funds. As much as you’re hoping to depend on property, such as land, for sustenance in your old age, it would help if you also had liquid cash for medical care, moving around, and upkeep.

You can save for your sunset days by opening a pension fund account, which you’ll be contributing towards. You can still contribute towards your pension account even if you are unemployed.

Most pension plans can be started with as little as Ksh 1000; hence are ideal even for low-income earners. The more you earn, the more you can contribute or put toward your personal pension plan.

These plans guarantee capital preservation, meaning you’ll still retain your contributions even in hostile economic conditions. Some might give you interest of 7- 10% per annum and 4—5% interest in the worst-case scenario.

Therefore, you’re guaranteed to get your capital back and a four per cent return on the bare minimum, regardless of the state of the economy.

Start a Side Hustle

Another thing you can do with Ksh 5 000 is to start a business or a side hustle. There are so many businesses you can start with that money.

To start a business, you’ll need to know several things, such as where to source your stock, how to manage money, and how to market yourself.

You could even invest your Ksh 5 000 in a finance class to learn those things as you raise money for larger purchases for your business.

Conclusion

With ksh 5 000, you can invest in unit trusts (bonds, balanced funds, and equity funds). You could also invest in stocks or a pension plan. Alternatively, you could start a business.

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