Bizna Kikao is an open platform where Bizna Club members can exchange ideas on how to improve their personal finance and business well-being.
Judging by your salary, I would say your savings are too little. Consider increasing your savings using various savings strategies, such as the 50-30-20 strategy.
It would help if you also considered diversifying your investments to low, medium, and high-risk ventures.
According to Gichuki Kahome, an investment advisor, some of the investment options open to you include:
1. Invest in a SACCO
A SACCO is an association registered and authorized to take money (deposits) and lend money (loans) to its members.
The SACCO pools the savings and lends them or invests in instruments such as shares, treasury bills, and bonds as authorized. SACCOs pay annual dividends to members.
SACCOs are good investment channels because, unlike banks, they have lower interest rates on loans and higher interest rates on savings.
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Unlike banks, they also demand no collateral, such as land or property, when taking loans.
Among the factors you should consider before joining a SACCO are whether the SACCO is registered. You can find this out by visiting the SASRA website for the updated list of registered SACCOs in Kenya.
You should also evaluate the interest rates offered by the SACCO on loans and deposits. Most SACCOs publish these rates on their websites.
Examples of SACCOs in Kenya include Stima SACCO, Tower SACCO, Safaricom SACCO, etc.
2. Invest in Money Market Funds
A Money Market Fund is a low-risk investment mutual fund that invests in highly liquid, short-term instruments such as treasury bonds, bills, and cash equivalent securities.
There are over 20 MMFs in Kenya that the CMA regulates. Their interest rates vary day to day depending on market conditions.
The most significant advantage of Money Market Funds is that they allow you to invest in areas like treasury bills and bonds that you wouldn’t otherwise invest in as an individual.
They also offer better returns than bank accounts, with average annual return rates of around 7-10 %.
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They are Ideal avenues to accumulate your savings for more extensive investments like real estate, buying land, or entering the stock market.
To join an MMF, do your research, compare different MMFs, and pick one that works for you according to your interests and preferences.
However, before committing your money, you should look at their portfolios to establish whether they are investing their money in high-risk investments.
If they are, they will likely lose your money as they pursue higher return rates. Examples of Money Market Funds in Kenya include Madison, Cyton, UAP Old Mutual, and Zimele.
3. Invest in Government Securities
Government securities are debt management obligations of the Kenyan government that individuals & organizations can invest in.
Government securities are an ideal investment for several reasons. They are risk-free and offer better returns than you would get in a bank fixed deposit or savings account.
There are two types of gov’t securities, i.e., Treasury Bills (3-12 months), and treasury Bonds (1-30 years)
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T-Bonds are a secure, medium to long-term investment that offers interest payments every six months throughout the bond’s maturity.
On the other hand, T- Bills are secure, short-term investments that offer returns after a relatively short time. They are available with maturities of 91, 182, & 364 days.
If you would love to learn more about Bills and Bonds, Visit the Central Bank of Kenya website for more details.
4. Investing at the Nairobi Securities Exchange
To start investing in the Nairobi Securities Exchange (NSE), you must first open a Central Depository System (CDS) Account.
This account facilitates holding and transferring shares traded at the stock exchange.
You can open a CDS Account with your stock broker – such as Genghis Capital and AIB – AXYS Africa – or via your bank.
When picking a stockbroker, consider investment costs. If you care about your investment returns, always prioritize brokers with low maintenance and investment fees.
Finally, remember that Investing in the stock market is a high-risk investment that can lead to high financial losses if not done wisely.
You can also consider other investments like real estate, agriculture, and cryptocurrency.
Do you have a burning question on entrepreneurship or personal finances?
Email your questions to [email protected] or WhatsApp +254738198620 or +254722529685 and get advise from Bizna Club members and the wider Bizna audience.
Invest in bonds sacco is good if you plan to borrow but government bonds returns are attractive and secure