What are the most profitable investment options in Kenya? Well, below are some vehicles available to Kenyan investors. Whichever option you select, it pays to remember that investments don’t typically move in the same direction so having a balance reduces the risk associated with one investment. Don’t put your eggs in one basket principle!
Public equities (Shares): These are shares that listed on a stock exchange, or example, the Nairobi Stock Exchange. The key objective is to sell shares when the price is higher than when you bought it or receive dividend payments.
Invest in companies that you understand. Key elements to look out for include sector prospects (is the industry or sector going to grow), profitability, strong management and positive cash flows.
Private equities: These are shares in companies that are not listed on the Stock Exchange. One needs to have a strong understanding of the nature of the business and confidence in the management. Equities carry higher risk and are recommended for your longer term investments.
Fixed Income (earn interest at a specified rate)
Treasury Bonds and Treasury Bills: These are instruments issued by the Government to borrow from the public. They offer a fixed rate of return otherwise referred to as interest. The longer the instrument the higher the return. Treasury Bills are issued for 91,182 and 364 days. Treasury bonds are issued for 1 year up to 20 years.
Corporate bonds: These operate in the same way as treasury bonds but are issued by private companies. Because they have higher risk they will usually offer higher rates of return than the Treasury Bills or Bonds.
Fixed deposit accounts: These are available in banking institutions. They are similar to savings accounts, but they are usually fixed for a certain period e.g. one month, three months etc. The longer your money is fixed for the higher the interest payment.
Property: Investments in property are usually in the form of land or rental property i.e. property you can rent out and get an income. Tips for buying property include:
Do your research. Don’t buy property blindfolded. Find out about the demand for that particular property in the area, crime rate, costs of similar properties. It is useful to find out exactly how long the property has been on the market.
Prepare yourself financially. Make sure you can afford it and have taken every cost into consideration. You also need to consider lawyer’s fees, stamp duty, bank fees etc. Do thorough due diligence. Make sure you get a search on the title. Also find out if there any outstanding rates to be paid on the property.
Cash: This is usually in the form of a Savings Account or a Current Account.
Unit trusts: These are pools of funds that are managed by professional fund managers on your behalf and placed in various investments. They include: Equity funds: They invest in public equities such as the Nairobi Stock Exchange. Their primary objective is to grow.
Money market funds: They invest in low risk instruments that can easily be converted into cash such as Fixed Deposits, Treasury bills, short term treasury bonds etc. Their primary objective is to keep money safe.
Fixed income funds: They invest in fixed income instruments such as Treasury Bonds. Their primary objective is to generate income.
Balanced funds: These invest in a balance of various investments.