“Waiting hurts. Forgetting hurts. But not knowing which decision to take can sometimes be the most painful...” - José N. Harris
With the internet and social media, there is so much noise around and we are left wondering how to sieve through the noise and make the right decisions. To investments, equipping ourselves with the knowledge of what is available to us narrows down our focus on what we should be considering.
This involves directly buying the securities or investing in a particular business. For you to undertake direct investment, understanding the underlying securities is key and in most cases, you should have sufficient time and knowledge to go through and make the right investment choice.
These are funds offered by various investment managers. The key here is to understand your overall risk appetite in order to select the right type of investment and know the various providers so that one selects the one that offers the highest long term risk-adjusted return.
Depending on how one decides to invest, understanding what to invest in is very important as even in indirect investing, the return of the investment is derived from the underlying asset.
Most of us have ambitions of one day starting and running a business. There are people who have decided the closest way to running a business is investing in or with someone else. Whichever the case, the key to note is that when you start a business it should be in a line that you understand well and you have time to invest in the business.
These are units of ownership in a company. These shares trade either in an organised exchange or over the counter. The share prices fluctuate depending on the projected valuation as the price is projected to be the present value of all the future cash flows. For you to invest in the stock market you need to know the stocks you are to invest in and open a CDS account with any of the available brokers and proceed to trade.
These are loans to the government. They are offered on a weekly basis. Bills are short term instruments with tenors of 91, 182, and 364 days and they are offered every week. The bonds are long term loans to the government and they are usually issued on a monthly basis but there are exemptions where the issuance frequency is more than that. To invest in this category one needs to open a CDS account with the Central Bank and payment of the same upon being successful is debited directly from your account. There are a couple of fund managers and investment banks that facilitate these investments too.
These are direct loans to companies. The commercial papers are short term with tenors of up to one year while the bonds are long term with most of them having an average tenor of five years. Most of these are arranged by reputable investment banks and they have a minimum investment of Kenya shilling one million as they are deemed to be for sophisticated investors who can analyse the companies and be comfortable before investing there.
These are easy and straightforward investments with banks to get some return on the cash lying idle in your account. They are either call deposits which you can recall at any time without a penalty or they are fixed for a certain period of time. The fixed deposits generate a higher return than the call deposits due to the certainty of the tenor.
These are investments in brick and mortar. This involves going through the land acquisition process and development of the same. Depending on one's risk appetite they can invest from the beginning of the process or they can just decide to invest in completed buildings. The development has a long lead time and has more risk and expected higher returns.
With continued development in regulations we have seen the establishment of Property Funds and also Real Estate Investment Trusts. These are more organised and are managed by professions in the real estate and investment fields. They are in most cases regulated by the capital markets authority but they can also be unregulated.
Most Saccos get their memberships from people with a common bond. People largely save in the Sacco to get some returns in form of dividend but one of the key driving forces has been the ability to access affordable loans. One should join a Sacco so that they understand its overall object.
Insurance companies have life products that are investments in nature. They give one a return but the overriding factor while investing in an insurance product is that it is meant to protect you and your loved ones against your demise or against your inability to continue being gainfully employed.
There are many retirement funds currently in the market available for both individuals and corporations. The biggest advantage of these funds is the tax-saving benefits that come with them and also some employees match what you contribute making it possible to have much more on retirement. The key providers of these products are the fund managers and the fund administrators. The key is to know which portfolios have the potential to generate the highest risk-adjusted returns for your portfolios.
As the name suggests these are investments that derive their returns from a certain underlying investment. Currently, in Kenya, the derivatives are based on some of the most largely traded stocks and the index. They are at times complex and investment bankers help guide the clients on the right choices to make.
It is clear that there are very many choices that one can invest in. Understanding the specific goals is key in helping select the right product. The stage that one is in life plays a big role.
When coming up with an investment portfolio it is, therefore, advisable to speak to someone, especially a reliable investment advisor as some of the investments might be difficult to liquidate without losing value and might take too much time to unwind as well.
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If you’ve made it this far… thank you. Shoot me a message me here if you have questions, I’d love to hear from you.
