When it comes to investments, different people think about investments differently. Paying for your education or your children’s education could be a key investment while for others this is not considered an investment but more of an obligation.  There are however different things that we all agree on that constitute investments. It is good to note that investments are not defined by the level of sophistication only and may include simple things like farming and having an art collection.

​Investments can be largely be divided into two main groups Passive investments and Active investments. Active investments are those in which you spend a lot of time monitoring and running in order to generate income, for example running a business. Passive investments are the investments where the investor does not have to spend time generating the returns eg investment in capital markets, unit trusts and government bonds.

​There are different options available in the market depending on the investor’s objectives, level of sophistication, available time etc.  Below is a list of some of the key passive investments options that one can look at investing in:

​      i.         Unit Trust Funds: These are pooled funds managed by fund managers and they have different asset classes depending on the underlying. They range from less risky funds like the money market funds to more risky ones like equity funds. Unit trusts has the advantage of remaining relatively liquid and one benefits from the professional management of money managers;

​     ii.         Stock Market Investments: This is investments in the listed companies. There are various companies that one can choose from and there are various investment houses that gives recommendation on what makes sense to invest in. The key here is to ensure that your stock selection is on point. Knowing the right things to look at in the company that one intends to invest in makes the whole difference. There are various courses that can help one understand the stock markets basic;

​    iii.         Fixed Income: As the names suggest the fixed income investments have fixed returns over a set period of time. They vary in tenor and the issuers. The issuers can be the government or corporates. The government short term instruments are called Treasury bills and have three tenors 91-day, 182- day and 364-day while longer dated ones are treasury bonds which can be normal bonds or infrastructure bonds. The shorter corporate bonds are called commercial papers while longer term bonds are called corporate bonds. When buying into fixed income the key is to understand the tenor and duration of your investment and doing an analysis of the issuer to ascertain the probability of default;

​    iv.         Derivatives Investments: These are investments that generate their returns from other underlying investments. They are based on the performance of things, specific stocks or indices. The main reason why one invests in this is for speculation purposes or as a risk management measure. The use of derivatives requires a little bit more sophistication compared to directly investing in the stock or the underlying asset. In the Kenyan market they include futures in the derivative markets, the Exchange traded fund and specific forward contracts;

​     v.         Offshore investments: These are investments in funds and products outside the country. They help with diversification of one’s portfolio. When investing in the offshore market the key is to understand the product features and the track record of the person offering this and second is to know the type of the underlying investment and the risk levels. If one is investing in offshore markets knowing whether the funds invest in fixed income, equities, derivatives, commodities etc help one gauge how much risk they are taking on;

​    vi.         Pension products: The retirement benefits sector has good products that individuals can take advantage of like the individual pension fund. They have lots of tax benefits and the individual gets to benefit from the knowledge of the professionals in the sector. When looking at this funds key is to look at the track record of the funds and the people running the funds;

​  vii.         Insurance investment products: Most insurance products provide security in case something happens to an individual. In most cases, they provide a return and the benefits that one gets in terms of the peace of mind is great but the returns might not be as competitive.

​ The Wealth creation journey is continuous and one should be guided by their goals. It is however important to ensure that we are continuously investing in the appropriate investment knowledge so that we select the investments that suites us under the various circumstances.

​ To help walk with you in the wealth creation journey join our Personal Wealth Creation Master class by clicking here.

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