The financial investment space in Kenya is expanding as more options come up. We are living in a time when the need to make extra income has become very important. Hence, this creates the need to explore the different top financial investment options in Kenya that you should consider.
Today, the choices for a Kenyan investor are more than at any other time in history.
Investment is the only way to achieve financial freedom. However, you can only identify and tap into the right investment if you have adequate market knowledge.
As a leading financial market in the continent, Kenya has a maturing financial industry. A key catalyst in the development of these financial invest investment options that you should consider.
However, settling on the best suitable option requires an understanding of some key investment elements such as
Ø Risk tolerance
Investment options have different risk levels. The amount of risk also determines the amount of reward in most cases. Hence, your risk tolerance level is what will determine the financial investment option to use.
Riskier options tend to have bigger rewards and vice versa.
Ø The amount of capital
Capital is another key determinant of the choice of a financial investment option. This is because some of these options have minimum capital entry requirements.
It means that you can’t participate in them if your capital is below the threshold. Key examples of investment options with thresholds include hedge funds and government bonds.
Ø Duration of Investment
The duration of investment differs across the various Financial investment options. Some are long-term while others are short-term.
It is you to determine how long you want to tie your capital. As an example, investment in government bonds could tie your capital up to 30 years while other options such as money market funds allow access to your capital within a short notice.
Ø Government regulations
Regulations are a key factor to consider when investing. Those options that are regulated tend to be safer and more attractive to investors than the unregulated ones.
The government also sets different conditions for each investment option making it prudent to understand the requirements of the regulations before settling on the right option.
Ø Market Knowledge
Market knowledge has no shortcut. You should only invest in the options that you have adequate knowledge of. This helps to ensure your investment decisions are well informed increasing the chances of success.
Top Financial investment options in Kenya that you should consider.
Now that we have an idea of the factors to consider when settling on the right investment option, let us review some of the top options available.
1. Stock market
The stock market is one of the most famous and most developed financial investment options in the country. With dozens of companies listed in the Nairobi securities exchange, the options are endless.
Investing in the stock market involves the buying and selling of shares. As a trader, you benefit from both share price gain and dividends. However, there are some factors that you need to consider before investing in the stock market.
Some of the key requirements to start in this market include having a CDS account and start-up capital. Stock market investment in the country happens through various brokers and investment banks.
Some of the companies whose share trading is available in the stock market include Safaricom, Equity bank, KenGen, and Co-operative bank. Full list of all Companies Listed on the Nairobi Securities Exchange.
Buying and selling shares in Kenya is simple and doesn’t require a lot of capital. Depending on the share price, you can get started with as little as 5,000 shillings.
2. Government bonds
These are instruments the government uses to raise money for various reasons such as infrastructure development. As the largest borrower in the country, the government issues bonds regularly to willing investors.
Advantages of government bonds
- They are issued regularly
- Offer competitive interest rates
- Some bonds such as infrastructure bonds are interest-free.
- They have minimal risk
- Having fixed interest rates makes it easier for future planning
These benefits make it a very lucrative financial investment option in the country with investors always competing for them.
Recently, the government has also made it simpler to trade in bonds by creating a retail bond known as MAKIBA. The bond is tradeable through the phone with a minimal investment capital of 3000 Shillings. It is also interest-free.
Among the key challenges with government bonds is that they are long-term and could go up to thirty years. There is also a limitation of minimum capital required of 50,000 shillings for treasury bonds and 100,000 shillings for treasury bills.
To invest in government bonds, you also need to have a CDS account. Another key point to note is that the government pays the interest half-yearly.
This is different from other investment assets such as SACCOs that pay dividends yearly.
3. Money market funds
Money market funds are investment vehicles that target highly liquid assets mostly on a short-term basis. The key term to note hear is short-term.
Hence, this already tells you that this option is suited for investors with short-term goals. Ideally, money market funds are a form of unit trust and normally declare their income daily.
How to invest in a money market fund
The process of investing in a money market fund is simple as long as you have an account and capital. Opening the account requires you to provide identification documents such as the national identity card and Kenya revenue authority pin.
Upon registration, you are now ready to invest after depositing your startup capital.
Investment in the money market fund is riskier in comparison to other options such as government bonds. The income is also not fixed as it depends on the daily market performance. This volatility makes it challenging for future planning.
Some of the top money market funds in the country include Cytonn, Britam, and CIC. They are regulated by the Capital markets authority (CMA) making them legal investment vehicles.
Savings and Credit cooperatives have emerged as some of the top investment financial institutions in the country. Their role in the credit and savings sector has made them a go-to choice for most Kenyans.
Other than access to credit, Sacco investors also target to get dividends on their savings. Dividend payment happens at the closure of every financial year. The dividend rate is not fixed but depends on the performance for the year.
Some SACCOs pay dividends as high as 15% making them among the top earners for financial investors in the country.
This is even higher than what most of the rest offer. As an example, the majority of money market funds average 10% in returns.
One of the major advantages of SACCOs is they attract a lower interest rate of 5% on income compared to stock market dividends that attract a 15% interest rate. Investment in a Sacco also allows you to choose the leadership team.
Investing in a Sacco requires adequate market research to ensure you only engage those SACCOs that are sound and operate under the Sacco Societies Regulatory Authority (SASRA). This is the government body that has the mandate to register and regulate SACCOs.
Investing with a legal institution minimizes the risk of losing your investments from fraudulent SACCOs. Such cases are not uncommon in the Kenyan market especially now that the Sacco movement is growing.
Investing with a Sacco requires you to open an account by fulfilling the various set KYC requirements.
5. Fixed Deposits
Most financial institutions such as banks offer fixed deposit investment options. This involves saving your funds for a specific period to earn a specific amount of interest.
This is an option that most financial investors tap into especially due to the security and predictability nature of the option. There are two types of fixing money that you can explore. These are both a fixed deposit or a call deposit.
The difference is that a fixed deposit has a definite timeline through which you have to fix the funds. This means your deposit matures only after the lapse of the fixing timeline. Cashing your funds before the end of this period comes at a cost such as losing your interest.
On the other hand, a call deposit is flexible and serves those customers who may need to access their funds on short notice. The only challenge with this option is that the interest rates are lower compared to those of fixed deposits.
The interest rates offered for this investment option are negotiable. Hence, you should ensure to negotiate for the best rates possible.
Before settling on the best institution to engage in, you should conduct adequate market research to get the best deal possible.
I had to mention this option because it is fast becoming a top option for some financial investors in the country making it the latest and fastest-growing investment option in the market.
It involves investment in digital currencies such as Bitcoin and Ethereum. This market is currently worth over 2 trillion dollars globally.
One of the key things attracting investors to cryptocurrencies is their fast value growth resulting in above-normal profit margins.
However, this volatility makes investing in cryptocurrencies highly risky as compared to other stable options such as fixed deposits and government bonds.
The industry also remains unregulated. Currently, there is no law in Kenya regulating the trading and use of cryptocurrencies. Lack of regulation increases the risk of venturing into this option, especially for those investors without experience.
High-risk levels with the trading of cryptocurrencies mean that the rewards are also above average more so for those investors with adequate market knowledge and experience.
Conclusion on the Top Financial Investment Options in Kenya That You Should Consider
The list above is an indicates the top financial investment options in Kenya that are available in the market. Each option is unique in its how it works and they all come with varying levels of risk and rewards.
Hence, you should do adequate market research before settling on the best option that suits your needs and abilities. The good thing is that you can always engage a consultant to incase you are having challenges engaging in any of these options.