I've always been intrigued with the Kenya treasury bills and bonds because the interest is higher there compared to the US. I've seen government bonds going from 10 - 15%

 

I found this post on Facebook from Ann Wanjiru. She summarized it so well so I thought I'd share it here.

 

To invest in Treasury bills & bonds you need to open a CDS account with CBK, check on their website for more details. Treasury bonds go for 5 to 20 years and interest is paid semi annually. So if you invest Ksh 100k in a 5 year bond at an interest rate of say 10%(assuming no withholding tax) the government will pay you Ksh 5k every 6 months over the 5 years. CBK will pay you back the Ksh 100k after the 5 years and you will have earned an interest of Ksh 50k in total. Treasury bonds are advertised monthly on the CBK website and they are also traded at the NSE as a secondary market.

 

Treasury bonds are a good way to invest in the medium and long term because they are risk free and they offer good returns. Pension funds, Insurance companies and even Commercial Banks invest their clients money in government bonds and only pay their clients a fraction of the interest. So it would be good for one to invest in Treasury bills & bonds directly and earn the full interest.

 

This is a good avenue to plan for education funds for your children or a retirement plan.

 

You can also opt for Treasury bills if you are looking for a short term investment because they go for 91 days, 182 days or 364 days.

 

For the NSE you trade through a stock broker, details of all the brokers are available on the NSE website. It is better to open a CDS account with a Broker who has an online or mobile platform. When you are ready to trade you just log onto the brokers website and give instructions to buy or sell shares at a certain price, ensure you do your research so that you quote a good price. The broker will then trade for you at a fee (this fee is regulated). The Central Depository & Settlement Corporation (a Government body) is the Custodian of all shares so once your broker trades for you then you should get a statement from CDSC confirming that the transaction occurred. This helps in safeguarding customers’ coz previously there were brokers who were trading with people’s money illegally.

 

Shares are a good investment for the long term I.e when you buy shares today you should give it time for the shares to appreciate to a good level. So you should invest in a good counter say Banks or Telecommunication companies and wait for a few years. You will be enjoying dividends every year and then eventually you can enjoy capital gains. Note that shares have a risk coz a company can be doing well today and go down in a few years so you need to be ready to take the risk. Research on the fundamentals of a company (eg. profits & dividends paid over the last couple of years) before making your decision. Check out mystocks.co.ke for more information.

So for Treasury bills & bonds you need to open a CDS account with CBK and for Shares you open a CDS account with a stock broker. You could also ask your stock broker or bank to buy for you Tbills & Tbonds but they charge a commission.

 

As a proud citizen I say you walk to CBK and open an account directly. The only catch with CBK is that the minimum you can invest in is Ksh 50k.

 

Insurance companies have also come up with Money Market funds(MMF) that you can invest as low as 2k. I have invested through CIC and their returns are good and the ease of investing or withdrawing funds is good.

 

 

Tbills & bonds are risk free & have good returns. But the amount required is high, they tie your money for long and they don’t have a compounding effect.

 

Shares can have very high returns in the long term but they are high risk instruments.

 

Saccos & Chamas have good returns and access to loans. But corporate governance is always an issue.

 

Real Estate very good returns & offers financial security but this is capital intensive which locks out most people.

 

MMF(Insurance Money Market funds) have good returns and have the benefits of ease of entry & exit. They also have the compounding effect. The down side is you lose control so the insurance company makes the investment decisions which brings in the risk.

 

Banks just keep what you need for your monthly expenses. If you can, have some money in an interest earning savings account that you can access in case of an emergency.

 

I don’t believe in Education policies because the return they offer is not so good but they give you the discipline of saving on a monthly basis.