For a long time, I struggled to understand why most Kenyans invest their in real estate and land. I always thought that there were a multitude of other avenues to invest and reap significant revenues compared to the property markets. But I'm slowly realizing why most people build rental houses once they have enough money. I'm not a professional investor. I have little experience and knowledge in the investment markets in the country. What I do know is that for a beginner, there is a very limited number of choices that you can confidently put money in when you have a spare Ksh. 100,000.
I’m a Noob, Sorry
I'm recently employed, only beginning to enjoy the calm that comes with having spare funds. This is helped significantly by the fact that I don't pay rent, with my parents insisting I move out when I'm fully prepared and self sufficient. 'Hukuna kutoka alafu urudi after three months, ama uanze kuitisha baba yako pesa ya rent....' is what my mom said to me. So I've been exploring the different markets and opportunities in an effort to ensure that my money grows to something substantial in the coming years. I have an Economics background, and I know the power of compound interest. This is what my amateur eyes can see. Therefore, please forgive my inexperience and ignorance. This is a learning process.
The Money Makers
I've gone through a number of options, ranging from the growing money market funds in Kenya, government securities, SACCOs, and real estate markets. The opportunities available are numerous and attractive. But as with many people of my generation, there's always the question of how much money it makes compared to the principal amount. We are a generation raised on instant gratification, and this filters into our personal choices. I'll only cover a few, as I'm sure investing is not the most exciting topic out here, and I'd rather not bore you.
REITS
Real Estate Investment Trust, for example, is a relatively new investment driver that provides a diversified and therefore secure opportunity. REITs are some of the safest and lucrative investment vehicles in the world. Done right, these trusts can generate reliable income for a long period of time.
However, these funds have significant management fees that eat into the gains made each year. I personally find these fees to be way too high, especially given that the returns don't seem to justify the fees. The property market also seems a little bit too fickle, and I've had the sense for a while that its a bubble that is bound to burst. However, to reiterate, I have very little knowledge and experience to say this confidently.
Forex
Forex markets seem like the most lucrative investment due to a number of factors. First is the high liquidity of the markets, which allows you to open and close positions at any time and with relative ease. This market is, for the most part, well regulated, both internationally and locally. The transaction costs of Forex markets are also relatively low.
However, access to established Forex funds is especially difficult due to the high entry points for these firms. MansaX, which to me look to be the most visible and most secure fund, has an entry point of Ksh. 250,000. This locks out a significant number of prospective investors. It does however ensure that investors are serious and knowledgeable to some extent, which is nothing but a good sign.
Money Markets
Money markets, especially those provided by established financial institutions seem to be safe and secure. They have the advantage of investing in a wide variety of interest bearing instruments. They have the ability to provide regular cashflow, and if retained, can offer significant returns due to compounding interest. However, the interest rates seem low to me, and the management fees are probably significant. I can only attribute this to the limited options available, and the lack of competition in this sector.
Your Point Is?
The most significant issue with investing in the Kenyan market is the young and immature investment market. While the investment market is rapidly growing and expanding, it still lags behind other markets in Africa. There is a limited number of options to invest in Kenya, which allows the few firms with the capacity and capability to charge high management fees and low returns. This is bound to get better with time, and we can already see it in the financial innovations and new investment drivers being set up in the country. There will still need to be a lot of financial education for the population of Kenya, but the trajectory is very promising. The age of retail investors is coming.
We do enjoy interest rates that other countries would kill for. Savings rates of 7% per annum may not seem significant until you consider that U.S rates can be as low as 1% per annum. With proper due diligence, smart investing and patience, I do believe that the Kenyan markets can offer massive returns in the future. The question is whether we - I - have the discipline needed.