Beginners Guide to Investing in Kenya

Many people approach investing in the wrong way. They end up losing money through bad investment decisions or even being scammed. Here’s our beginners guide to investing safely in Kenya.

Tip #1

“Investing is for the rich, saving is for the poor.”

With small amounts of money, one should worry more on saving more money or growing their income first. And worry less about their returns in the short term because they do not matter much in the short term.

If Total Assets & Expected Annual Return < Expected Savings.

This means your investments are earning you less than you are saving, so you should focus on your savings. However, if your assets can earn you more than you can save in a year, you should focus on investing.

Tip # 2

Diversification

Diversification is not how you make wealth; it’s how you preserve wealth. When you are getting started in investing, find a few great investments, and go all in. Get more diversified as your wealth increases.

Tip #3

Create an Emergency Fund first.

Investing in Kenya requires that you hold your assets for long enough to yield high returns. The last thing you want to do as an investor is to sell your long-term assets to bail yourself out of an emergency. You will lose all your long-term gains.

Tip #4

There is nothing like a low-risk investment with high yield.

You can have low risk, or you can have high yield, but you cannot have both in the same investment. When you come across someone promising you high yield with low risk, take your money and run away!

Tip # 5

Investing in stocks.

Stock picking is simple but not easy. Many investors underperform the market in the long run. I’ll quote warren buffet, “Most investors will find that the best way to own common stocks is through an index fund that charges minimum fees.”

Many investors overestimate their ability to pick individual stocks. Index funds eliminate the risks of individual stocks, market sectors, and manager selection. While owning the stock market over the long term is a winner’s game, beating the stock market is a loser’s game.

Tip # 6

Prioritize markets over securities.

“Most of your financial returns will come from the markets you select to invest in, rather than the actual securities you decide to hold.”

In certain periods, certain markets perform better than others. In the recent past crypto has.

Tip # 7

The investor’s biggest enemy is himself.

“The first principle is that you must not fool yourself and you are the easiest person to fool.” Much of investing returns do not come from trading frequently, but from sticking to your investing in Kenya thesis and doing nothing else.

In investing, emotional intelligence matters more than IQ. It’s all about maintaining your cool during bear markets when everyone else is selling. And not falling into the greed trap during bull markets when everyone else is buying.

Tip #8

The importance of liquidity

Keep a reservoir of liquidity in your portfolio. Investors perish if they have no liquidity. The biggest risk to your money is the inability to turn an asset into cold, hard cash when you need the cash.

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Tip #9

Cash is King.

Cash is the cornerstone that holds everything else upright. It can hold up the rest of your wealth through the worst of times. You should match the horizon of your assets (the cash) with that of your liabilities (your expenses).

Tip # 10

Experience is the best teacher.

Only a fool waits to learn from his own experiences, but some lessons can only be learned from personal experience. Investing is a game where the stakes are high since it involves risking money. Do not take more risk than you can handle.