There are different investment assets available – cash, debt, equities, properties, commodities, and derivatives. Luckily, there many types of investment assets in Kenya that you can choose from to begin your investing journey or diversify your portfolio.
Each of these asset classes has different features, risks, and returns. Whatever assets you settle for will depend on your risk tolerance, investing horizon, and expected returns.
Read more on basic investment terms
They are also referred to as stocks or shares. Companies, public or private, issue these and signify ownership interest in the company. As a shareholder, you get to share in the company’s profits through dividends or have voting rights as a common shareholder.
Investing in a private company (private equity) could have higher rewards, but the market is not as liquid or regulated as that of publicly traded companies.
If you want to invest in Kenyan companies listed at the Nairobi Securities Exchange (NSE), you have to open a Central Depository and Settlement account. This is an electronic account for holding your equities and managing transfers of stocks in the stocks market.
Investing in equities allows you to earn returns through dividends and capital appreciation when the share prices increase.
The stock market can be volatile, considering the share prices are also affected by factors outside the company’s control.
Debt investment instruments allow you to lend money to a company or government in return for fixed payments of interest and the principal amount at maturity. Governments and companies use debt instruments to raise capital for their projects and other financing activities.
Some of the common debt instruments you can invest in include bonds (corporate and government), Treasury Bills (T-Bills), commercial papers, and debentures. Debt instruments can be short-term or long-term instruments and are usually considered less risky than equities.
Cash and Equivalents
Cash and equivalents are short-term investments with high liquidity, low risks, and returns. These include money market funds, term deposits, and savings accounts. While cash and equivalent investments offer no capital appreciation, they can be sources of low-risk income returns and portfolio diversification.
Real asset investments involve investing in physical or tangible assets like real estate, infrastructure, and commodities.
You don’t have to own land or properties to be a real estate or property investor. One can also invest in REITs (Real Estate Investment Trusts). REITs own, finance, or operate real estates that generate income, like malls, warehouses, offices, and apartments. As an investor, the real assets’ daily operations or financing are not your obligations, but you earn returns in dividends. In Kenya, there are three types of REITs: income, development, and Islamic REITs.
Infrastructure investment includes networks and assets used in transportation, storage, and distribution of goods, information, energy, people, like toll roads, airports, or pipelines. Commodities, on the other hand, include assets like precious metals, natural gas, oil, or agricultural products like wheat, corn, cocoa, soybeans, coffee, and sugar.
Given the different types of investment assets in Kenya, there are many ways you can earn a return or grow your capital. Once you’ve established your risk tolerance levels, your investment time horizon and have the initial investment amount needed, you can choose any of these investments and use an investment company.