Why Invest?
Saving money in a bank account is good, but inflation slowly reduces its value. Investing helps your money grow faster than inflation, building wealth over time.
Simple truth: Money that works for you is better than money sitting idle.
Basic Investment Concepts
1. Return
What it means: How much money you make from an investment
Example: Invest KES 10,000, one year later it’s worth KES 11,000 → KES 1,000 return (10% return)
2. Risk
What it means: Chance you might lose money
Types:
- Low risk: Government bonds, bank deposits
- Medium risk: Corporate bonds, money market funds
- High risk: Stocks, real estate, business
Rule: Higher potential returns usually mean higher risk
3. Diversification
What it means: Don’t put all eggs in one basket
Example: Instead of KES 100,000 all in one stock, spread it:
- KES 30,000 in stocks
- KES 30,000 in money market fund
- KES 20,000 in SACCO
- KES 20,000 in Treasury bonds
Why: If one investment fails, others protect you
4. Compound Interest
What it means: Earning returns on your returns
Example:
- Year 1: KES 10,000 earns 10% = KES 1,000 (Total: KES 11,000)
- Year 2: KES 11,000 earns 10% = KES 1,100 (Total: KES 12,100)
- Year 3: KES 12,100 earns 10% = KES 1,210 (Total: KES 13,310)
Power: Over 20 years at 10%, KES 10,000 becomes KES 67,275!
5. Time Horizon
What it means: How long until you need the money
Short-term (1-3 years): Money market funds, Treasury bills Medium-term (3-10 years): Bonds, balanced funds Long-term (10+ years): Stocks, real estate
Rule: Longer time = can take more risk = higher potential returns
Investment Options in Kenya
1. Savings Accounts (Lowest Risk)
How it works: Keep money in bank, earn interest
Returns: 0-7% per year
Minimum: Varies (often KES 0-1,000)
Pros:
- Very safe
- Easy access to money
- No fees (usually)
Cons:
- Low returns
- Inflation may eat value
Best for: Emergency fund (3-6 months expenses)
2. Fixed Deposits (Low Risk)
How it works: Lock money in bank for fixed period (3 months to 5 years), earn higher interest
Returns: 7-11% per year
Minimum: KES 10,000-100,000 (varies by bank)
Pros:
- Safe
- Fixed, predictable returns
- Higher than savings accounts
Cons:
- Money locked (can’t access early without penalty)
- Returns still modest
Best for: Short to medium-term goals (wedding, land deposit, car)
3. SACCOs (Low to Medium Risk)
How it works: Join savings cooperative, save regularly, earn dividends
Returns: 10-15% per year (dividends)
Minimum: KES 500-5,000 membership, then monthly contributions
Pros:
- Good returns
- Can get loans (3x your savings)
- Community support
Cons:
- Must be member
- Less liquid (may need notice to withdraw)
- Quality varies by SACCO
Best for: Regular savers wanting returns + loan access
4. Money Market Funds (Low Risk)
How it works: Pooled fund investing in short-term securities (Treasury bills, bank deposits)
Returns: 10-14% per year
Minimum: KES 1,000-5,000
Pros:
- Higher returns than banks
- Low risk
- Easy to withdraw (1-3 days)
- Professional management
Cons:
- Not guaranteed (though very safe)
- Small fees
Best for: Everyone—great place for savings beyond emergency fund
Top providers: CIC Money Market Fund, Sanlam Money Market Fund, Zimele Money Market Fund
5. Treasury Bills and Bonds (Low Risk)
How it works: Lend money to government, they pay you interest
Treasury Bills:
- Short-term (91, 182, or 364 days)
- Returns: 15-17% currently
- Minimum: KES 100,000
Treasury Bonds:
- Long-term (2-30 years)
- Returns: 14-18% per year
- Minimum: KES 50,000
- Interest paid every 6 months
Pros:
- Very safe (government backed)
- Good returns
- Tax-free for some bonds
Cons:
- High minimum amounts
- Bonds lock money for years
Best for: Medium to long-term investors with capital
6. Nairobi Securities Exchange (NSE) Stocks (Medium to High Risk)
How it works: Buy shares of companies, earn from dividends and price increases
Returns: Varies widely (-50% to +100% or more per year)
Minimum: From KES 5,000 (depends on stock price)
Pros:
- High growth potential
- Dividends (some stocks)
- Own part of real companies (Safaricom, KCB, EABL, etc.)
Cons:
- Can lose money
- Prices fluctuate daily
- Requires research and monitoring
Best for: Long-term investors comfortable with risk
7. Unit Trusts / Mutual Funds (Medium Risk)
How it works: Professional fund managers pool money from many investors, invest in mix of stocks, bonds, etc.
Types:
- Equity funds (stocks): Higher risk, higher returns (15-25% in good years)
- Balanced funds (stocks + bonds): Medium risk (10-15%)
- Bond funds: Lower risk (8-12%)
Returns: Depends on fund type
Minimum: KES 1,000-5,000
Pros:
- Professional management
- Diversification
- Accessible for small amounts
Cons:
- Management fees (1-3% per year)
- Not guaranteed returns
Best for: Investors wanting diversification without picking individual stocks
Top providers: CIC, Old Mutual, Britam, ICEA Lion, Sanlam
8. Real Estate (High Risk, High Capital)
How it works: Buy land or property, earn from rent or selling later
Returns: 10-30% per year (varies widely)
Minimum: KES 500,000+ (land) to millions (property)
Pros:
- Tangible asset
- Land appreciates over time
- Rental income
- Hedge against inflation
Cons:
- High capital needed
- Not easy to sell quickly (illiquid)
- Maintenance costs (property)
- Scams common
Best for: Established investors with significant capital
9. Business/Side Hustle (High Risk)
How it works: Start or invest in a business
Returns: Varies wildly (-100% to +500%+)
Minimum: Varies (can start small)
Pros:
- Unlimited upside
- Control
- Active income + asset building
Cons:
- High failure rate
- Time-consuming
- Stressful
Best for: Entrepreneurs with skills, time, and risk tolerance
Step-by-Step: Start Investing
Step 1: Build Emergency Fund First
Before investing anything, save 3-6 months of expenses in easily accessible account
Why: Investments can go down; you don’t want to sell at a loss during emergency
Where: Regular savings account or money market fund
Step 2: Clear High-Interest Debt
Pay off expensive debt first (credit cards, mobile loans, shylocks)
Why: If debt costs 20% interest and investment earns 12%, you’re losing money overall
Exception: Cheap debt (HELB, mortgage under 10%) can wait
Step 3: Define Your Goals
Be specific:
- Goal: What are you saving for?
- Amount: How much do you need?
- Timeline: When do you need it?
Examples:
- Down payment for land: KES 500,000 in 3 years
- Retirement: KES 10,000,000 in 30 years
- Child’s university: KES 2,000,000 in 15 years
Step 4: Match Investments to Timeline
Short-term goals (1-3 years):
- Money market funds
- Fixed deposits
- Treasury bills
Medium-term (3-10 years):
- Balanced funds
- Treasury bonds
- Mix of money market + stocks
Long-term (10+ years):
- Stocks
- Equity funds
- Real estate
Step 5: Start Small
Don’t wait until you have “enough”—start now, however small
Examples:
- KES 1,000/month in money market fund
- KES 500/month in SACCO
- KES 2,000/month in stock via regular investment plan
Why: Habit matters more than amount; compound growth starts small
Step 6: Automate
Set up standing order from salary account to investment account
Why: “Pay yourself first”—money invested before you see it, before you spend it
Example:
- Salary arrives 1st of month
- Standing order sends KES 5,000 to money market fund on 2nd
- You live on what remains
Step 7: Increase Gradually
Every salary increase, raise your investment amount
Example:
- Currently investing KES 3,000/month
- Get raise from KES 40,000 to KES 50,000/month
- Increase investment to KES 5,000/month
- Still have more to spend than before
Goal: Eventually invest 20-30% of income
Step 8: Diversify as You Grow
Start simple (one money market fund)
As balance grows, spread it:
- KES 50,000: All in money market fund
- KES 200,000: 70% money market, 30% SACCO
- KES 500,000: 50% money market, 25% SACCO, 25% stocks/bonds
- KES 1,000,000+: 30% money market, 20% SACCO, 30% stocks, 20% bonds
Adjust based on your risk tolerance
Step 9: Review Quarterly
Every 3 months, check:
- Are investments performing?
- Do I need to rebalance?
- Has my goal or timeline changed?
Don’t obsess daily (especially for long-term investments)
Step 10: Stay Consistent
Markets go up and down—keep investing regardless
Example: Stock market drops 20%
- Don’t: Panic and sell everything
- Do: Keep investing (you’re buying at discount!)
Long-term consistency beats perfect timing
Common Mistakes to Avoid
1. Waiting to Start
Mistake: “I’ll invest when I earn more”
Reality: Every month you wait, you lose compound growth
Fix: Start with KES 500-1,000/month now
2. Chasing Hot Tips
Mistake: Friend says “XYZ stock will double!” → You invest without research
Reality: Most hot tips fail; you lose money
Fix: Do your own research or invest in diversified funds
3. Emotional Decisions
Mistake: Sell when market drops (fear) or buy when it’s overpriced (greed)
Reality: Timing the market is nearly impossible
Fix: Invest regularly regardless of market conditions
4. No Emergency Fund
Mistake: Invest all money, then forced to sell investments during emergency
Reality: Might have to sell at a loss
Fix: 3-6 months expenses in accessible account before investing
5. Putting All Money in One Place
Mistake: Everything in one stock, one SACCO, one asset
Reality: If it fails, you lose everything
Fix: Diversify across different investment types
6. Ignoring Fees
Mistake: Not checking management fees, transaction costs
Reality: 2-3% annual fees can cut long-term returns significantly
Fix: Compare fees; choose low-cost options when similar
7. Scams
Mistake: Promise of “50% returns guaranteed in 3 months!”
Reality: It’s a scam
Fix: If it sounds too good to be true, it is; verify all investments with CMA (cma.or.ke)
Realistic Expectations
Good Returns in Kenya
- Conservative portfolio: 10-12% per year
- Moderate portfolio: 12-15% per year
- Aggressive portfolio: 15-20% per year (with higher risk)
Doubling Your Money
At 10% per year: Money doubles in about 7 years
At 15% per year: Money doubles in about 5 years
Rule of 72: Years to double = 72 ÷ annual return percentage
Growing Wealth
Start: KES 5,000/month invested at 12% return
Results:
- After 5 years: ~KES 410,000
- After 10 years: ~KES 1,150,000
- After 20 years: ~KES 4,900,000
- After 30 years: ~KES 17,600,000
Key: Consistency and time
Resources to Learn More
Websites
- Capital Markets Authority (CMA): cma.or.ke (verify licensed brokers/funds)
- Nairobi Securities Exchange: nse.co.ke (learn about stocks)
- Central Bank of Kenya: centralbank.go.ke (Treasury bills/bonds)
Books (Available in Kenya)
- “The Richest Man in Babylon” by George S. Clason
- “Rich Dad Poor Dad” by Robert Kiyosaki
- “The Intelligent Investor” by Benjamin Graham
Local Experts
- Follow business sections: Business Daily, The Star Business
- YouTube channels by Kenyan financial experts
- Attend free seminars by fund managers (CIC, Britam, etc.)
Take Action This Week
Day 1: Calculate your monthly expenses → Ensure emergency fund covers 3-6 months
Day 2: List your financial goals (amount, timeline)
Day 3: Research one investment option (start with money market fund)
Day 4: Open investment account
Day 5: Set up standing order for automatic monthly investment
Day 6: Put first amount in
Day 7: Review this guide and plan your diversification strategy
Remember:
- The best time to start was yesterday
- The second-best time is today
- Start small, stay consistent, think long-term
- Invest in your education while investing your money
You don’t need to be rich to start investing. You invest to become rich. Start today, stay disciplined, and watch your wealth grow over time.