5 Common Types of Investments in Kenya - 2023

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If you are new to investing, then you’re probably wondering how best to get started. Where is the best place to invest your money?

That is an important question because the right investment can do wonders for your financial plans. The problem is that there are so many options, making it hard to pick the one that’s ideal for you. This article will fix that.

We will cover the most common types of investments in Kenya, understand how they work, and how you can start investing in them.

Below is the list of the 5 most popular investment options in Kenya;

  • Shares
  • Bonds
  • REITs
  • Mutual funds/Unit Trusts
  • Money market funds

Let's look at each of them in more detail.

1. Shares

Also known as stocks, shares represent a piece of ownership in a company. So by owning a share, you become part owner of the business, meaning you get a stake in the business's success (or failure).

For instance, buying Safaricom shares would mean that, as a part owner, you’d be entitled to a share of the profits since you own a piece of the business.

Profitable companies share their profit with investors periodically. Each investor receives a share of the profits, known as dividends. But this is not the only way that shares make money. Investors can also make profits through capital gains.

This is where the financial value of the company’s shares goes up due to good business performance, favorable economic conditions, or any other positive market factors.

Suggested: Understanding Shares: How the Nairobi Stock Exchange Works

Who should buy shares?

Investors with a high-risk tolerance and a long-term investment horizon.

Shares are highly volatile i.e. their prices fluctuate wildly over the short term. And that makes them risky because their value could drop at any moment and for whatever reason.

They are ideal for long-term investors who want to realize capital gains, which can be achieved by simply investing in great businesses. That’s because the value of good, profitable companies tends to increase over time.

The minimum number of shares you can buy at the Nairobi Securities Exchange is 100. So the cost will depend on the price of the specific stock you want to buy. Generally, it can cost anywhere from KES 200 (sh.2 per stock) to KES 35,000 (sh.350 per stock) to start.


2. Bonds

Simply put, a bond is a loan between a borrower and a lender. Sometimes, when companies have large financial needs, they can turn to investors for a loan. This loan is called a bond.

As the investor, you’ll act as a lender to some of these companies. And in return, you’ll receive periodic interest payments from them, much like a bank does when it lends money. Once the loan duration ends, the company will repay your full principal amount.

There are two kinds of bonds: government (or treasury) bonds and corporate bonds. Treasury bonds are loans given to the government while corporate bonds are those given to public companies.

Bonds can be bought directly from the borrowing company, or from the Nairobi Securities Exchange, where investors can buy or sell any available bonds.

Who should buy bonds?

They are perfect for investors with a short- to medium-term investment horizon and a low-risk appetite.

Bonds provide a good avenue for investors looking for a regular income without bearing a huge risk. However, being low-risk means they don’t offer returns as good as those we see in shares.

Bonds in the NSE are sold in multiples of sh. 50,000, which makes them quite costly. However, there are alternative ways to buy them such as mutual funds (from 1,000) or the mobile-only option of M-Akiba (from 3,000).

3. REITs

Short for Real Estate Investment Trust, this is an investment vehicle that pools money from investors to invest exclusively in real estate.

REITs make money from their properties through rent, which is then passed to the investors as dividends. They are ideal for investors looking for an alternative to traditional stocks and bonds because they invest in a different asset class, which makes them good for diversification.

Currently, there are 3 REITs in Kenya approved by the Capital Markets Authority: ILAM Fahari I-REIT, Acorn D-REIT, and Acorn I-REIT (by Acorn).

Read More: REITs in Kenya: How to Invest in Real Estate with Little Capital

Who should invest in REITs?

They are suitable for investors with a medium- to long-term investment horizon and a slightly high-risk appetite.

REITs make money by either renting or selling their real estate properties. It usually takes time to build, market, and manage such properties so REITs aren’t ideal for short-term investors.

The ILAM Fahari I-REIT can be bought directly from the Nairobi Securities Exchange while both of the Acorn REITs can be bought from the Vuka platform. Depending on the number of shares you want to buy, it’ll cost about KES 1000 to start.

4. Mutual Funds

A mutual fund is a professionally-managed investment vehicle that pools money from many investors and invests it in assets like stocks, bonds, and other such securities.

The main types of mutual funds, based on the assets they invest in, include:

  • Equity funds - which invest in stocks
  • Bonds funds - which invest in bonds
  • Money market funds -which invest in debt instruments
  • Balanced funds - which invest in a mix of different assets

By investing in a mutual fund, you’ll pool your money with other investors and then authorize an investment professional to invest it on your behalf. The money is invested in specific assets, as indicated by the type of mutual fund that you invest in.

Recommended: Mutual Funds in Kenya – The Best Guide for Beginners

Who should invest in Mutual Funds?

Investors with little experience looking for a hands-off investment approach.

The main advantage of mutual funds is that you get the services of an investment professional. And because the pro is trained and qualified to manage investments, they can do a better job at finding and investing in great assets for you.

There are many mutual funds available in Kenya. The most common ones are managed by investment companies such as CIC, Old Mutual, Cytonn, and Sanlam. Investing in any of them costs anywhere from 1,000 to 5,000 for beginners.

5. Money Market Funds

MMFs are a type of mutual fund that invests in low-risk financial instruments such as treasury bills, corporate debt, and fixed deposits. These instruments are usually short-term and pay a reliable rate of interest.

Money market funds are usually owned and run by professional investment companies. They are open to all investors, provided you can pay the minimum joining fee, which is usually less than KES 1000.

Who should invest in Mutual Funds?

Those looking for short- to medium-term assets, low risk, plus a regular income.

MMFs invest in short-term debt instruments and can be a good place to make a regular return since most of them pay their investors almost every month. They also invest in low-risk assets, making them a relatively safe type of investment.

There are over 20 MMFs in Kenya. Below is a link that shows the best of them, and how you can quickly get started investing in each.

Recommended: 7 Best Money Market Funds in Kenya – 2023