Investing is most commonly confused with saving and it’s understandable how one may confuse the two. There is a story in the Bible about a Master who gave his servants 5k, 2k, and 1k each. The first and the second doubled their money, but the last one dug a hole and hid it. On returning, the Master was furious with the last servant as he was too cautious, even further going on to call it criminal to live like that. He took his money and gave it to the first servant and advised him to get rid of his play safe mentality.
This story resonates well in today's times as it teaches us the difference between investments, saving, and risk. What I gather from the story is that if the first two servants lost their money but had taken the risk to increase their wealth, the master will not have been furious at them as they displayed a character that he had valued.
When thinking of investments, risk must always be a part of your strategy, as well as liquidity. Liquidity is the ability to convert your investment into cash. Say for example you invest in Real Estate, for you to get cash from your investment, you have to sell which will take days, sometimes months. However, if you were to invest in let’s say, fixed deposit in a bank, all you need to do is withdraw. These days it takes even seconds!
In Kenya, Investments come in 2 broad types, described by their risk, return and liquidity. These are;
The above categorization offers a glimpse of what Kenya has to offer in terms of investment options. The reality on the ground is that this is just a broad categorization of investments but not the full picture. The process of investments involves due diligence, diversification, investment analysis of the product on offer and the economy, personal risk profile and liquidity needs and much more.
We shall be releasing A Beginner’s Guide to Investments: The Investment Process, which shall detail, the process of how to invest simply and sensibly.
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