Amid mounting concerns over inflation and the rising cost of living that have left many households anxious, Kenyans are encouraged to consider embracing the concept of passive income. This strategy can serve as a vital shield to protect personal finances and navigate the challenging economic times.
On October 5, we hosted an enlightening session on X (formerly Twitter), led by Timothy Macharia, the Head of Wealth Management at KCB Investment Bank. The session aimed to shed light on various investment opportunities available to empower Kenyans to establish a dependable stream of passive income.
The key takeaways from this session.
Preparing for Unpredictable Times: Imagine waking up one morning to news that the cost of oil has surged, perhaps by Kshs. 10. This can be a signal that the prices of other goods and services are on the rise. Therefore, passive income functions as a crucial safety net during unforeseeable financial challenges.
Unlocking Financial Freedom: Passive income is the key to achieving financial freedom, offering the prospect of financial flexibility and accessibility. It allows you to envision a future where your financial well-being is secure. You can travel, support your family, and prioritize self-care—all achievable through passive income.
Personalized Investment: Timothy stressed that there are no universal rules dictating how much one should invest. Some individuals might invest Kshs. 5,000 because that's what they can afford, while others may comfortably invest Kshs. 100,000 or even Kshs. 500,000. The essential factor is to tailor your investment approach to your unique goals and financial situation.
Living Within Your Means: Creating passive income begins with conscientious management of your lifestyle to ensure that your expenses consistently remain below your income. Different careers come with varying career spans, for instance, a doctor's career may span up to 80 years, while a professional athlete may have a shorter career span. It's imperative to align your investment strategy with your individual circumstances. Investments are not solely about money; for some, the most invaluable investment involves self-improvement, such as acquiring new skills.
Exploring MMFs, T-Bills, and Bonds
During the session, our Head of Wealth Management, Timothy Macharia, talked about various investment tools available in Kenya, including Money Market Funds (MMFs), Treasury bills, and bonds. He underscored the distinct purposes of each option:
Money Market Funds (MMFs) offer accessibility with no lock period, ensuring that investors have swift access to their funds. Money market funds are designed to offer easy access to your funds. You can generally withdraw your money with short notice, providing flexibility for your financial needs. We believe that everyone should have access to secure investments. The minimum investment required is of just KES 5,000. This offers a competitive annual return of 10.50%, making the KCB Money Market Fund an attractive option for growing your wealth securely.
Treasury bills (T-Bills) feature lock periods ranging from 3 to 12 months, making them suitable for investors with longer investment horizons. Investing in KCBIB Treasury Bills is a low-risk option, as your investment is backed by the Kenyan government, rendering it one of the most secure ways to grow your savings. The minimum amount you can invest here is Kshs. 500,000 which comes with 12.20%, 12.30% and 11.39% investment rates at a period of 91, 182, 364 days respectively.
Bonds, in contrast, require a more extended lock period and cater to a different category of investors with longer investment horizons. Suppose you earn a monthly salary of Ksh 100,000 and intend to save 20% each month, equivalent to Ksh 20,000. To ensure you stay committed to your plan, it's advisable to set up a standing order for automated deductions on a preset date each month. After saving for 5 months, you can invest your savings in T-bonds, requiring only Kshs. 100,000 as the minimum investment. These bonds pay semi-annual interest at a rate of 13% to 16% per annum.
Timothy stressed that the need to prepare for uncertain times applies not just to salaried individuals but also to business owners. He urged entrepreneurs to establish clear boundaries between personal and business finances. This practice creates a financial safety margin, ensuring that personal finances remain secure, even when businesses face challenges.
You can access a recording of the KCB X session: https://bit.ly/3RWKc2M
Start your investment journey with KCB Bank today. Write to us at wealthmanagement@kcbgroup.com
