Investment Opportunities in Kenya: Unit Trusts

Investment Opportunities in Kenya: Unit Trusts

There are many ways that you can invest your money. Among all the available options out there, there exists good and bad investment options.  Whether an investment option is good or bad for you is dependent on your current life situation.

The viable investment options for a person who has retired from work, for instance, differ greatly from those of a young person who still has a long way to retirement. Reason being, the youngster has the advantage of being able to take out higher risk investments than his older counterpart; without worrying about loosing money or not being able to attain financial stability.

In our first ‘Investment Options’ article, we spoke about 14 ways to invest Sh. 10,000.  If you want to learn about investing in stocks and bonds and other investment options, I suggest you check out the article. In this article, we will talk about investing in unit trusts.

What is the meaning of Unit Trusts?

It’s an investment pool of resources from many investors. These resources are invested in financial securities with the aim of yielding a return on investment for each investor.

Advantages of Unit Trusts

  1. Given that it’s an investment pool and many investors are involved, they usually have a high return on investment
  2. The management of unit trusts is highly professional, and this also contributes to the high returns
  3. As an investor, you have easy access to your money. You need to wait for only 3 working days after requesting a withdrawal to get your money
  4. They are very flexible in the sense that you can top up your investment whenever you find it convenient
  5. There exists 4 different types (funds) and you can choose the fund(s) to invest in depending on how much risk you are willing to take (your risk appetite)

 

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The 4 Funds Include:

  1. Money Market Fund
  2. Equity Fund
  3. Bond Fund
  4. Growth Fund

1) Money Market Fund

I would recommend this to you if you have a low risk appetite. Additionally, I would recommend it to you if you are a short-term investor. If you are looking to invest for 1-12 months, the money market fund is definitely for you.

The interest rate for this fund is higher than that of bank deposits. Normally, it stands at 8% per day.

2) Equity Fund

I wouldn’t recommend this to anyone who has a low risk appetite. Returns could be very high at certain times and dip before you know it. This fluctuation in returns is due to the fact that this fund is invested in listed stock at the Nairobi Securities Exchange.

3) Bond Fund

This fund has a medium to low risk profile, meaning it is not so risky. The fund is invested in fixed income securities.

4) Growth Fund

It has a medium risk profile. Thus, it provides a balance of safety, income and capital appreciation- its value goes up with an increase in its market price. Therefore, over time, it commands a higher market price than what you spent purchasing it.

What Do I Recommend Investing In?

I recommend investing in the money market fund since it is the least risky- its returns are guaranteed.

Additionally, it is an open-ended investment meaning you can top up and withdraw money at any time. In the case of a withdrawal, your account is credited and you can access your money after 3 working days.

You can invest as low as Sh. 10,000 and you’ll never loose your capital. At the end of the year, you’ll get your capital plus interest. Speaking of interest, the interest rate is usually 8%; earned daily and compounded monthly.

The interest rate is market-driven. This means that it fluctuates on a daily basis (you can find updated daily rates on the NSE website and daily newspapers). However, it usually fluctuates within the 8-8.5% margin. It never goes below 8%.

Therefore, when you are thinking about investments, my advise to you is to think about the money market fund. It’s not the type of investment to cause disappointments.

 

 

 

3 thoughts on “Investment Opportunities in Kenya: Unit Trusts”

    1. Hi John,

      Thank you for reading the article and choosing such a wise investment. Kindly call 0713543487 for further assistance

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