What asset classes can you add to your USD portfolio?

Why is it important to diversify your portfolio in multiple currencies?

A short thread🧵 I've always recommended a portfolio allocation of 50% KES denominated assets and 50% USD denominated assets

But why do I recommend this kind of portfolio?

1. Protect yourself from the weakening and not so stable Kenyan shilling.

10 years ago, 1 USD = 86KES
Today, 1USD = 130KES

In less than 10 years, the KES depreciated by about 50%

Treasury Bills vs Treasury Bonds.

Most people confuse the two even though they are more different that similar.

In this thread:
1. Learn why T-bonds are the best source of passive income in Kenya.
2. Learn why I don't recommend investing in T-bills

Let's go👇👇 Let's start with definitions:

T-bills - short term debt obligations for the Kenyan govenrnment.

T-bonds - Long term debt obligations for the Kenyan government.

In simple terms, when you invest in a T-bill you are lending money to GoK for a short period of time(less than a year) while if you invest in a T-bond, you are lending money to GoK for more than one year (2-30 years)

When most people think of passive income in Kenya, Rental Income from Real Estate comes to mind.

But what is the best source of passive income in Kenya?

Here's why rental income isn't the best source of passive income and how other alternatives compare

Breakdown below👇 Before we start, let me make the following clear:

1. We are comparing asset classes based on one return element only - cash flow generation.

2. We are talking about passive income. Where you put your money, do nothing and wait for a return.

Of course if you want more money from your capital, you can get more involved, start a business and take up more risk.

Avoid these money mistakes:

1. Never save your emergency fund in a SACCO

2. Never use your Money market fund for long term investing.

3. Never save money using your banks’ saving or fixed deposit account

4. Never use your Chama as your only savings or investment plan Here's the Breakdown:
1. Savings in your SACCO and your share capital in a SACCO are not easily accessible.

The best place to save for your emergency fund is in a Money Market Fund

2. Money Market Funds are best suited for short term preservation of cash.

Not for long term investing. They give a return that keeps up with the inflation rate and prevailing interest rates.

The best opportunities for wealth creation are in the stock market, Bonds, Real estate, and other assets.

New MMF investors are worried that MMF returns are on a downward trajectory

From highs of 18% a few months ago, MMF rates are expected to go their normal levels of 7-10%

Why is this happening and what should investors do?👇👇 1. Why are rates coming down?

Rates are coming down because the rates of the underlying assets are also going down.

Money Market funds invest in T-bills, Fixed deposits, demand deposits, call deposits, commercial paper, etc

With the Central Bank cutting interest rates, and even more rate cuts expected, the rates of the above underlying assets have been declining as well

If you find yourself living paycheck to paycheck without making any savings,

Here are a few things you can try to help you change your savings culture:👇👇 1. Prioritize savings over expenses.

Do not save what is left after spending. Spend what is left after saving.

How is this possible?

Set an amount or percentage of money that you can comfortably save every month.

Then once you get paid, you first deduct the savings first.

Getting questions on which among the two IFBs is better to invest in and why:

When it comes to T-bonds, more so when buying directly via CBK,

Only a few factors actually matter when choosing which T-bond to invest in:

These include: 1. Type of bond.

There are generally two main types of Treasury bonds with the main difference being the tax obligations:

a) Fixed coupon bonds - Subjected to a withholding tax of 10-15 % depending on bond's tenor

Bonds with tenors of less than 10 years - 15% withholding tax

Bonds with tenors of more than 10 years - 10% Withholding tax

b) Infrastructure bonds. Investors love them as they are tax free.

Money Market Funds vs T-bills

A question that is often asked by many:

"Since MMFs mainly invest in T-bills, why can't I invest directly in T-bills and get the *full gross return* before management fee is deducted?"

Here is how MMFs compare to T-bills👇 Before we even talk about returns, a MMF has an edge over T-bills because of the following reasons:

1. Liquidity With a MMF, you can access your money within 2 days of asking.

For T-bills you have to wait until the maturity of the paper since T-bills aren't traded in the secondary market like T-bonds.

Hence a MMF is more liquid than T-bills

Although T-bills have shorter tenors of 91 days to 365 days hence still score high on the liquidity rankings.

In 2024, I PERSONALLY worked with over 1,000 clients to help them master their personal finances and investments.

Here are the top 7 insights from working with 1,000+ clients to grow their wealth.👇👇 1. The best way to protect your portfolio from the weakening Kenyan shilling or from currency risks is by holding your wealth in long term USD denominated assets.

In 2023, the most popular investing advice was, "save in USD and thank me later, IYKYK" ):

the KES depreciated against the USD by a whooping 25%

Everyone rushed to convert their savings from KES to USD, only for the KES to bounce back this year from lows of 160KES/ USD to 129KES/USD

This led to many investors registering huge losses and even converting their USD back to KES

Did you know that you can start investing in Real Estate in Kenya with less than Ksh 1,000?

I present to you Real Estate Investment Trusts(REITs) in Kenya

Here's everything you need to know about investing in REITs in Kenya👇👇 A REIT is a regulated collective investment vehicle that enables collective investment in real estate.

Investors pool funds to invest in a trust that earns profits from real estate.

REITs build or acquire properties to generate rental or sales income, which is distributed to unit holders annually.

One of the biggest regrets that people have with their personal finances is:

"I have nothing to show for my 10-20 years of working despite earning a good income & even getting pay increments severally."

Why does this happen and why do so many people end up in this?👇 Let's start with why this regret happens:

1. Taking huge debts that overstretch your budget and take decades to settle.

2. Living paycheck to paycheck. Having a zero savings rate

3. Lifestyle creep. This is where an increase in income leads to a corresponding increase in lifestyle expenses

4. Black tax. Shouldering the burden of your family, relatives and friends

5. Lack of a long term financial plan.

7. Not budgeting your money. You don't intentionally tell your money where to go.

7. Financial illiteracy. Lacking knowledge on how to manage your personal finances

The most asked question in my DMs

"Let's say I have this amount of money, or I can manage to save this amount of money per month, how and where should I invest?"

This is financial planning 101

Here's the best answer to this👇👇 Once you have a decent income and you can manage to put aside some decent savings month on month,

You need a financial road map to guide you on where you should deploy your savings.

Here are 10 steps that you can follow to come up with your own financial road map.

As an investor, you have to make informed decisions that are backed up by data.

Here are my top 10 sources of data that help me understand financial markets in Kenya.

They also help me offer credible financial advice to my clients.

Steal them below👇👇 1. The SACCO Supervision report by SASRA.

Every year, the SACCOs Societies Regulatory Authority (SASRA) Publishes a report that summarizes how SACCOs are performing in the country.

This report will help you understand the SACCOs sector in Kenya and how SACCOs are run.

You can find the reports on SASRA's website

Here's a thread I did on this years report.
x.com/kahome_steve/s…

Which is the best SACCO to join?

Here are 5 considerations to make when joining a SACCO:

1. Financial Stability of the SACCO. According to Sacco Societies & Regulatory Authority (SASRA) all Deposit Taking(DT) Saccos should:

a) Have a core capital to Total Assets ratio of at least 10%

b) Core capital to Total deposits should be more than 8%

c) The maximum external borrowing to total assets allowed is 25%

d) Institutional capital to Total Assets Ratio should at least be 8%

THREAD🧵

Money Market Funds(MMFs) in Kenya

What are MMFs? How do they Work?

What are the best MMFs in Kenya?

How can I join a MMF?

Let's find out below👇👇 1/ What is a Money Market Fund?

A Money Market Fund is a low risk investment mutual fund that invests in highly liquid, short term instruments.

Let's breakdown this complex definition.

Mutual fund - pooling money from different people
low risk - low probability of losing capital
highly liquid - can easily convert into cash
short term - mature in less than 18 months

Career paths have changed.

The Gig economy has produced freelancers, content creators, and other careers that have irregular and seasonal earnings.

Here's how to manage your personal finances with an irregular income👇👇 Managing an irregular income is hard because:

1. You don't know when you'll get paid.

As a freelancer, some clients take time to pay you after you have completed your task.

Some may take a month, three months, half a year or even a whole year to process an invoice and pay you for the job

When investors think of passive income in Kenya, they mainly settle for Real Estate's Rental income.

Before you take that loan to put up those rentals or buy that off plan house,

Here's why Real Estate may not be your best option for passive income in Kenya👇👇 1. Tax inefficiency:
Property owners in Kenya pay the following taxes:

a) Stamp duty - 4% of the property value

b) Capital Gains tax - 15% of the net gain

c) Land rates - For residential properties within Nairobi, unit owners are expected to pay a Property Tax of 0.115% of the property value

d) Rental Income tax - 7.5% of the gross rent received

e) VAT - Commercial buildings are subject to VAT.
VAT may also be levied on additional charges you may be required to pay along with your property purchase

f) Legal and registration fees: 1-3% of property value depending on your advocate

Almost every Kenyan investor is stuck with a plot somewhere that they are unable to liquidate.

The plots quickly turn into idle or dead assets with little financial gains

Here's why you should think twice before buying that kaploti:

1. Those plots don't generate any cashflows The piece of idle land will not generate any income for you.

Stocks generate dividend income, bonds pay semi annual coupons, real estate generates rental income.

But your kaploti will only take money from your pocket to pay land rates, maintain it, fence it...etc.

To make it worse, some people even take loans to buy idle assets. Double tragedy!

In Kenya people approach retirement planning in 3 main ways.

1. Individual pension plans(IPPs)
2. Personal investment portfolios
3. A hybrid of both

Here's how these 3 compare 👇👇 1. Individual pension plans (IPPs)

This is probably the most popular way.

You work with an insurance company or a fund manager regulated by the Retirements Benefit Authority (RBA) to offer retirement solutions.

You make a certain contribution per month, and they invest the money for you over the years until you reach your retirement age.

How do you invest in global stocks and ETFs?

You need to open a brokerage account that gives you access to global markets.

Here are the 5 options available for Kenyan investors and how they compare:

1. Interactive Brokers. Interactive brokers one is the biggest stock broker outside the U.S.

It is licensed and regulated in over 10 countries and was founded in 1978.

The company is also listed on the New York Stock Exchange.

10 Money rules that can help you simplify personal finance and investing decisions.

1. Rule of 72

Helps you estimate the number of years needed to double your money at a given annual rate of return For example if you have 10M invested, how long will it take you to double your money to 20M?

We assume a minimum required rate of return of 10% per annum

72 divided by 10 = 7.2yrs

Hence with a required rate of return of 10% per annum, it will take you 7.2yrs to double your money.