CBK floats bonds every month. That means there are a lot of bonds to invest in.

How do you decide which bond to invest in?

Here are some of the factors that you should consider:

1/ Type of bond.

Infrastructure bonds are tax free and very lucrative to investors. 2/ Type of sale.

You have more control over the price in a primary issuance than in a tap sale or a reopened bond where you may find yourself paying a discount price or a premium price.

3/ Maturity of the bond

This determines when you will get your principal back in case you hold your bond to maturity

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Life insurance is one of the key components of wealth protection.

It's also very key in wealth succession/estate planning.

Payouts are tax free & cannot be contested in court.

In this Thread we discuss the role of Life Insurance in wealth protection Let's start with the basics:

What if life Insurance?

It is a contract between an insurance policy holder and an insurance company,

Where the insurer promises to pay a sum of money in exchange for a premium, upon the death of an insured person or after a set period.

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.

Imagine this

You're moving in to Kileleshwa & you have the option to buy a 3 bedroom apartment at KES 15M or pay a monthly rent of KES 150K.

Hint: Investing the 15M in an IFB that fetches a return of 13% would earn you 1.95M per annum or 162.5K per month

Lets evaluate this👇 Last week I did a tweet on the never ending debate about "Renting vs Home Ownership"

While most people talk crap about renting and praise Home Ownership, there are pros and cons in both.

In this thread I will try to highlight the pros and cons of each and then leave you to have the final say.

With a portfolio of KES 20M, you can withdraw KES 1.2M every year & probably never run out of money

This only accounts for 6% of your portfolio

With an average annual return of at least 6% you can survive on KES 100K a month

This is how to think about retirement planning👇👇 Regardless of when you want to retire, this is what your entire retirement portfolio should entail:

1. A personal portfolio. A diverse set of income producing assets like MMFs, bonds, stocks, real estate

2. A pension plan. This should act like a back up to your personal portfolio.

You get to utilize the expertise of fund managers to grow your retirement kitty.

3. Medical Insurance. Medical bills can quickly force your to dispose your long term assets.

Treasury bonds were the best performing Asset class in Kenya in 2023.

Here are answers to Frequently Asked Questions about Treasury bonds:

1/ What is the difference btn Treasury bills and Treasury bonds? A T-bill is a short-term borrowing instrument issued by the the CBK to raise money on short term basis – for a period of up to 1 year.

T-bills are issued in maturities of 91, 182 & 364 days.

T-bills are sold at a discounted price to reflect investors' return & redeemed at face value.

Answering the most frequently asked questions about Money Market Funds.

1. Can I lose my money in a Money Market Fund?

No.

Money Market Funds are managed by a Fund Manager, overseen by a trustee, a custodian and regulated by the Capital Markets Authority. The Fund Manager ensures funds from investors are invested in accordance with the fund’s investment objective.

A Trustee ensures that investors’ interests are protected at all times.

A custodian (usually a bank) holds in safe custody the funds of a unit trust.

As a young person who thinks a lot about personal finance and investing,

I've come to realize that much advice about investing isn't suitable for young people.

Here's how young people should approach investing.👇👇 1. The biggest holding in your portfolio is you - income that your career will generate over your life time.

Your skills and knowledge will do more for you than any amount of investment returns over your lifetime.

Invest in your self.

Assuming you can manage to save 20K - 50K a month for the next 5 years,

You can easily create a portfolio that generates a passive income of 10K - 30K per month.

Here's a simple portfolio that you can create👇👇 A portfolio is a collection of assets owned by one person or an entity.

Simply put, a portfolio represents all the investments that you own.

These assets or investments may include stocks, bonds, real estate, mutual funds, etc.

Despite the high yields from government bonds,

Investors are worried that the government may default.

Kenya has even been referred to as the Next Ghana.

In this thread, we cover what it means for a government to default, causes, effects, and whether Kenya is likely to default A default refers to a situation where a sovereign state is unable or is unwilling to fulfill its debt obligations.

When a nation defaults, it has not made the necessary loan or bond payments.

Default often forces a nation to seek assistance from IMF or World Bank.

There are three funds that every investor should have:

1/ An Emergency Fund
2/ A Sinking Fund
3/ A Run Away Fund

Here's what they are and how to create them👇👇 1/ An Emergency fund.

What is it?

This is a set amount of money that covers your daily expenses for a certain period of time.

It should cover your daily *normal* expenses for a period of 3-6 months.

There have been fears by retail investors that the Government of Kenya may default on its debt.

How can retail investors de risk their bond portfolios?

And should they really be worried?

A small thread🧵👇 First, the probability of GoK defaulting on it's debt is very low.

And the consequences of this would be dire in the near future.

Hence GoK would do anything possible to avoid a default.

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So you just landed a new, well paying job?

Here’s how to save and invest your money in the right way👇👇 1/ Create a Budget.

If you do not tell your money where to go, you will always wonder where it went.

Separate your needs from your wants.

If you do not budget your money, it will never be enough to cater for your needs.

If you struggle with sticking to your budget or managing your money,

Here are a few things that you can try:👇👇 1/ Have two bank accounts.

One is for receiving money and the other is for holding money to cater for your expenses.

This works best for people who are paid or receive money several times in a given month.

It helps avoid the thinking that you have a lot of money to spend

The KES has depreciated against the USD by 19.54% in the last one year.

How can investors protect themselves from the depreciating Kenyan Shilling?

1. USD MMFs
2. Foreign stocks
3. Invest in Eurobonds

Here are more details:👇👇 1. Foreign stocks.

For the average investor, this is the best way to protect your portfolio against KES depreciation.

Owning foreign stocks, requires that you hold them in a foreign currency like the USD.

Some brokers allow you to do this with as little as $5

A thread of all my best threads on personal finance & Investing.

This is a masterclass on personal finance on it's own.

You can bookmark for later or share with your friends. P.S.

If you'd like the information on these threads well explained in an organized manner,

I have two e-books that you can find at the bottom of this thread.

If you invest in bonds as a retail investor, you have to be very careful with how you do it.

Otherwise, your lack of knowledge will cut down on your returns.

Here are a few things I have learned that can help retail investors:

1. The best way to invest in bonds is via CBK Open a CDS account and make sure you get enrolled on the TMD service that allows you to bid for bonds on your mobile phone via USSD code.

With that you can easily place bids for bonds from your phone.

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Investing in offshore/foreign stocks.

How can you access foreign markets in Kenya?

What are the advantages?

What are Exchange Traded Funds (ETFs)?

Let's dive in👇👇 Why Invest in Offshore markets?

1. The risk of currency depreciation.

The USD has gained 18.96% over the KES over the last one year.

If you hold your assets in KES, your portfolio is down 18.96%

What asset can give you a return of 20%+ to recover that? Hardly any

The big expenses in your life determine how your financial life will unfold.

What percentage of your income caters for rent?
What percentage goes to school fees?
What percentage goes to car expenses?

Make these decisions very carefully. They will affect your life greatly. If you are struggling financially, and you have a decent income & you aren't in debt, revisit those big budgeting decisions.

Before you obsess on tracking your expenses to the last coin, take care of the big financial questions of budgeting

The small expenses don't matter much.

Land is probably the most popular & preferred investment in Kenya for both right & wrong reasons.

Before you buy a piece of land in Kenya,

Here are a few important things that you should think about land as an investment & how it affects your finances:👇👇 Let's start with some basics:

Why is buying land a popular investment in Kenya?

1. Vigorous marketing campaigns by Real Estate Companies.

TV stations, Radio Stations, Newspapers & even celebrities are all pushing land as the prime investment.

With a retirement portfolio of Sh 20M, you can withdraw Sh 1.2M every year and probably never run out of money.

This will account for only 6% of your portfolio.

With an average annual return rate of at least 6%

You can live on Sh 100K per month without working. With that, you can retire and live a life that your portfolio can cater for.

Retirement does not ave to await until you are 60 or 65 years of age.

You can retire at any age you want, provided you have the financial security.