Many of us hold the false notion that you have to be experts with a lot of money to start investing. We often promise ourselves: I will start investing when I reach a comfortable pay grade. Or, I still don’t know where to start and I may lose money. While these thoughts may sound rational (and I admit that they are normal thoughts to have) they come from a place of fear. A fear of making bad decisions with your hard-earned cash and/or losing it because of situations outside your control.

Despite the fear that’s holding you back, the time is always right to start your investment journey and I will share with you 7 investments you can make with KES 5,000 or less. Okay, let’s dive right in.

Money Market Funds

The first investment I would recommend is the Money Market Fund (MMF). With MMF, you will kill two birds with one stone: First, you will be saving since they provide capital preservation and second, you are able to invest since you’ll get an interest on your money. MMF’s low-risk makes them a good choice for beginner investors or if you don’t want to spend restless nights worrying about losing your money.

Bond Funds

A Bond Funds, also known as Fixed Income Fund, is a medium-to-high-risk investment made up of treasury and corporate bonds, as well as other fixed deposits. Like Money Market Funds, Bond Funds are also under Unit Trust. In Bond Funds, your fund manager, pools money from different unitholders, selects bonds that are performing well and invests in them. The return is then shared with the investors.

 This type of investment is ideal for someone who wants to expose their money to the bond market but doesn’t necessarily have the KSh. 50,000 or KSh. 100,000 that is usually required for investing in infrastructural or normal bonds as auctioned on the CBK website.

Balanced Funds

If your risk appetite ranges from low to moderate, Balanced Funds is the investment choice for you. Also found under the Unit Trust, Balanced Funds is a form of hybrid investment that is distinguished by its diversification over two or more asset types, from Treasury Bills and Bonds to Corporate Debts and Equities. This diversification exposes your money to moderate risk and in Kenya, you can start investing in a Balanced Fund with as little as Ksh. 1,000.

Equity Funds

Equity Funds is also under Unit Trust and just from the name, here the fund manager will invest your money in the stock market (equities). But you will not get to decide which shares to buy or which ones to sell. Instead, the Funds Manager pools the unitholders’ money and invest in the best performing stocks.

I know you are wondering, why go for Equity Funds instead of trading directly in the stock market through the Nairobi Securities Exchange? In many ways, Equity Funds are good investment vehicles for investors who aren’t so knowledgeable about stock market investing but are eager to penetrate the market.

Since the underlying asset in Equity Funds is stocks, it’s important to note that it is a bit risky as compared to MMF, Bond Funds, and Balanced Funds.

Stock Market Investing

Yes, the Nairobi Security Exchange stock market. According to Nairobi Security Exchange regulations, you can buy a minimum of 100 shares per trade. So, for instance, if you were to buy Safaricom shares which are currently going for about KSh. 30 per share, you would spend KSh. 3,000 to buy the minimum shares. Now, because you are using a broker or a brokerage firm to be able to purchase shares off of NSE (I used Dyer & Blair Brokerage firm), a certain percentage (let’s 2.5%) of the KSh. 3, 000 is charged as the brokerage fee. The total amount is barely KSh. 4,000 and you’re already on your way to building a stock market portfolio.

The stock market, without a doubt, comes with risk because companies rise and companies. But when you are strategic, when you set out to understand the business model of the company you want to invest in, the industry it operates in, evaluate the financial health of the company, and the level of risk the company is taking with its debt, it is one of the best ways to build sustainable wealth in the long term.

Personal Pension Funds

Also known as Personal Retirement Scheme. I recommend that as soon as you start earning money, you should begin saving for retirement. The sooner you begin, the more you will compound. It’s important to acknowledge that you won’t be employed forever and, if you do the math, your post-retirement years will most likely be longer than your employment period. Thus, a strategic pension plan will provide you with a steady stream of income in the future, allowing you to retain your current lifestyle.

A Personal Pension plan is an account you open to personally be contributing toward your pension. For business people with no formal employer, this is a good idea to pick up. But even with formal employment that provides NSSF, it’s a safe strategy to have a Personal Pension Fund on the side.

Personal Pension Funds guarantee capital preservation and most of them require only KSh. 1,000 to set up.

Starting a Business/Side Hustle

The beauty of side hustle is that you don’t have to start big. You can start as a hobby, having fun and building your audience slowly. And in this era of the internet, there are more viable business ideas at our fingertips than ever before. Some ideas do not even require capital. Are you into fashion? Create an IG account and share your passion with the world. With as little savings as KSh. 5,000, you can purchase your first stock from Gikomba.

Better yet, you can also invest in yourself by taking online classes to learn skills that will enable you to run your business better.

There we go! The 7 investments you can make with as little as KES 5,000. Now you see how opportunities to become rich by investing are right within your reach?

If you want to learn how to start investing, how to navigate the dilemma of choosing the right investment plan for your financial position, and build a successful investment portfolio, consider joining our upcoming masterclass HERE.

Happy Investing!

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