How to invest wisely in stocks, treasury bills


Nairobi Securities Exchange trading floor. PHOTO | NMG

It is said nowadays if you want your product to literally fly off the shelves, just say it has medicinal value or extra high returns on investment.

This is because we have a significant bunch of people in our society who are obsessed with shortcuts. They want to lose weight, stay health and live long but don’t want to go through the laborious process of exercising and living health: they want just a pill that will do magic in days.

We have people who don’t want to put their money in sure bet investments like shares, bonds and treasury bills which are regulated and tested over the centuries. Instead they want anything else that promises crazy retunes within short time.

But according to Benson Kivai, Investment Manager at Sterling Capital Limited based at Delta Corner, Westlands, Kenyans have started trooping back into the stock market, investing mainly in shares, bonds and treasury bills.

Mr Benson notes that investors can make good returns if they get advice on the best stocks to buy depending on their goals rather than relying on their guts and friends.

Financial sector regulators, the Central Bank of Kenya, the Capital Markets Authority the Retirement Benefits Authority have warned of a rise of fraudulent and unregulated schemes marketed by entities promising high returns of up to 20 percent yearly. They include online forex frauds, illegally pooled funds, cryptocurrency, real estate and ponzi schemes.

Traditionally, investing in the financial markets is a way to build wealth over time. For instance, people have made fortunes by investing in shares. However, it is not unusual to lose money in the short term. The prices of shares go up and down. This is what makes novice investors panic and sell or keep off altogether.

It takes patience and market knowledge to mint money from the stock market. To make money in stock market experts advise you to focus long term and you do at least three four things:

First identify a good stock broker who is licensed and regulated by the Capital Markets Authority and who is able and willing to give you financial advice. Studying the market and monitoring your investment is added advantage.

Second, you need patience. Stock prices keep fluctuating and sometime you may feel as if you will lose your money. As long as the company fundamentals are right, this should not give you sleepless night.

Third, don’t let emotions—mainly fear and greed—drive your investing. Learn to master your emotions to avoid making rash moves that cost a lot over the long term. Don’t follow or do what majority do blindly.

Take for example Safaricom shares that dipped after Initial Public Offer and remained low over a lengthy period of time. Majority of investors sold and quit the market. Those who remained and even bought more are all smiles now.

Lastly adopt the tortoise and the hare plan, a slow and steady strategy win the race. Buy shares slowly but steadily over a long period. Don’t buy once in bulk and wait.

Mr Kiunga is a business trainer and the author of ‘The Art of Entrepreneurship: Strategies to Succeed in a Competitive Market’