After deciding how best to constitute yourself and getting satisfied that you have selected the best vehicle for wealth management (read more, visit our website at www.robenconsulting.co.ke), it is time to get deeper and select the products that will provide best returns. This will be highly driven by the expected return and the investor’s risk appetite.

Much as we all would like to leave the decision to a professional, it is prudent that we carry out research no matter how basic it turns out to be. There are many investment products, but the final decision is arrived at after considering the level of risk one is willing to take on.

It is also important to consider opportunity cost of investing in either or the other of the available investment products.

1. Shares

   This includes shares in listed companies, startups established by other parties or starting own entity in which shares are allocated to various parties.

   • Due diligence is required, covering management of the company, from Board, senior staff, and other staff.

   • The product offered by the entity you are investing in should be marketable and appealing to you in person. Ensure you believe in the product or service that the company in whose shares you are investing is offering.

   • Compliance with various statutory obligations may be important to consider.

   • Profitability, current cashflow and projected cashflow for at least three of the years you intend to hold the investment.

2. Real Estate

   Investment in rental property both residential and commercial. This is sometimes considered passive income but there may be various loopholes that need to be considered. The following are some of those considerations

   • Is the property’s income stream covering the financing obligations?

   • Is the property’s income stream covering repairs and maintenance bills?

   • Is the property’s income stream covering all the required taxes and other levies?

   • Is there a net cash inflow after all the anticipated outflows?

   There is a need to maintain proper records to help in deciding whether the property is really offering the desired return or to divest from the investment. Rental income is not as passive as many would wish.

3. Annuities

   This product is offered by financial institutions and Insurance Companies. They offer a guaranteed income stream. When choosing an annuity, the devil is in the details, and it is therefore important to read the fine print very carefully to evaluate if the actual returns are within the expected threshold.

4. Land

   Land is an investment that can be held for capital appreciation or for resale as a trading commodity. Whichever the decision is taken by the investor should be evaluated for optimal returns. Land has been very risky in Kenya of late due to existence of fraudulent titles and extra care needs to be taken. It is important to go back to the history of ownership of the land from as far back as possible. If the land at one point belonged to the Government or to a government institution, it is important to review the process that vested that land to private hands. Only invest in land if you are satisfied that all the transactions are above board.

5. Bonds

   There are two types of bonds-Government bonds issued by the Central Bank and Corporate Bonds. Government Bonds are low risk but have lower returns. Corporate bonds are high risk but can have higher returns. It is important to evaluate the risks surrounding the company that is issuing the bond including the management practices, corporate governance, and overall compliance to statutory obligations. If there is an aspect of non-compliance, this is a very big red flag.

6. Treasury Bills

   This is one of the safer options especially in stable countries since government default is lower. However, the returns are also modest.

7. Cryptocurrencies

   My mantra in investing is that you only invest in a product that you fully understand and one whose risk you can establish. Money has been made in Cryptocurrencies and based on your risk appetite and proper understanding of the particular product, this is also an investing option.

8.  Savings Account

This is the worst option that any investor can choose given that money in the bank is likely to lose value, whatever the interest rate is offered. Most of the financial institutions invest in any of the above listed products, pocket the bigger share of the returns and give savers a very basic return. This, coupled with the fact that the return offered in most instances does not cover inflation, the money invested in real terms offer negative returns.