Step 3: Investing in Income-Producing Assets

Welcome back to our blog series on How to Increase Your Net Worth! So far, we’ve covered:

• Step 1: Tracking Your Finances – Understanding where your money goes is the foundation of financial growth.
• Step 2: Budgeting for Success – Creating a spending plan that aligns with your goals.

Now, in Step 3, we’re taking things up a notch by focusing on Investing in Income-Producing Assets a proven way to accelerate wealth-building.

What are the Income Producing Assets?

Income producing assets are investments that generate regular income while growing in value. In Kenya, the right choice of asset depends on your financial goals, risk tolerance, and desired return. Here’s a breakdown of popular options, ranked by risk and return in the Kenyan market:

Dividend-Paying Stocks (Nairobi Securities Exchange – NSE)

• • Risk Level: Moderate
  • Expected Return: 5% – 10% annually (dividends plus potential capital appreciation)
  • Capital Required: Ksh 10,000 – Ksh 100,000 (depending on the stock and number of shares)
  • Why Choose This? Investing in dividend-paying stocks listed on the Nairobi Securities Exchange can provide steady passive income. Though market volatility can affect share prices, established companies like Safaricom, Equity, and KCB offer relatively stable dividends. Suitable for investors comfortable with some risk and market fluctuations.

Rental Properties

• Risk Level: Moderate to High
• Expected Return: 7% – 12% annually (rental income plus property value appreciation)
• Capital Required: Ksh 1,000,000 – Ksh 10,000,000 (depending on location and property type)
• Why Choose This? Real estate remains a popular investment in Kenya, especially in urban centers like Nairobi, Mombasa, and Kisumu. Rental income offers stable returns, and there’s potential for property value appreciation. However, risks include market fluctuations, tenant issues, and property maintenance costs.

Government Bonds and Treasury Bills

1. • Risk Level: Low
   • Expected Return:
     1. 1.  Kenya 10Y: The yield is 14.43
        2. FXD1/2023/2Yr: The traded yield is 13.0000%
        3. 91-Day T-Bill: The key rate is 10.456%

• Capital Required: Ksh 50,000 – Ksh 100,000 (depending on the bond or bill)

• • Why Choose This? Government bonds and Treasury Bills are considered low-risk investments in Kenya. They provide stable returns, especially for conservative investors. These government-backed securities are ideal for preserving capital while earning predictable returns, and they’re a good choice for those seeking minimal risk.

Money Market Funds

• Risk Level: Low
• Expected Return: 8% – 12% annually
• Capital Required: Ksh 5,000 – Ksh 100,000 (depending on the fund)
• Why Choose This? Money market funds are a popular choice for conservative investors in Kenya, offering low-risk, short-term investments in Treasury Bills, commercial paper, and other highly liquid assets. They offer better returns than savings accounts, and their liquidity makes them a flexible option for short-term goals.

Trust Funds (Unit Trusts)

• Risk Level: Low to Moderate
• Expected Return: 6% – 14% annually
• Capital Required: Ksh 5,000 – Ksh 50,000 (depending on the trust fund)
• Why Choose This? Trust funds, including unit trusts, pool money from various investors to invest in a diversified portfolio of assets like stocks, bonds, and real estate. They are managed by licensed fund managers, making them a good option for those seeking diversification with a relatively low to moderate level of risk. Unit trusts can be a good vehicle for long-term wealth-building with relatively stable returns.

SACCOs (Savings and Credit Cooperative Organizations)

• Risk Level: Low to Moderate
• Expected Return: 6% – 15% annually (depending on SACCO performance)
• Capital Required: Ksh 2,000 – Ksh 50,000 (depending on the SACCO)
• Why Choose This? SACCOs are a popular way for individuals to save and invest in Kenya. These cooperative societies offer competitive interest rates on savings and loans. Many SACCOs also provide dividends based on profits. They are ideal for members seeking safe, community-based investments with a focus on both saving and earning interest. However, the returns can vary based on SACCO performance and management.

Small Businesses or Side Hustles

• Risk Level: High
• Expected Return: 15% – 40% annually (or higher, depending on success)
• Capital Required: Ksh 50,000 – Ksh 500,000 (depending on business type and scale)
• Why Choose This? Starting or investing in a small business in Kenya—especially in growing sectors like agribusiness, e-commerce, and technology—can yield high returns. However, businesses in Kenya face challenges like competition, fluctuating demand, and economic conditions. This option is suitable for those willing to take on high risk for potentially high returns.

Digital Assets and Royalties

• Risk Level: Moderate to High
• Expected Return: 5% – 20% annually (depending on market success and promotion)
• Capital Required: Ksh 5,000 – Ksh 100,000 (depending on the digital product or service)
• Why Choose This? The Kenyan market is seeing growth in digital assets, such as online content creation, eBooks, and digital services. Income can come from digital products, licensing, or royalties. Success often depends on market trends, content quality, and online visibility. This is ideal for entrepreneurs and creatives willing to invest time and effort into promotion and market growth.

Fedhatrac: Your Partner in Smart Investing

Investing may seem complex, but with Fedhatrac, you’re never alone. Here’s how we help:

• Personalized Strategies: Build an investment plan tailored to your goals.
• Educational Tools: Access workshops, articles, and calculators to make informed decisions.
• Expert Guidance: Receive ongoing support to optimize your portfolio.
• Collaborative Network: Connect with a community of investors and professionals.

Fedhatrac simplifies the investment process, empowering you to confidently grow your wealth. Download the Fedhatrac App Today to start your Journey of Increasing your Net Worth!

https://play.google.com/store/apps/details?id=com.fedha.fedhatrac

Stay Tuned for Step 4: Diversifying Your Income Streams
In the next post, we’ll discuss how to protect and expand your financial foundation by creating multiple sources of income.