Here Are The Best Investment Opportunities For 2021

The year 2020 began full of promise, where most people were optimistic to start another decade.

The onset of the COVID-19 pandemic and the continuous increase in the number of infections has become more than just a health concern but also a monetary concern where many people have lost their sources of income as many businesses were affected.

One of the key lessons to take away from the pandemic era is the importance of having investments that can cushion you when times get tough either through a job loss or reduced income.

The initial stages of the pandemic saw investors move their investments into safer asset classes such as bonds where the number of bonds traded in March 2020 increased by 38.0 percent

Other investors cashed in on-demand from certain stocks in the market such as those in telecommunication and technology, which were favored by the pandemic.

The shift has, however, been more evenly distributed between various asset classes, as investors have learned how to factor in the pandemic in their investment decision-making.

As an investor it is important to distinguish between; an investment and savings. Investments in the purchase of assets with the hope of generating some income in the future or the asset appreciating hence being able to sell it at a profit.

Savings, on the other hand, is putting aside money for emergency purposes which may include the purchase of an insurance scheme, Sacco savings, and the savings account at your bank.

Primarily, investing grows your wealth while helping you meet your financial goals and increasing your net worth over time.

Before making an investment decision there are factors that one needs to consider which include: the risk involved in undertaking the investment, the expected earnings in form of returns, the disposable income that you have ready for investment, the time horizon that you want your money to be tied to that particular investment, among other things.

While investing can build wealth, it is also advisable to balance any potential gains with the risks involved. There are many ways to go about investing, which can range from very safe choices such as Treasury bills, bank deposits, and money market accounts to medium-risk options such as corporate bonds, and even higher-risk picks such as stock and cryptocurrency markets.

This means that you can find various investments that offer a range of returns and fit your particular risk profile while providing an opportunity to combine investments to create a well-rounded and diversified portfolio.

Some of the investment options to consider for the rest of 2021 and going forward include;

1. Equities – They represent an ownership holding in a company listed at a securities trading exchange and is interchangeably referred to as stocks or shares. The purchase of stocks must be facilitated by a licensed stockbroker with the minimum investment being 100 shares of any company. An investor gains through capital appreciation in the event the stock trades at a higher price than the purchase price, and dividends declared by the respective companies when they make a profit. For the first three months of 2021, the Nairobi Securities Exchange gained 4.3% in comparison to the 8.6% decline reported for the whole of 2020. The gain is an indication that as earlier highlighted investors seem to have factored in the risks that come with the pandemic. Therefore, the equities market still presents an attractive opportunity for patient investors who are willing to identify value companies that have proven to withstand the pandemic and can provide favorable capital returns and a high dividend yield in the long run.
2. Fixed Income – These are debt securities that provide a return in the form of fixed pre-agreed periodic interest payments and the repayment of the principal upon maturity. Since the start of the year the yield curve – which compares the yields on bonds as compared to the remaining time to maturity, has adjusted upwards both in the short and long end. The upward readjustment means that the yields on government bonds have gone up being an indication that the government is under pressure to raise funds and the investors are asking for a premium as the risks increase due to the spike in COVID infections. The disadvantage of a rising yield curve is that it has an inverse relationship with the bond prices which could reduce the capital gains on current holders of bonds. The following are the types of fixed income securities:
3. Treasury Bills – These are short-term investments that are promissory notes in nature, issued and fully guaranteed by the government with tenors of 91, 182, or 364-days. The current rates for 91-day, 182-day, or 364-day are 7.1%, 7.6%, and 9.3%, respectively,
4. Treasury Bonds – These are long-term debt securities issued by the government with tenors of greater than 1-year. Investments in government securities are done through opening a CDS account either through the Central Bank of Kenya or a local commercial bank