How To Start Buying GoK Bonds, Investing In Stocks And Building Emergency Funds

By Getrude Mathayo / Published September 1, 2022 | 12:49 pm

KEY POINTS

While stocks may offer you the potential for capital appreciation, bonds may provide a steady stream of investment income, and play an important role in potentially lowering your overall portfolio risks.

KEY TAKEAWAYS

How to invest in Government Bonds:

Open a CDS Account
Decide what you want to invest in
Complete and submit an application form
Get the auction results
Pay

How To Start Buying Government Bonds

If you are looking to build up a well-diversified portfolio, you will usually be advised to include both stocks and bonds among your investments. While stocks may offer you the potential for capital appreciation, bonds may provide a steady stream of investment income, and play an important role in potentially lowering your overall portfolio risks.

A bond is a debt security where the bond issuer (the borrower) issues the bond for purchase by the bondholder (the lender). It is also known as fixed income security, as a bond usually gives the investor a regular or fixed return.

Open a CDS Account

To invest, you need a CDS account with the Central Bank of Kenya (CBK). The first step to investing in Treasury bills is to open a CDS account with the Central Bank.

Once you have your CDS account, which can be opened for an individual or a corporate body, you can invest in multiple Treasury bills and bonds, so you only need to complete this step the first time you’re investing.

Decide How You Want to Invest

Treasury bills are offered every week, with maturities of 91 days, 182 days, and 364 days. This means that when you are ready to invest, you will be able to choose from one of those options.

You should decide on a maturity length based on the recent interest rates, which can give you an idea of what to expect in upcoming auctions, and based on how long you can commit your funds.

Complete and Submit an Application Form

Most government bonds are fixed coupons. This means that the interest rate will not change over the life of the bond so the semi-annual interest payments from these bonds will stay the same

When you are ready to invest, you need to complete a Treasury bill application form. This includes information about the Treasury bill you want to purchase, like the issue number, the maturity period you want, and the face value amount you want to receive upon maturity.

Get the Auction Results

The Central Bank’s Auction Management Committee (AMC) meets at 4 pm on auction days, and after considering all received bids, determines the cut-off rate and the successful weighted average of the accepted bids.

Following the auction, investors need to call or visit the Central Bank or its branches to determine if their applications were successful and to determine how much they owe for their Treasury bill

Payment

The payment period for an auction typically closes on the following Monday at 2 pm. Investors can submit their payments, in the amounts specified when they contact the Central Bank, through cash or banker’s cheques for amounts under Kshs. 1 million and through a KEPSS transfer for larger amount Successful applicants who fail to submit payments within the payment period can be barred from future investment in government securities.

How To Invest In Stock Market

Investing in stocks means buying shares of ownership in a public company. Those small shares are known as the company’s stock, and by investing in that stock, you’re hoping the company grows and performs well over time

By investing your money regularly, you may be able to increase it many times over time. That’s why it’s important to begin investing as early as possible and as soon as you have some money saved for that purpose

Investing in stocks is a great way to build wealth by harnessing the power of growing companies. Getting started can feel daunting for many beginners looking to get into the stock market despite the potential long-term gains, but you can start buying stock in minutes.

Related Content: Buy Stocks In Companies That You Believe In

Investing in the stock market is a long game. A good rule of thumb is to have a diversified investment portfolio and stay invested, even when the market has ups and downs.

Figure out your goals

It’s important to know what your fundamental goals are and why you want to start investing in the first place. Knowing this will help you to set clear goals to work toward

Define Your Tolerance for Risk

What’s your tolerance for risk (the chance that you may lose money while investing)? Stocks are categorized in various ways, such as large capitalization stocks, small-cap stocks, aggressive growth stocks, and value stocks

Choose how you want to invest

These days you have several options when it comes to investing, so you can really match your investing style to your knowledge and how much time and energy you want to spend investing. You can spend as much or as little time as you want on investing.

Choose Your Investment Account

Choose an investing account that can help you get started. Decide if you want to do it yourself or get a professional to help out. A human financial advisor can help you design a stock portfolio and can help with other wealth-planning moves.

Set a budget for your stock market investment

The key to building wealth is to add money to your account over time and let the power of compounding work its magic. That means you need to budget money for investing regularly into your monthly or weekly plans

Focus on investing for the long-term

One of the best ways to secure your financial future is to invest, and one of the best ways to invest is over the long term. It may have been tempting over the past few years to deviate from a long-term approach and chase quick returns.

Manage your stock portfolio

While fretting over daily fluctuations won’t do much for your portfolio’s health or your own there will of course be times when you’ll need to check in on your stocks or other investments. It’s important to remember that your objective in the market isn’t just to be right, it’s to make big money.

How To Start Building An Emergency Fund

An emergency fund is money in a bank account that’s set aside for unplanned expenses. An emergency fund is an essential part of a solid financial plan. It can help pay unexpected expenses, alleviating the need to use high-interest credit cards or take out a loan.

Having an emergency fund can provide peace of mind, an assurance that you have money when an unexpected expense happens. If there is one thing the ongoing coronavirus pandemic has taught us, it is that an emergency can strike at any time and you can’t do anything about it other than be prepared.

The amount of money required to save for your emergency fund may make you nervous and push you to shelve plans to start the activity.

Set a target date for setting up your fund

Setting a target date can be helpful in you reaching your goal faster. Depending on your current financial situation, set a date for achieving your goal for the emergency fund. It could be three months, six months, or even a year.

Make a budget and see where you can start saving more money

It’s important to know where your money is going to find ways to save. Budgeting helps you maximize income and find ways to reduce or manage your spending.

Determine your emergency fund goal

A budget is a spending plan that helps you to determine how much money you need each month to cover essential expenses. This number can be calculated by adding up monthly costs for housing, food, transportation, and other necessities

Automate your savings

Out of sight, out of mind: the easiest way to save money is never to touch it in the first place. Set up a separate account just for your emergency fund and have your chosen contribution amount deposited automatically, either by your employer or your bank.

Be consistent with your savings

Setting up an emergency fund means that you have to be very consistent with how you put money into your account. Consistency is key. If you stop putting money into your emergency fund for any reason, the amount of money you have will not grow

Eliminate short-term debt

Debt is a great hindrance to setting up an emergency fund. This is because with the income you will get, you’ll be spending most of it to pay off debts. You will end up being left with little to no money to set up your emergency fund.