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

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.

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1. 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.

2. 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.

3. 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.

4. 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

5. 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.

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