mzeiya
Elder Lister
Investing in Kenya is taking a nosedive through taxes on bonds, which have been the safest and tax free instruments for investing.
It's also not safe from currency depreciation and inflation. Apart from where we need to invest, we also need to think about beating depreciation, inflation and taxation...
For the most part, financial literacy usually directs us to rely on a mix of money market funds (MMF), treasury bills & infrastructure bonds for passive income. Rational and risk averse investing for everyone, as it seems.
Accounting for inflation and currency depreciation increasing each year, investing returns reduce over time.
Tax + inflation on investment returns means a loss for investors locally.
Sad fact: the Nairobi Stock Exchange hasn't had an IPO in 9 years. Apart from Safaricom and a few other stocks, returns haven't been much to write about.
Being a risk-averse investor sounded good: afterall, you're not taking up risky instruments and putting yourself in a position to lose all your money, right?
Wrong.
You lose through inflation, increasing taxes and currency depreciation every year.
Let's do some simplified math:
If you invest 100k in a year expecting annual returns, here's what you're supposed to get:
1. MMF (~10%) ≈ 10k
2. Bonds (~15%) ≈ 15k
3. Saccos (~13%) ≈ 13k
4. Stock (~20%) ≈ 20k
There are exceptions, so these are an average in each.
Patience is key in the discipline of compound interest so that you increase your returns or keep reinvesting them...
What's the value of these returns if:
1. Like last year, the shilling drops +30% in value?
- The 10k is worth 7,000
- 15k is worth 10,500
- 13k is worth 9,100
- 20k is worth 14,000
Currency depreciation isn't supposed to be that bad, right?
The govt should ensure the currency doesn't just lose value, right?
It does.
2. Bear in mind that official inflation doesn't cover ALL costs that have gone up.
It counts a simple basket of basic food items, transport and housing.
It doesn't reflect rising costs in healthcare, education, business tariffs, taxes and things like loans.
That's why the cost of living keeps going up yet economic reports say that the country is doing well overall/ generally.
Investing and gaining from compound interest runs on an assumption that you won't cash out your returns, but that you'll keep reinvesting to gain more.
Shrinking earnings, rising taxation and currency depreciation WILL reduce disposable income & make people cash out on investments based on needs.
That's why there's a wide gap between seeing money "flowing" in Kenya with increase in both poverty and luxury on both extremes with a decline in the number + capability of the middle class.
Some people say that we no longer have anything like a middle class in Kenya.
There are reasons both supporting & showing the flip side of this. What's your take on the middle class in Kenya?
Do we stand a chance?
Point is that inflation is up along with currency depreciation & taxes.
So, to be profitable or to have reasonable return as an investor, you need to have returns that are above the rate of currency depreciation and inflation; otherwise you're losing in spite of investing.
If you're saving without investing, that's losing money by default. How can we keep our expenses down when prices go up each year?
Living frugally may or may not be the answer.
What's a frustrating reality is having to beat what drags our investment down, work full time and still figure out which investments are viable.
What do we do?
1. Increase earnings
2. Invest abroad
3. Source cheaper loan rates
4. Manage life risks
Increasing earnings means different things to different people:
Could be:
-A second or part time job
-Business expansion
-Reducing tax liability
-Total job change
-Digital products/ services along the main skill set
-Relocating to a conducive area
-Investing in additional skills, specializing expertise or
-Getting specific high value certifications
Investing "abroad":
Investing is borderless. We're not limited e.g. as Kenyans to Kenya. If another market has better returns & is open to investment, we're not stuck.
It's a matter of initiative and discipline because:
1. Information is available; a good chunk is free but it'll take time & practice to figure out
2. Investing is borderless.
Financial institutions (Saccos, banks, MFIs, etc) have the leeway to speculate & leverage, get profit then give you as a customer part of the returns. If they get 50%+ & give you <15%, why shouldn't you get the same returns?
Cheaper loan rates:
Loans are valuable for assets that can bring income. This is specific to financial tools (not necessarily real estate).
The world of alternative financing is worth a good dive.
Expensive loan rates can mean paying 1.5x -2x of the original amount. The devil is always in the details...
Life risks are inevitable.
Living consciously, in peace, planning and foresight have their part to play.
Mental, emotional, professional, creative, social, and physical health are underrated assets in this matrix.
We're in an age of enlightenment and information.
Ignorance is expensive, not bliss in this age.
To close this thought series:
Investing has taken a nosedive in Kenya.
Investing returns are up against inflation, taxes & currency depreciation.
There are solutions so we don't have to be at a total loss.
Ignorance will be costly going forward. Initiative is key.
Ultimately, saving in Bitcoin beats rising inflation, currency depreciation and taxes all in one.
Life in Bitcoin terms gets cheaper/more affordable.
The last 5 years have seen 980% return in KES terms.
The next 5+ years will be worth noting.
It only requires patience and consistency. Whatever you save in Bitcoin terms is yours to keep.
It's also not safe from currency depreciation and inflation. Apart from where we need to invest, we also need to think about beating depreciation, inflation and taxation...
For the most part, financial literacy usually directs us to rely on a mix of money market funds (MMF), treasury bills & infrastructure bonds for passive income. Rational and risk averse investing for everyone, as it seems.
Accounting for inflation and currency depreciation increasing each year, investing returns reduce over time.
Tax + inflation on investment returns means a loss for investors locally.
Sad fact: the Nairobi Stock Exchange hasn't had an IPO in 9 years. Apart from Safaricom and a few other stocks, returns haven't been much to write about.
Being a risk-averse investor sounded good: afterall, you're not taking up risky instruments and putting yourself in a position to lose all your money, right?
Wrong.
You lose through inflation, increasing taxes and currency depreciation every year.
Let's do some simplified math:
If you invest 100k in a year expecting annual returns, here's what you're supposed to get:
1. MMF (~10%) ≈ 10k
2. Bonds (~15%) ≈ 15k
3. Saccos (~13%) ≈ 13k
4. Stock (~20%) ≈ 20k
There are exceptions, so these are an average in each.
Patience is key in the discipline of compound interest so that you increase your returns or keep reinvesting them...
What's the value of these returns if:
1. Like last year, the shilling drops +30% in value?
- The 10k is worth 7,000
- 15k is worth 10,500
- 13k is worth 9,100
- 20k is worth 14,000
Currency depreciation isn't supposed to be that bad, right?
The govt should ensure the currency doesn't just lose value, right?
It does.
2. Bear in mind that official inflation doesn't cover ALL costs that have gone up.
It counts a simple basket of basic food items, transport and housing.
It doesn't reflect rising costs in healthcare, education, business tariffs, taxes and things like loans.
That's why the cost of living keeps going up yet economic reports say that the country is doing well overall/ generally.
Investing and gaining from compound interest runs on an assumption that you won't cash out your returns, but that you'll keep reinvesting to gain more.
Shrinking earnings, rising taxation and currency depreciation WILL reduce disposable income & make people cash out on investments based on needs.
That's why there's a wide gap between seeing money "flowing" in Kenya with increase in both poverty and luxury on both extremes with a decline in the number + capability of the middle class.
Some people say that we no longer have anything like a middle class in Kenya.
There are reasons both supporting & showing the flip side of this. What's your take on the middle class in Kenya?
Do we stand a chance?
Point is that inflation is up along with currency depreciation & taxes.
So, to be profitable or to have reasonable return as an investor, you need to have returns that are above the rate of currency depreciation and inflation; otherwise you're losing in spite of investing.
If you're saving without investing, that's losing money by default. How can we keep our expenses down when prices go up each year?
Living frugally may or may not be the answer.
What's a frustrating reality is having to beat what drags our investment down, work full time and still figure out which investments are viable.
What do we do?
1. Increase earnings
2. Invest abroad
3. Source cheaper loan rates
4. Manage life risks
Increasing earnings means different things to different people:Could be:
-A second or part time job
-Business expansion
-Reducing tax liability
-Total job change
-Digital products/ services along the main skill set
-Relocating to a conducive area
-Investing in additional skills, specializing expertise or
-Getting specific high value certifications
Investing "abroad":Investing is borderless. We're not limited e.g. as Kenyans to Kenya. If another market has better returns & is open to investment, we're not stuck.
It's a matter of initiative and discipline because:
1. Information is available; a good chunk is free but it'll take time & practice to figure out
2. Investing is borderless.
Financial institutions (Saccos, banks, MFIs, etc) have the leeway to speculate & leverage, get profit then give you as a customer part of the returns. If they get 50%+ & give you <15%, why shouldn't you get the same returns?
Cheaper loan rates:Loans are valuable for assets that can bring income. This is specific to financial tools (not necessarily real estate).
The world of alternative financing is worth a good dive.
Expensive loan rates can mean paying 1.5x -2x of the original amount. The devil is always in the details...
Life risks are inevitable.Living consciously, in peace, planning and foresight have their part to play.
Mental, emotional, professional, creative, social, and physical health are underrated assets in this matrix.
We're in an age of enlightenment and information.
Ignorance is expensive, not bliss in this age.
To close this thought series:
Investing has taken a nosedive in Kenya. Investing returns are up against inflation, taxes & currency depreciation.There are solutions so we don't have to be at a total loss. Ignorance will be costly going forward. Initiative is key.Ultimately, saving in Bitcoin beats rising inflation, currency depreciation and taxes all in one.
Life in Bitcoin terms gets cheaper/more affordable.
The last 5 years have seen 980% return in KES terms.
The next 5+ years will be worth noting.
It only requires patience and consistency. Whatever you save in Bitcoin terms is yours to keep.
