ARE BONDS A GOOD INVESTMENT?

ARE BONDS A GOOD INVESTMENT?

On matters investments, the stock market often takes the spotlight, with its tales of quick wealth and overnight success. However, bonds offer a different appeal, known for their stability and security, making them a staple in many investors' portfolios.

• Bonds provide a reliable income stream, often paying interest semi-annually. Holding a bond until maturity ensures the return of the principal amount, making them attractive for capital preservation.
• Investing in bonds can offer a steady income even before maturity through interest payments. Many retirees choose bonds to secure a portion of their portfolio while generating income to cover daily expenses. For example, investing Ksh.10 million in bonds could yield Ksh.1.28 million annually, providing a substantial monthly income without touching the initial investment. Treasury bonds (T-bonds), backed by the Kenyan government, offer a reliable option for investors nearing retirement or seeking stable returns.
• Bonds, including T-bonds, function as debt securities issued by entities like corporations and governments to raise capital. Investors receive fixed interest payments periodically until the bond matures, at which point they get back their principal investment.
• T-Bonds: Longer-term loans, repaid over 1 to 30 years unlike T-Bills: Short-term loans, repaid in 91, 182, or 364 days

How to Invest 

• Open an account with the Central Bank or a bank, then bid for securities in auctions. 

• T-Bills: Short-term investments, mature in 91, 182, or 364 days.T-Bonds: Medium- to long-term investments, mature in 1 to 30 years.Both are secure investments managed by the Central Bank, offering consistent returns over time. 

• T-Bills: Auctioned weekly, offer competitive returns (10% to 12%) for investments starting at around Ksh.100,000. Interest is paid upon maturity. 

• T-Bonds: Auctioned monthly, provide semi-annual interest payments, and are usually tax-free.

 Who Can Invest: 

• Anyone over 18 with a Kenyan bank account can invest directly or through a bank. 

• M-Akiba: Introduced in 2015, allows investments from as low as Ksh.3,000, making government securities accessible to more people.

 Investment Process 

• Open an account with the Central Bank or a commercial bank, then bid for securities through auctions. Interest is paid upon maturity.T-Bonds: Auctioned monthly, provide semi-annual  Anyone over 18 with a Kenyan bank account can invest directly or through a bank.

In summary, bonds particularly T-bonds, can be an attractive option for those seeking a steady income stream and capital preservation in their investment portfolio.