How Much of Your Money Should be in Bonds?


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Bonds are the way to go for most investors. 


When building your portfolio of wealth, the first step you must take is to determine where, and how much to invest. There is no right or wrong way to do this; however ensure that you consider your experience as an investor, your age and the financial plans that you have. 

As you embark on this, take note that it helps to approach investing as a life-long endeavour i.e. your time horizon is your life expectancy. Adopting a long-term approach to investing enables you to make better returns with a longer view on rates of return that allow you to recover from short-term volatility. 

The Right Bond Portfolio Mix

A strategic asset allocation approach considers returns based on a moderately aggressive approach, moderate growth approach and conservative approach. Here is what to expect with each: 

  • The moderately aggressive approach may attract a return of 12% or more if you allocate 80% to stocks and 20% to cash and bonds over the long term.  With this approach, expect a less volatile portfolio with a down as low as –20% in a single quarter. This means that for every million bob you invest; the value could drop to KES.400, 000 a year. This type of allocation will require frequent rebalancing each year. 
  • The moderate growth approach may attract a return of more than 10%, allocating 60% in stocks and 40% in cash and bonds. The portfolio may drop by 20% in value meaning that for every million bob, the value could drop to KES. 800,000. 
  • The conservative approach is best for capital preservation than achieving higher returns, as we invest more than 50% of your portfolio in bonds and cash – little in stocks. 

With these types of approaches, it is best to rebalance each year to ensure that the strategy is working at optimal strategy. That is, buying more when the market is low and selling when high. 

Bond Minimums

The minimum size of individual bonds you can purchase, either directly or through the NSE, is in KES. 50,000 increments. Bond funds on the other hand, don’t have this requirement but may have a minimum investment at any given time. As you plan your investment portfolio, ensure that you take this into consideration.

Also, take into consideration the commissions or mark-ups that come with bonds purchased through brokers or bond funds. Purchasing bonds directly during treasury’s initial issue does not attract commissions or mark-ups. 

Purchasing Through A Broker

If you purchase individual bonds through a broker, the broker makes money by marking up the price he pays for the bond or charges a commission. Take note that any amount that the broker may add or charge will significantly affects your investments yield. So choose wisely and take note of all costs associated with working with a broker. 

The Bottomline 

To recap, there is no one size-fits-all strategy to bond investing. Analyzing your own personal situation is the best way to determine what the best asset allocation for you is. Doing so can get you right combination of growth and income to meet your needs, while still having peace of mind. 

Great Fact: Warren Buffet made 99.7% of his wealth after 50th birthday. This goes to show us that, it’s never too late to start securing your future. 

Happy Investing!

Image credits: Top by Rawpixels via Pexels

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Irene Makanga
Irene has an MBA in Finance and is an avid businesswoman, passionate about financial literacy.


    • Yes, if you already have a CDS account (if not just apply for one through CBK again) and want to invest in government treasury bills or bond…simply decide what you want to invest in and fill in the necessary documents to make a bid and submit to CBK. From there, you will be adviced on when a review of bids will be done, upon successful completion you’ll receive information on whether your bid was successful on not. If successful, you will be requested to transfer the necessary funds to CBK on a specific date (usually on a Monday).

  1. Thanks for the prompt response! Keep the post coming! Im consuming it all! I may have to reach out to you when I’m in Kenya next to get some assistance with interacting with the CBK. The site is kinda vague!


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