The Best Investing Advice for Kenya in 2023

Today, uncertainty is the only certainty. The epochal change now flips the script on valid investment strategies.

Inflation (amongst many other factors) has become a major problem creating great uncertainty. Inflation is now structural – not cyclical- which continues to force the government’s hand. And government policy has become quite aggressively tight, making the government the problem instead of the solution.

Rising interest rates are unsustainable long-term as excessive government debt becomes too expensive relative to receipts. This will force a solvency problem, which creates a quandary for the government because those higher interest rates are required to tame inflation.

Rising taxes, though deemed as anti-inflationary may become inflationary as it may cause prices to naturally go up as a result of reduced supply of goods and services relative to the quantity of money.

With all this in mind, here is the best investing advice in Kenya for 2023 so far:

1. Trade Against The Grain Vs A Trend Following Strategy

Two paths here. Trading against the gain which offers the best way to ramp up long-term investing profits. It means buying low and selling high – and that’s how you turn a profit.

Or, following the trend, which offers profits from the systemic tendency of the market to gradually incorporate new information. As such, tends to outperform when there are large economic shocks and market stress.

Whatever of these strategies you integrate into your investment goals, do not forget to manage risk.

For long-term investors, try to manage risk by rebalancing your portfolio. You sell stock investments or asset classes that have come to constitute a bigger portion of your portfolio and buy more of the stocks or EFTs that have underperformed – buying low and selling high.

For trend followers, keep in mind that the trend is only your friend until it ends. To manage the investment risk associated with trend-following, consistently monitor your portfolio. Buy stocks or EFTs that are in an uptrend and sell those that aren’t.

Related: How to Apply Warren Buffett’s Famous Investing Advice

2. Diversification

The question is whether to diversify or not to diversify.

Consider the view of the investment guru, Warren Buffet, who is famously known to be against diversification as he believes it only offers protection against ignorance. Diversification limits the downside of bad decisions and inadvertently, also limits the upside of good investing decisions. However, keep in mind Buffet has the resources and experience to better able to manage the consequences of any investment decisions he makes.

In the recent past, deep diversification has become even more difficult to achieve as many asset classes have become highly correlated. To adequately diversify and limit your risk, choose assets that are truly uncorrelated and look at relatively recent performance accounting for the recent epochal change today. You can also consider the following:

• Mix and match a variety of strategies into your portfolio by the source of return.
• Diversify by investment process to avoid limiting yourself to investment product diversification for risk management.

3. Invest in What You Know

As we said earlier, the only thing certain is change. The times are currently going through today cannot be judged through the lens of the past few decades of economic history. Now for more than ever, you need to have a much broader context to understand what is happening and how these changes in your investment and financial planning assumptions.

As such, stick to what you know. If you don’t understand a company’s business model, don’t invest in it. There are more variables at play causing the change, and some of them cannot be predicted accurately. For instance, the introduction of Artificial Intelligence (AI). We know for sure that AI will certainly have a big impact but it is very difficult to predict whether the big impact will yield great productivity advances thereby profits, or turbulence thereby destruction or end.

So, to invest wisely, take on only what you know. Understand how the company makes money, its lasting competitive advantage, and potential threats to those competitive advantages that could compromise future earnings. Without this in-depth insight, it will be harder to identify changes in the company’s long-term prospects. As a result, you may miss opportunities to increase our position or worst case scenario hold onto stock longer than you should.

By sticking to this one principle, many mistakes can be avoided – simply stay within your circumference of knowledge or competence.

4. Act-On Bargains

Seek out good deals. This is in terms of low stock prices, management fees and more. This doesn’t mean that you buy cheap assets that no one wants just for the sake of it. Look for value instead.

Value can be found in good companies at efficient prices. Adopt a more comprehensive approach when selling out long-term investment opportunities, incorporating economic trends and alternative markets that offer more robust tail protection and better average returns.

5. Invest for the Long Run

The surest path the wealth creation is through compound growth over the long haul. This can only be achieved through long-term focus. Therefore, be patient and always invest with good intentions thereby temporary downturns will not shake you up.

Therefore, when investing with a long view, here is a general rule. Any money you need in less than five years shouldn’t be invested in the stock market – for your short-term investment goals, consider putting your money in high-yield savings accounts, fixed deposits, money market accounts etc., instead.

Related: How to Evaluate The Quality of a Stock for Long-Term Value Investing

6. Take Advantage Employer Matching Contributions

Employer matching contribution is your employer will pay x shillings for every shilling to contribute towards the scheme. For example, If you contribute Ksh 10,000 yearly towards a certain employer matching plan, then your employer will contribute the same or a fraction of the same under your name towards the same plan.

If you are one of the few Kenyans who have access to employer-matching contributions for retirement plans or any other plans. Take advantage of this. This money grows tax-free while in the plan and is only taxable when withdrawn. You can accumulate a substantial amount over time if you diligently keep it.

7. Take. Profit.

Stay focused on your goals. Stay disciplined to sty on track. And, do not get too greedy and hold on to investments for longer than necessary – just take those profits!

Key Takeaways

Choosing to invest or not during this time of epochal change is a personal matter. I strongly advise you to do what is right for you, as one shoe doesn’t fit all. However, if you do choose to invest or make some changes to your current investments, you should follow a few more tips:

• Don’t leave your assets or investments on auto-pilot.
• Don’t obsessively track every market fluctuation.
• Do set periodic reminders to review your investment portfolio.
• Do make adjustments as your situation changes as the current economic crisis we are in plays out, it will ultimately get resolved. or plays out and the crisis or recession pl

All in all, Happy Investing!

Image Credits: Top by Alesia Kozik via Pexels