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    28May, 2024
    Book Review – The Richest Man in Babylon
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    "The Richest Man in Babylon" is a classic personal finance book written by George S. Clason. First published in 1926, the book remains popular due to its simple and easy-to-understand advice on managing money and achieving financial success. Here are 10 key takeaways from the book:

    1. Start thy purse to fattening: The book emphasizes the importance of saving money and investing wisely. It suggests setting aside at least 10% of your income for savings and investing in income-producing assets.
    2. Control thy expenditures: The book advises against living beyond one's means and encourages living within one's income. It suggests creating a budget and sticking to it to avoid overspending and accumulating debt.
    3. Make thy gold multiply: The book encourages investing in income-producing assets, such as rental property or businesses, to grow one's wealth. It suggests finding ways to make money work for you, rather than working for money.
    4. Guard thy treasures from loss: The book stresses the importance of risk management and diversification. It advises against putting all of one's eggs in one basket and suggests spreading investments across multiple assets to minimize the risk of loss.
    5. Make of thy dwelling a profitable investment: The book suggests using real estate as a means of building wealth. It encourages buying a home and paying off the mortgage as quickly as possible and also suggests using rental property as a source of passive income.
    6. Ensure a future income: The book emphasizes the importance of planning for retirement and suggests saving for retirement as early as possible. It advises creating a retirement plan that includes income-producing assets, such as rental property or dividend-paying stocks.
    7. Increase thy ability to earn: The book encourages continuous learning and self-improvement. It suggests investing in one's education and skills to increase earning potential.
    8. The five laws of gold: The book outlines five laws of gold that it believes are essential for achieving financial success: Start thy purse to fattening, control thy expenditures, make thy gold multiply, guard thy treasures from loss, and make of thy dwelling a profitable investment.
    9. Understand the power of compound interest: The book explains how compound interest can work to your advantage and encourages saving and investing early in life to take advantage of the power of compound interest.
    10. Seek wise counsel: The book advises seeking the advice of experienced and successful individuals to learn from their experiences and avoid common mistakes.

    Overall, "The Richest Man in Babylon" is a practical and easy-to-read guide to achieving financial success. It provides simple and timeless advice that is still relevant today, and it encourages readers to take control of their financial futures by saving, investing, and living within their means.

    14May, 2024
    Busting the Myths: Separating Fact from Fiction in the World of Investing
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    Investing can be a complex and daunting task for many people, which is why there are many myths and misconceptions about it. Here are seven of the most common myths about investing and the truth behind them:

    1. "You need a lot of money to start investing." This is not true. There are many ways to start investing with little money, such as investing in mutual funds or exchange-traded funds (ETFs) that have low minimum investment requirements.
    2. "Investing is only for the wealthy." Investing is for anyone who wants to grow their money over time. With the advent of robo-advisors, investment apps and online brokerage, investing is easy and affordable for anyone.
    3. "You have to pick the hot stock of the moment." Picking individual stocks can be risky and requires a lot of research and expertise. A better approach is to diversify your portfolio by investing in a mix of different assets, such as stocks, bonds, and real estate.
    4. "You have to time the market." Timing the market is impossible, as no one can predict with certainty what the stock market will do in the short term. Instead, it's better to invest for the long term and let compound interest work for you.
    5. "You can't beat the market." While it's true that most individual investors can't perform better than the market, it's not impossible. Some investors and fund managers can consistently perform better than the market through a combination of skill, research and experience.
    6. "The higher the risk, the higher the return." While it's true that high-risk investments can potentially yield higher returns, it's important to remember that they can also result in large losses. A well-diversified portfolio that includes low-risk investments can help to balance out the overall risk of your portfolio.
    7. "You don't need to diversify your portfolio." Diversification is an important aspect of investing, as it helps to spread out risk. Diversifying your portfolio across different asset classes, such as stocks, bonds, and real estate, can help to minimize losses if one investment performs poorly.

    It's important to understand that investing is not a get-rich-quick scheme. It requires patience and discipline, and a long-term approach is generally the best strategy. Additionally, seeking advice from a qualified financial professional can help to ensure that your investment decisions are based on sound financial principles.

    8May, 2024
    Investing in Treasury Bills and Bonds in Kenya
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    In the recent past, the interest rate on Treasury Bills and Treasury Bonds has been substantively high. The Bills rate has been at around 10% and the Bonds rate at above 14%. This is indeed a good time to consider investing in these treasury products.

    Below is a simplified guide on how Treasury products work and how to invest in the same.

    Investing in Treasury Bills and Bonds

    Treasury Bills and Treasury Bonds are one of the ways that the government funds its expenses through debt or borrowed funds. Treasury bills are used to borrow short-term funds (within a year) to finance the day-to-day running of the government, such as paying supplies, wages, salaries and the like.

    On the other hand, Treasury Bonds are used to borrow long-term funds from the local public (periods of more than a year). These funds are utilized for capital expenditures such as building roads, hospitals, bridges and the like.

    Characteristics of Treasury Bills and Bonds

    •    The government offers Treasury Bills in 3 periods; 91 Days, 182 Days and 364 Days. Treasury Bills are on offer every week. Interest rates are determined through an auction process. Investors place bids and depending on the amount the government want to raise, the interest rate is determined.
    •      Each month, the Central Bank announces the Treasury Bonds on offer. The Bonds differ in terms of; period, interest rate (coupon), and tax implication among other factors. You can get the current offers here - https://www.centralbank.go.ke/bills-bonds/treasury-bonds/
    •     If a Treasury bond does not raise the amount that the government has targeted, the government can re-issue the bond in later months or years.
    •     The Central Bank pays interest for the treasury bonds in intervals of 6 months. The interest rate of Treasury bills is deducted at source. This is called discounting. For example, if you successfully apply for a Treasury bill of Ksh 200K and the interest rate is 15K, you will pay CBK Ksh 185K and receive the Ksh 200K at the end of the investment period.
    •     Treasury Bonds for building infrastructure (Referred to as Infrastructure Bonds) are 0% tax-rated.

    Below is a summary of the characteristics of Treasury Bills and Bonds;

    Treasury BillsTreasury Bonds
    PeriodShort Term (3, 6 or 12 months)Long Term (Over 1 year)
    InterestDiscountedEvery 6 months
    Price DeterminedAuctionAuction
    TransferNon transferableYes - NSE
    Minimum100,000.00100,000.00
    W/Tax on Interest15%15%,10%, 5% and 0% for Infrastructure Bonds
    ReturnsInterestCapital gain/interest
    Interest rates (current season)8-11%13-15%
    CostsNo further costsNSE fee 2.6%
    OffersWeeklyMonthly

    How to trade in Treasury Bills and Bonds

    Opening a CDS Account with the Central Bank of Kenya – To trade in a Treasury Bill or Bond, you need to open a CDS account with the Central Bank. This CBK CDS account is different from the CDS account used for trading in stocks.

    To open the CBK CDS account, you need to visit a CBK near you. There are 7 CBK locations. See locations here - https://www.centralbank.go.ke/contact-us/ . You can also open a CBK CDS from any CBK Treasury Bills and Bonds agents. Agents include stockbrokers, commercial banks and other financial institutions.

    Once at CBK, ask for the Treasury Bills & Bonds desk and request to open an account.

    Opening an account takes about 2 weeks after applying. You will receive a notification from CBK by text once this is done.

    Deciding on the Treasury Bonds on Offer – Once your account is open, you can now trade in both Treasury Bills and Bonds.

    To buy Treasury Bonds, you need to know what is on offer. You can find this information on the CBK website here;- https://www.centralbank.go.ke/bills-bonds/treasury-bonds/

    Make an Application – Once you have determined the Treasury Bill/Bond to purchase, you will apply by filling out an application form with your details and the amount you are seeking to invest and submit it to the Central Bank before the indicated deadline. You can also apply using the CBK USSD code of *866#

    Results Announced - The Central Bank will alert you through a text of the conclusion of a Treasury bill or bond auction. You can check the status of your application via the CBK USSD for Treasury Bills & Bonds (*866#).

    Make Payment – Once your application is successful, you will make the payment for the bill or bond. To do so, give instructions to your bank to transfer funds to the CBK account with your details. Your local bank will help you with making this payment. You can also pay by depositing a Banker’s Check to any CBK office, or Treasury Bills & Bonds counter. Once you make the payment, your CBK Treasury bills & bond CDS account will be updated with the bill/bond.

    Receiving interest for Treasury bonds – The Central Bank will pay you interest every 6 months after purchasing the Treasury Bond until the end of the period of the bond. Payments will be made through the bank account you indicated in your application.

    End of Tenor – At the end of the tenor, Central Bank will pay you back the amount that you invested in the Treasury Bond.

    Selling in the Nairobi Securities Exchange – Treasury bonds are negotiable. This means that you can sell your treasury bond to someone else through the Nairobi Securities Exchange before the end of the tenor. For example, if you buy a 25-year Treasury Bond, you can sell it to someone else through the NSE after 2 years or after any period. The price of the Bond is determined by demand/supply forces.

    We hope this has shed more light on how to invest in Treasury Bills and Bonds. If you have any further queries, kindly feel free to ask by writing to us at invest@rubianiwealth.com