Need Help?

NCBA’s guide to short-term investments

August 2, 2021

The Kenyan middle and lower classes all desire to tap into short-term investment opportunities. Investors are often not looking to wait for several years to multiply their returns but are simply looking to fulfill their short-term plans like for purchasing an asset, funding education, or financing a vacation for the family.

However, with limited savings and other expenses taking precedence, the returns of short-term investments are deemed dissatisfactory, and we often opt for quick money schemes.

Short-term investments options may not suffice for a random Naivasha plan over the weekend. Nevertheless, if you have about Ksh50,000, short-term investments are ideal for investors who are looking for a safe income with lesser risk and moderate returns.

By definition, a short-term investment is a temporary investment or marketable security that has a maturity period of up to 5 years and that provides liquidity for near future expenses. Generally, short-term investments are preferred because they limit the duration risk of any interest-rate-driven changes.

The longer the tenure of an investment, the more susceptible it is to inflation fluctuations. Therefore, investing in the short-term offers you liquidity for your projects while protecting your capital.

It is a great habit to accumulate savings, but even better would be to seek a short-term investment that can yield returns as early as between 3-12 months.

When assessing an investment, there a few things to take note of;

1. Tenure – How long do you want to keep your money in that scheme or security?

2. Liquidity – When do you want to redeem your investments? Is the interest redeemable at any point?

3. Return – What are the expected returns at the end of the set period?

4. Income tax applicable – How much will you remit in taxes? Ensure the tax applicable, if any, cause minimal damage.


Take a look at a few options available for a short-term investment:

Stock/Equity Funds

This investment option trades public companies listed in the Nairobi Stock Exchange (NSE) with the expectation that the company’s future will results in higher profits or a greater market share. Some stock funds also pay an annual dividend depending on its revenues. You are likely to experience very drastic changes on both ends of the spectrum with this market because values rise and fall drastically over a short period of time.

Fixed Income Funds
This investment option preserves your income in government or private securities that give specific returns on specific dates for example Treasury Bonds, Fixed Bonds and Floating-rate Bonds. The way they work is by offering your investment as debt with the expectation of income through consistent dividend payments – every 6 months for the case of government bonds. The returns may be paid early than the maturity date which can be from 1 year and can extend to up to 30 years.


Money Market Funds
This fund invests in securities like government treasury notes and treasury bills, as well as loans to banks and certificates of deposit. These are low-risk investment options that allow you to retrieve your investment easily despite offering moderately lower returns than Fixed Income Funds. Their maturity period varies. Investing in a Treasury Bill, for example, means you are loaning money to the government for a maturity period usually either 91, 182 and 364 days at an interest.

Foreign Currency
Investing in foreign currency involves buying and selling the currency of different countries through the foreign exchange market (FOREX). Investors can trade currency pairs during bearing in mind current information and detailed analyses to assess the most profitable pairs. An investor is likely to use an electronic trading platform – like NCBA’s TradeFX – to buy and sell currencies all within a secure environment.

Term Deposit Accounts
Term deposit accounts offer your investment an opportunity to earn interests with fixed rates for the term of your investment with the flexibility to reinvest at maturity including Fixed-deposit Accounts and Call Accounts. With a minimum opening balance of Ksh100,000, you can determine how long you want to invest and enjoy high-interest rates. For Fixed-deposit Accounts, interest rates are fixed for the period of your investment. For Call Accounts, interest rates are fixed for the term of your investment, so you don’t have to worry about declining interest rates.

Unit Trust Fund
A unit trust fund pools investors’ money into a single fund, which is then channeled into various professionally managed investment vehicles including money market, treasury and corporate bonds, shares and property. They are protected by the Capital Markets Authority of Kenya and managed by an independent trustee who is the registered holder of the scheme’s underlying assets. Under NCBA’s stable, we have an NCBA Money Market Fund, NCBA Equity Fund and NCBA Dollar Investment Fund licensed by the Capital Markets Authority of Kenya.

Investing requires you to make smart informed decisions. Whatever the investment, always do your research. Read a variety of resources about the financial vehicle investing in and find resources that are credible and take into account market trends and the global economy. Be sure to speak to your relationship manager to help you work on a strategy and focus your investments on your future financial goals.