Your business has generated free cash flow. After paying operating expenses, reinvesting in the business, and servicing debt — there's money left. Now you have a strategic decision: let it sit or deploy it intentionally.
What You'll Learn
- Main investment products available for businesses
- How to think about each from a business perspective
- Risk and return profiles compared
- Building a systematic investment discipline
Money Market Funds: The Business Workhorse
MMFs are the ideal first investment for business surplus. Benefits: daily liquidity, competitive yields (9–13% p.a. in Kenya), low minimum investment, regulated structure, professional management. Use for: operational surplus, payroll reserves, tax provisioning. Serrari's MMF Index shows real-time performance.
Treasury Securities: Government-Backed Returns
T-bills (91, 182, 364-day) and T-bonds (2–30 years) offer government-guaranteed returns. T-bills: competitive short-term yields, fully liquid at maturity, zero credit risk. Bonds: higher yields, interest income, tradeable. Ideal for systematic, predictable investment of planned surplus.
Unit Trusts: Diversified Exposure
Unit trusts pool capital from multiple investors and invest in diversified portfolios of equities, bonds, or balanced instruments. Professional fund managers allocate capital across sectors and geographies. For SMBs: balanced unit trusts offer equity upside with managed downside risk.
Fixed Deposits: Yield Certainty
Fixed deposits offer a pre-agreed interest rate for a defined term (30–365 days). Higher yields than MMFs for the certainty premium. Suitable for capital not needed within the deposit term. Key: compare rates across banks quarterly. Ladder maturities to maintain partial liquidity.
Creating a Systematic Investment Process
Month 1 of every quarter: calculate deployable FCF. Month 1, Week 2: allocate per Investment Policy Statement. Monthly: reinvest all returns. Quarterly: review performance against benchmarks. Annually: reassess risk tolerance and allocation targets. Systematize the process to remove emotion.
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