Why diversification is the future of investing

追加: 2026-05-20

[00:00:00]Sometimes an asset class can be performing so well that you're sure that this will always be the place to put your money. That's usually a very dangerous attitude to invest in. There's a big and and I think an unhealthy you know focus on the return but at the at the core of a portfolio there should be that one asset where you know career in case of anything this one I can actually liquidate and sort out any issues I have. Is there a risk of the same for from an investing standpoint where you're in too many asset classes that it's no longer diversification you just restrain yourself so far? Of course, there's a constraint in terms of the amount of capital you have accessible to you because if you needed to have genuine diversification, you need to get into so many uncorrelated assets and there's a there's a finite amount anyone can have individually to do this.

[00:00:48]Diversification is exactly what you just alluded to. The simplest explanation being not putting all your eggs in one basket. It's that simple. Can an individual also do the same thing?

[00:00:58]Ideally, they can.

[00:01:10]Hi, welcome to another episode of Make Money the Podcast. The show where not only tell you but also show you what's happening to your money and what could happen. Now on the 29th of this month that's May 29 the business daily will have its annual invest education uh conference or forum and our theme for this year is in the future of investing and diversification in a new era and what a time to have a conversation about diversification and I know earlier within the season we've spoken about not having your eggs in one baskets and try to deploy different asset classes to achieve the same goal which here on the podcast of course is to make money and I'm delighted to have a conversation with a man whose daily job is really about ensuring that portfolios are quite diversified to ensure that no matter the ups and down, no matter who's fighting who out there, you are able to generate a return as an investor and I'm happy to introduce Mr. Nahashan Mongai. He is the executive director uh global markets at Standard Investment Bank and welcome to the podcast and happy to have you here.

[00:02:10]>> Thank you Kee for having me. So we've uh I've set the context by mentioning that uh you know the goal always is not to have your eggs in one place and you try diversify. So and here we are talking of diversifying with a goal of winning. So as investors we really want to get the >> highest maybe not really particularly mostly the highest but also the most sound return you can get out there you know no matter the situation. So I'd like us to start off with uh describing what diversification looks like. you know to many people it may take very different forms but from an investing perspective what would you say diversification is >> um first of all thank you thank you for having me on the show and and I'm very happy that we are having a conversation about uh diversification uh as you mentioned my entire you know reason to be is actually running a fund called Mansax which is doiciled under the global markets division of standard investment bank and when we started this fund the idea a was actually to create a fund that allowed investors to have access to a diversified portfolio. So just to answer your question, diversification is exactly what you just alluded to. The simplest reason being um the simplest explanation being not putting all your eggs in one basket.

[00:03:25]It's that simple. Then it gets now a bit more complicated because for everybody the the the diversification requirements can vary. Uh for some people it it's dependent on how much liquidity you need. Uh for others it's about how old you are. Uh for other people it's about how big your portfolio sizes. So that's when it starts changing just a little bit for uh every investor. Uh but diversification is simply being different asset classes uh that give you different returns and and are uncorrelated with each other. So um other than just having different asset classes the other the other uh key thing for diversification is also to ensure that these asset classes are even if they're different are not correlated. So to give you an example um you can be invested in equities but you need to to invest for example in gold which is an uncorrelated asset or invest in bonds while at the same time investing in commodities which are uncorrelated. that creates what you call genuine diversification and not just having different asset classes for the sake of it. On top of that diversification across geographies, you can be in the Kenyan market in equities but again also be in the South African market or in the US markets that again creates geographical distri diversification where if markets in Kenya are behaving a certain way then they will not typically uh uh you know copy what's happening in South Africa and so on. So diversification that's the bottom line of what diversification is uh and that's how investors will typically protect their returns and their downside. Yeah, let's speak further to the benefit of diversification. And here for me the question becomes then the primary goal is not to have all your eggs in one basket and the goal of course is what happens when you have all your eggs in one basket. Mostly you tend to break all your eggs, right? So beyond that benefit of ensuring that like you mentioned there's the asset classes whe whether they correlate or they are different there's also the geographical diversification. What other benefit would you say an investor derives from you know trying to be in a bit a little bit more uh or trying to build a little more diversified uh portfolio than you know your typical you know flat flat way of investing in a single asset class.

[00:05:49]Yeah, the biggest thing is of course preventing concentration risk. Okay, so sometimes an asset class can be performing so well that you're sure that this will always be the place to put your money. That's usually a very dangerous attitude to invest in. So that concentration risk is actually what you're trying to uh to really watch out for. But the other thing is also to augment returns in a sustainable way. Um so if you invested in a lot more asset classes you're more likely to beat the you know your typical market benchmark and we can get into that later um without proportionately increasing your risk. That's called generating an alpha return. So for example you know the work we do at Mansa X we try to create a return that is higher than average without disproportionately increasing the risk. The only way to do that is diversification. genuine diversification. Uh the second thing is also to just to be able to ride through volatile times. Um if you look at what happened in the first quarter of this year, you know, we had a good year, stocks were up. Um you know, metals like like gold and silver were still doing very well compared to how they were last year or rather a continuation of the success they had last year. Then suddenly we had the invasion of Iran and then suddenly geopolitical risks became the the main thing the market is focusing on. Suddenly we were worried about energy prices. We were worried about uh supply chains constraints. But for investors who had the ability now to suddenly not only just have stocks but now also they were able to buy oil, they were able to buy natural gas, they were able to maybe um have precious metals in their in their portfolio. Suddenly they were not too concerned about this geopolitical concerns and their portfolio just continued performing just like any other day. In fact, just to put into perspective, our returns for Mansa X for Q4 last year were pretty much almost the same as the returns we had uh in the first quarter of this year considering the two different dynamics in both quarters. That can only be achieved in a genuinely diversified portfolio. And that's for example, we like to be very clear that our fund is what you call a multi-asset strategy fund. you know meaning that at any one time there are different asset classes delivering a return which is then combined to give the overall return that we then give our investors now at an individual perspective because I think what you might be wondering is can an individual also do the same thing ideally they can but of course there's a constraint in terms of the amount of capital you have accessible to you because if you needed to have genuine diversification you need to get into so many uncorrelated assets And there's a there's a finite amount anyone can have individually to do this. So for example, you want to invest in Kenyan stocks but also global stocks into euro bonds and so on. Some of those even have minimum ticket sizes. For example, to enter Euro bonds, you need to have $200,000. If you're trying to diversify your portfolio, then it means your portfolio cannot be anything less than a million dollar. So it gets it gets very difficult as a at an individual level.

[00:08:58]That's why even for us at Standard Investment Bank, we created a multiasset strategy fund that allows you to be exposed to a diversified portfolio without having to do it for yourself, which can get very complicated.

[00:09:10]>> Yes.

[00:09:10]>> All right. That actually shows the importance of then choosing diversified also options where you know you can't really do it by yourself, but you can invest in an asset class that's already quite diversified and giving you exposure to different asset classes.

[00:09:22]>> Exactly. Now let's turn to Kenyans are making moves to quite diversify. We are seeing diversific diversification growing. If you look at our collective investment schemes which assets sits at around 700 billion shillings about a fifth of that or 20% sits in special funds. Yes.

[00:09:38]>> And you know you pioneered that. We've seen many more players come in a lot of special funds starting.

[00:09:43]>> We are talking now of exchange traded funds listed in our Nairobi securities exchange which also give diversification. Do you feel that as investors now we are trying to we are getting we are getting the message. I mean it's still early days you know we are still talking of a fifth not a third or half half half of uh half of you know if you are to look at collective invest invest investment schemes being diversified >> do you feel that we are getting there we are making strides towards diversification as investors absolutely um Kenyan investors are definitely getting more sophisticated when we started um Mans in in the at the tail end of 2018 one of the things everybody asked is will Kenyans really understand a more sophisticated approach to investments and we were had faith in Kenyans. We were certain that Kenyans are very exposed. If you look if you look at even our internet internet usage it's much higher than most other African countries meaning that Kenyans knew that there are other things that are investable. They just did not know how to access them. Okay. Okay. So when we created Mansa X and and brought in the proof of concept uh I mean the concept of investing in uh global financial instruments the proof of concept was was was in the in the uptake by investors.

[00:10:55]So when you say about um 20% of you know of the industry now being in special funds that's actually a very good uptick and in fact what I believe will happen over time is that the entire industry itself because I still think you know the CIS um you know sector should even be much larger uh you know you should be talking about something mirroring what we have in the pension side you know talking about trillions of shields really that's where we should be we should be we should not be talking hundreds of billions. So because the cake is small, it then still looks like the percentage is higher. But I believe once Kenyans continue to take this up, it will u it will it will actually not be a big, you know, proportion of what the investable market really is.

[00:11:42]>> Yeah. Yeah. So um just a few more questions to go from my end and I begin with noting that uh is there co assets when you're talking about diversification particularly looking at it from an individual are there assets that you must have even as you're talking of diversification that you cannot miss maybe defensive stocks or a defensive portfolio where maybe it's treasuries more treasuries than equities >> or maybe even insurance to safeguard yourself we've talking about the risk and navigating risk that's the last conversation we had other asset As you said are a must have if an investor is to truly say they are diversified.

[00:12:18]Absolutely. I think at the core at the core of every portfolio you must have something that is genuinely liquid at at the bare minimum. you know uh I think when people talk about portfolios there's a big there's a big and and I think an unhealthy you know focus on the return but at the at the core of a portfolio there should be that one asset where you know care for in case of anything this one I can actually liquidate and sort out any issues I have so at the core of it you must have that so typically um for the longest time this has really just been you know you know money market instruments really uh but in a day and age like now of course special funds have come to you know bridge that gap because of their liquidity as well. Uh again uh you know short-term bonds form a very good liquidity core for anybody who who essentially does not have access to other asset classes. Then of course now you have your growth stocks and so on.

[00:13:14]But I just want to again just go back to the bit when I said while this is the case. Um what special funds did and continue to do for this market is actually put all that for investors without making you know scathing think you know am I am I am I is my portfolio location okay you know because you're not an you know you're not a port analyst you're not looking at asset classes and how they're performing.

[00:13:41]>> Yeah. So you don't want that stress. You don't want that stress. So, I can get into portfolio allocation techniques here and then start, you know, lecturing you about how to even check your correlation and the assets that you're holding and how they're geographically distributed. Or you can just look for funds that already do this naturally and invest in those funds. It's a much easier way for you to achieve the same thing and in fact even safer way because no matter how much you get an idea here and there it will be difficult for you to replicate it because you're not a professional in that aspect but of course if if um if you had no access to these funds absolutely make sure at your core you have a liquid asset on top of that look for something that's defensive by the long run but again like I mentioned at the beginning of this conversation how old are you a diversive ified portfolio for a 20 year old requires a different core asset. For example, their core asset is not a liquid asset. What are their risks really?

[00:14:39]>> Yeah.

[00:14:39]>> You know, so their liquidity needs are lower than a 50, 60 year old. So you can see how quickly it gets complicated based even on how old you are and what stage in life you are. And now that's why we also really encourage investors to constantly engage their financial advisors on such matters.

[00:14:55]>> So finally before we close it, uh Mr. I would like to ask a question that you really can't get away with when you're talking about diversification spreading yourself too thin. Yeah. Right. So there's always a scene in life that some people are, you know, jacks of all trades but a master of none. Is there this is the risk is there a risk of the same for from an investing standpoint where you're in too many asset classes that it's no longer diversification. You you just restrain yourself so far wide.

[00:15:24]>> Yeah. You don't want to make a call on anyone. Is there such a risk for for you from where you sit?

[00:15:28]>> Absolutely. Absolutely. Um I mean even for the most professional fund managers, we at any one point have to accept what's a strategy this time. So if we can go and and if you listen to a lot of my YouTube videos that we do quarterly for Mans investors, you've seen those.

[00:15:45]Every quarter, you'll notice there's a theme. So either we this this quarter we are more more focused on tech stocks for example and and and maybe uh commodities and metals and that's it. Then other times you'll see um maybe we are focused on pharmaceutical stocks, utilities and so on. So we are not in everything also at the same time always and if we are not doing that you also shouldn't because as you said even just even the cost even the the cost of running such a portfolio the cost itself might might be might undermine the returns. So yes, there's such a risk as as over diversification and again that comes from a perspective of fear and fear again comes from not having enough knowledge. That's why I keep insisting when it comes to your portfolio. If if you want to be genuinely diversified, it's also important to just make sure you're speaking to professionals, the right financial advisors and so on to guide you in your journey. Otherwise, you'll buy, you know, you'll buy real estate, then you'll buy 100 stocks and so on. If your if your resources are limitless for example at what point does it stop and when do you consolidate it into a portfolio that is well managed but again back to special funds special funds are a unique unique development in this market and we also have to um I mean first we we take a lot of pride in being the trailblazers for special funds um with Mansa X and then all the funds that essentially have come and also you know have some of the attributes of Mansa X. We are really proud to be in that space but we also really thankful that the regulator also saw how important this was to develop for the market. So the regulator has worked very hard to ensure that this exists. So Kenyans should take advantage because special funds offer you that diversification in a lot of sophisticated things. I mean if you look at what special funds are invested in, if you look at what the west has been doing, we're not in reinventing the wheel but this did not exist for the ordinary moni. If you look at some of the things we invest in in in in special funds, typically you'd have had to be a very very ultra high net worth individual to have a portfolio where we have invested in private markets in SpaceX for example. Yeah.

[00:17:54]>> You know, you'd have to have been someone coming with a million dollars.

[00:17:56]Now, someone with 250,000 shillings can actually have that exposure. So, this is a big big win for investors in Kenya.

[00:18:04]And I think special funds will continue to do very well because of continuously listening to the needs on investors and giving them something that quite honestly ke this was something that an investor would not have been able to access.

[00:18:16]>> Great.

[00:18:17]>> So Mr. Nahashan I'd like to thank you at this point for being on the podcast and we look forward to more conversation and in particular we get a lot of audience questions around Mansa X and I'm sure we'll work something out on on how we can maybe break down uh the same for audiences who've been asking questions.

[00:18:33]They really want to understand the fund.

[00:18:34]How does it work? How do you change your strategy in the middle of a Trump to it happens? What do you do? What what happens right at SIB for that? And of course, so we we do thank you for being on the podcast.

[00:18:46]>> Thank you for having me.

[00:18:47]>> Thank you. And that has been Mr. Nashan Mongai. He's executive director for global markets at Standard Investment Bank. And that has been another episode of Make Money the Podcast. And before we leave you, just to remind you, May 29th uh 2026 at the Mvin here in Westlands, we'll have our business daily annual investor education conference and we do hope you make your way there and you can find details across all our platforms.

[00:19:11]And for make money, we do take a break from this episode onwards, but uh this is a comma, not a full stop. So make sure to watch out for episodes further down the road. And until I see you on the next episode of Make Money, do remember to make your money work for you. My name is Kefa Mor. Goodbye.