One of the most popular debates you will ever hear among investment circles is the Real Estate Vs. Paper wealth (i.e., stocks, mutual funds) question. Most people try and argue which option is better over the other and on a typical day you are likely to find such debates going on Facebook, Quora and Reddit. The truth is that both forms of investment are in competition and proponents from both sides will often try to sell you their product by pointing out how better it is over the other. For instance, real estate sales persons will give you the good side of real estate and why you should invest in it.
On the other hand, fund managers and stock brokers will try and sell you products like MMFs and stocks by highlighting why they are better than real estate. As much as I am a real estate guy, I have also invested in paper wealth myself, which has given me exposure to both worlds. In this guide, I will be breaking down each investment vehicle, together with its advantages and disadvantages plus reasons for investing in one over the other.
What is Paper wealth?
Let us start by first defining the terms so that we are all on the same page. For starters, paper wealth can be defined as the value – in terms of money – that exists on financial documents. This could be either as a stock, Money Market Fund or Bonds which can only be realized after you sell the asset. If you own 10,000 shares of Safaricom, then that is paper wealth and it is not real until you cash out by selling. Other examples of paper wealth include;
- Company stocks & SACCO shares
- Treasury Bonds
- Mutual funds
- Money Market funds
- Crypto currencies
- REITs (Real Estate Investment Trust)
The advent of technology has really made access to paper wealth much easier compared to previous periods. Today you could easily set up a trading account with a stock broker and begin your investment journey. For many forms of paper wealth, you can only make money in three ways;
1. Capital gains
Capital gains mean that the unit of investment you bought, for instance the shares of a company, have gone up in value. This rise in value could be because of strong market fundamentals like high demand for a company’s stock or speculative from people who expect price hikes due to new products in the market. For instance, if you buy a share of equity bank at KES 40 and sell it at KES 55, you have made money through capital gains.
2. Dividends
Paper wealth can also make you money from dividend when the company performs well. In the case of publicly listed companies or SACCOs, whenever they turn in a profit from their operations, they are required to share it with investors by issuing dividend. Dividend payouts can happen either quarterly, semi-annually or annually depending on the company you invest in.
3. Interest Income
You can also make money through interest income which is common for Money Market Funds and Treasury Bills. This is what companies refer to as yield. You have perhaps heard about MMFs like Jubilee insurance give a yield of 9% per annum when you invest with them. This means that if you invest KES 100,000 with them, then at the end of the year they will give you KES 9,000 as interest income from your investment.
Pros & Cons of paper wealth
| Pros | Cons |
| Easy to get started – Most paper wealth investments, such as stocks, bonds, and money market funds (MMFs), require relatively little capital to begin investing. | Limited control – Investors have very little influence over market movements or the performance of their investments. |
| Passive investment – Unlike real estate, paper wealth generally requires minimal day-to-day management once invested. | Market volatility – Financial markets can fluctuate significantly, meaning investments may lose substantial value over short periods. |
| Tax efficient – Many paper wealth investments attract relatively low ongoing taxes, making them an efficient way to grow wealth. | Meaningful returns often require large capital – Significant income or wealth creation typically comes from investing larger amounts over time. |
| Highly liquid – Many investments can be converted into cash quickly. For example, Money Market Funds (MMFs) can often process withdrawals within 24–48 hours. | Taxes on realized gains – Capital Gains Tax (CGT) and withholding taxes may apply once profits are realized, reducing overall returns. |
| Helps beat inflation – Over the long term, well-chosen paper wealth investments can generate returns that outpace inflation, preserving purchasing power. | Highly efficient markets – Since most investors have access to similar information, consistently finding undervalued investments and earning exceptional returns is difficult. |
Real Estate as investment
Real estate is the next highly contested and seemingly controversial asset class in today’s investment environment. Having been in the industry for some time, I have experienced the good and the bad it has to offer which I am willing to discuss with you. For starters, real estate is the most common type of investment dating back to the re-colonial period. I even like to joke that God in the Bible, promised the Israelites Real Estate and Moses was the broker who was tasked with showing them where the land was. All jokes aside, this historical part of real estate makes it popular among all age groups than most forms of paper wealth. Also the fact that it has minted so many millionaires, gives it validity and more people trust it.
Real estate is divided into several classes, that vary majorly in terms of the purpose and target market they serve. These classes include;
1. Residential
These are properties designed for living such as bungalows, apartments and maisonettes. Residential real estate is the most common form in Kenya because of our growing population which increases the demand for units. Returns in this category vary from 6% – 15% depending on the property type, location and how you position it in the market (i.e., a furnished apartment will make you more money).
2. Commercial
Commercial properties consist of income-generating real estate that is used for business purposes like; office spaces, shopping centers and retail. With a good location and strategy, commercial properties can make you a lot of money compared to residential properties because they are cheaper to execute. In most cases, you as the developer only deliver a shell and the tenant installs fittings depending on how they want to use the space. This saves you money on finishes which can be quite expensive to do.
3. Industrial
Industrial real estate refers to properties that are used for manufacturing, production, logistics and warehousing. In my view it is highly specialized and very expensive to undertake but once you secure good tenants, they are often more long term because companies rarely move as it is expensive on their end. So locking in on a company like Davis & Shirtliff might mean that you have a tenant for the next 5+ years.
4. Land
Land is the most known form of real estate in Kenya. In fact, whenever you mention Real estate, I am sure many people will think that you are only talking about land. However, land still has its own classes which include;
- Unimproved land sold in its raw form, majorly for speculation
- Agricultural land used for farming & ranching
- Value-added plots like those sold by Optiven that come with improved roads & amenities
Most Kenyans have in the past bought land for speculative purposes which many end up regretting because it becomes so hard to sell.
Pros & Cons of real estate in Kenya
| Pros | Cons |
| Tangible asset – Real estate is a physical asset that you can see, use, and improve over time. | Low liquidity – Selling property can take weeks or months, making it difficult to access cash quickly when needed. |
| Emotional and personal value – Beyond its financial benefits, owning a home can provide a sense of pride, security, and long-term stability. | Requires active involvement – Real estate demands more effort through due diligence, maintenance, tenant management, and ongoing oversight, making it less passive than paper wealth. |
| Easy to pass on through estate planning – Property can be transferred to future generations, making it an effective tool for building generational wealth. | Tax inefficient – Multiple taxes may apply throughout the property lifecycle, including Capital Gains Tax (CGT), Stamp Duty, Rental Income Tax, and VAT on commercial properties. |
| Greater control over performance – Owners can influence a property’s value and income potential through renovations, maintenance, pricing, and effective management. | Higher investment risk – Poor investment decisions, overpaying for property, or falling victim to fraudsters and conmen can result in significant financial losses. |
| Opportunity to outperform the market – Real estate markets are relatively imperfect, meaning investors with better information or negotiation skills can uncover highly profitable opportunities. | High capital requirement – Buying or developing real estate usually requires a significant amount of money for the down payment, legal fees, and other acquisition costs, making it less accessible than paper wealth. |
| Steady and predictable cash flow – Well-managed rental properties can generate consistent monthly income and reliable long-term returns. | Too many risks involved – you have tenancy risk, capital risk, legal risks, vacancy risks, location risk, change in tax-laws risk |
| Strong hedge against inflation – Property values and rental income generally rise over time, helping preserve purchasing power during inflationary periods. |
A combined approach
I am a firm believer in not putting all your eggs in one basket. So while many people would want to argue whether it is good to invest in real estate or paper wealth, my view is you can use both to build a balanced and bullet proof investment portfolio. For example, as you save up money to buy a plot to build, you can put it aside in a Money Market Fund where the realized interest helps you achieve more capital.
Alternatively, if you are a landlord, you can put aside the rent you collect in government bond which will yield you even more. The book of Ecclesiastes 11:2 writing by the wisest man on earth states, “Divide your portion among seven, or even eight, for you do not know what disaster may befall the land.” My advice to you is not to get caught up in the debate, but rather see how you can use both forms of investment to your good.
