Effect of Investment Strategies on Portfolio Performance of Individual Investors in the Nairobi Securities Exchange

Abstract

This study sought to determine the effect of investment strategies on the portfolio performance of individual investors in the Nairobi securities exchange. A descriptive cross-sectional survey approach was adopted. The population for this study were individual investors in the Nairobi Securities Exchange. A sample of 384 respondents was used. Both primary and secondary data were collected in this study using a questionnaire and data collection tool. Data were analyzed using descriptive and inferential statistics. The strongest correlation was observed between the active investment strategy and portfolio performance, followed by growth, passive and value strategies. From regression analysis, there was a strong positive correlation between investment strategies and performance. The relationship between investment strategies and performance was also found to be significant. It was revealed that growth and active investment strategies were statistically significant predictors of portfolio performance, with positive relationships. Active investment strategy had the largest beta coefficient, indicating that it is the most important of the four strategies in affecting portfolio performance, followed by value investment strategy and growth investment strategy, while passive investment strategy had the least influence on portfolio performance. The study concludes that investment strategies have a strong, positive and significant effect on the portfolio performance of individual investors in the Nairobi Securities Exchange. The study recommends that Nairobi Securities Exchange ought to encourage individual investors to educate themselves about various investment strategies and their potential impact on portfolio performance. It is also recommended that Nairobi Securities Exchange emphasize the importance of diversification to reduce risk.