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The world of stocks congregates numerous rich people, including the world’s most wealthy man, Warren Buffet. Moreover, the richest in the tech field also put their money into this investment vehicle.
Shares are units of ownership in a company. The NSE or Nairobi Stock Exchange facilitates all stock purchases and sales. It hosts over 60 NSE-listed companies countrywide.
If you are new to stocks, this piece covers the following:
- How to buy stocks in the Nairobi Stock Exchange
- Benefits of investing in stocks
- Commonly asked questions
Let’s dive in!
How To Buy Shares In Nairobi Stock Exchange
Finding a lucrative company and purchasing stocks physically is cumbersome and time-consuming. With the current long work hours, investors need a more flexible and accessible investment solution.
Thanks to the Nairobi Stock Exchange, it facilitates a seamless process of buying shares in Kenya online. So, how can you purchase shares in NSE?
Step 1. Identify a Suitable Stockbroker
Stockbroker – A stockbroker is an agent who buys and sells shares on behalf of their clients within the confinements of the Nairobi Stock Exchange.
There are numerous stockbrokers in Kenya with the largest percentage being independent dealers. However, if you want a famous option, you can explore banks that provide brokerage divisions.
When dealing with a stockbroker you will pay a fee or brokerage fee. Note that these charges vary across different brokers. As a result, you must consider the fees charged when choosing a stockbroker.
The lower the brokerage fee the better your returns. Also, remember to choose a stockbroker who supports online trading for convenience and easy accessibility.
Step 2. Open a CDS Account
The CDS is the wallet that stores your shares. It takes after a bank account which stores your cash. It is a mandatory requirement to have a CDS account before investing in company shares in Kenya.
Your stockbroker will help you open a CDS account. It’s important to note that some will require you to visit their offices to complete this process. On the contrary, others will facilitate the entire process online.
The requirements for opening a CDS account, include:
- National ID or passport
- KRA PIN
- Passport-size photos
- Bank account details
To open a CDS account you only need to complete a few forms to hit the road running!
Step 3. Choose The Stocks To Buy
Now that you have a CDS account, you can choose the stocks you want to buy. Unfortunately, most beginner stock investors get stuck in this stage trying to figure out the most profitable and low-risk option.
The best way to go about this is to identify a company you understand well. Find a company whose products you use or know well for a substantial period. Then with experience, you’ll invest in more sophisticated companies as you become a pro.
Step 4. Determine The Amount Of Shares To Buy
Congratulations! Your CDS account is operational and you’ve found an appropriate company to invest your hard-earned money. Now, it’s time to decide how much shares you should purchase.
During this step, it’s important to note that the minimum number of shares you can buy is 100 units while the maximum number of shares is not limited. As long as you have enough money to purchase the shares you can stretch as far as you want.
Step 5. Fund Your CDS Account
Your stockbroker requires funds to facilitate your share buys. Thanks to CDS, it gives them access to funds to conduct this process. Hence, you are required to fund your CDS account.
Depending on your stockbroker, you can fund the CDS account through bank deposits or MPESA transfers.
Why Invest In Stocks?
With so many investment opportunities, you’re perhaps wondering why stocks are a great choice. Here are 5 reasons why people invest in stocks in Kenya:
1. Dividend Payouts
Although not mandatory, when companies make profits they distribute part of it to their shareholders. If you are a shareholder, the token you receive in this case is known as a dividend.
Hence, the more shares you have in such a company, the higher the dividend payouts you receive. It’s essential to note that most NSE-registered companies have a semi-annual and annual dividend payment schedule.
2. Capital Gains
What is capital gain?
Capital gain refers to a case where the selling price of a share is above the buying or original price. Say, for instance, you purchased XYZ company shares at Kshs 15 then after some years its price increases to Kshs 20. In this case, your capital gain will be around 33.3%.
3. Passive Income
In stocks investments money works for you. Your work is only to provide funds and direct the stockbroker which company you want to invest in and you’ll enjoy passive income in the form of dividends and capital gains.
Unlike the 8 to 5 daily hustle that only earns you money when working, stocks allow you to concentrate on other things and still pay you.
4. Easy Credit Access
Did you know as a shareholder that you don’t need to place your properties as collateral?
Investing in stocks allows you to put up your shares as security when applying for a loan. The good news is that you don’t have to sell your shares to obtain the credit.
Your shares only stand in until you complete your debt payment as agreed with your lender.
5. To Gain Influence
Not everyone buys shares for financial reasons!
Some wealthy investors only purchase shares to gain a level of control in companies. Reason?
The more shares you have in a company the more influence you have over the decisions made. Hence, you get a chance to impact the industry’s direction by introducing positive changes that impact the company’s profitability and the community’s well-being.
Frequently Asked Questions?
Which Are The Cheapest Shares To Buy In Kenya?
According to AskTraders, as of May 2024, the cheapest shares to buy in Kenya included the following:
- Liberty Kenya Holdings Ltd.
- Longhorn Publishers PLC
- Express
- Britam Holdings
- Sameer Africa Ltd
- CIC Insurance Group
- Eveready East Africa Ltd
2. How Much Do I Need To Buy Shares In Kenya?
Every stock in NSE has a unique price, making it impossible to give a minimum amount of cash investment. However, since we know that the minimum number of shares one can buy is 100 shares, finding the lowest-priced share can help you determine the least amount of money you need to invest.
For example, if XYZ company offers a share at Kshs 10, multiplying this by 100 shares will give us the minimum investment amount. In this case, it will be Kshs 1000.
This value will however change when investing in companies with lower or higher-priced shares.
Also Read:
Ready To Expand Your Portfolio With Shares?
Now that you have seen how shares work, are you ready to invest in the Nairobi Stock Exchange?
If you’re new to stocks don’t fret, I can help you find the most suitable choice to create a bright financial future. Feel free to book a consultation session with me today at 0703472299 or email me at centwarriors@gmail.com.
Don’t forget to visit our finance store for more money resources!
