What are shares, and how do they work?
Shares are a legal mechanism that entitles the shareholder to share ownership of any given company. The key term here is ‘share,’ which means that all owners have agreed to give up a certain percentage of their earned profits and divide it evenly. This means that shareholders who own 5% of the company will receive 5% of the total profits and, in some cases, also benefit from voting rights.
In Kenya, you can buy shares at licensed stockbrokers, An online broker, or an investment manager or financial adviser. They work by allowing investors access to substantial returns on their investment and helping boost local economies through job creation through domestic investment.
The Nairobi Securities Exchange is the official stock exchange in Kenya. It is the central marketplace where buyers and sellers of Kenyan shares meet to trade. There are more than 64 stocks from companies spanning across the 11 sectors of the Kenyan economy, including:
- Investment Services
- Energy, and more.
WHY SHOULD YOU CONSIDER BUYING/SELLING SHARES IN KENYA?
There is one main reason why people trade shares, and this is to make a profit from buying and selling securities and to earn dividends and capital gains from being a shareholder.
When you trade stocks, your profitability will be determined by the timing of the market, market conditions, risk factors, supply and demand of shares, the company’s performance, stock mispricing, and several other components.
Stocks are a highly liquid investment, and they can easily be bought or sold. The reason for their liquidity lies in the high volume of buyers and sellers who participate in the market.
Requirements for buying shares in Kenya
To trade on the Nairobi Stock Exchange, you will need a valid Kenyan ID or passport, your address in Kenya, an income source within Kenya, cheques for linking with a bank. You will also need to open a CDS account at a stockbroker to buy and sell securities.
How to buy shares in Kenya: in summary
- Open a CDS account– it’s free from any stock broker or investment bank.
- Decide the stock to buy.
- Choose the number of shares to buy.
- Complete the trade.
It’s also important that you learn how to sell shares in Kenya since there’ll be plenty of profitable cashing out opportunities along the way.
How to buy shares in Kenya in 2022
Step 1: Locate the broker or agent you want to use and fill in a securities application form.
Step 2: Once approved, the stockbroker will help you open a Central Deposit and Settlement account known as CDS Account. You can also open a CDS account from your bank.
Step 3: The stockbroker will give you market rate information on various listed securities and help guide you through the best shares to buy in Kenya 2021 based on risk appetite determined by the level of experience and financial means.
Step 4: You are all set to buy and sell shares on the NSE (Nairobi Stock Exchange). However, you will need to deposit a minimum of Ksh 5,000 into your CDS account to start purchasing shares.
How to identify the best shares to buy in kenya
Apply these tips in your quest to identify the best shares to buy in NSE Kenya (Nairobi Stock Exchange).
- Research your prospective company’s general health: If you want to invest, let’s say in Safaricom, look for its annual report first. This will give you an overview of the company’s future prospects- you want to buy shares of a stable, growing company.
- Evaluate the business further: Hunt for any useful information in the newspapers, the internet, TV, etc. about the company’s shares. Also look for the latest Nairobi stock exchange performance data of the share from the NSE online platform. You want to be sure that the company’s share has great potential going forward.
You can also consult an experienced investor or your broker for advice on the best companies to buy shares in Kenya even as you analyze the company’s competition, cash flows, debt levels, and strategic plan.
How many shares should you open with?
The least number of stocks you can purchase is 100 so you require adequate funds depending on the share you want to mark your entry with.
This may not be much in some cases. For example, if the share you’re buying is trading at Kshs 5.00, you’ll just need Kshs.500.00! You may, of course, need higher amounts if you go for shares with higher worth