How to Buy Shares in Kenya: The Complete Guide

Today I am going to show you how to buy shares in Kenya.

Shares, also known as stocks, according to the Nairobi Securities Exchange, are a piece or pieces of ownership of a company or an enterprise.

When you buy a share, you become an investor and thereby an owner of a portion of the company’s profit or losses.

When you buy a company’s shares, you assume such roles as becoming a guarantor for borrowing loans from cooperative societies and banks.

It is also an easy way of saving your money for the future because once you buy the shares, they continue growing and you stand a chance of earning more money.

How to buy shares in Kenya

Here is how to buy shares in Kenya in 2020

1. Have valid documents

In Kenya, while purchasing a tock or any financial assets, the following documents are required: A valid Kenyan ID or passport, your Address, source of income, and cheques for banks linking.

2. Identify a good brokerage firm

shares in Kenya can be bought in three main ways. Through a stockbroker, An online broker or an investment manager or financial adviser.

The NSE should list a genuine brokerage firm. Should also be willing to advise you on the uncertainties that come with buying shares the advantages and also advise you on best stock markets you can invest in.

3. Open a Central Deposit and Settlement account (CDS)

This account enables you to buy and sell shares or other securities at the NSE similar to a typical savings account.

It can be opened directly through the Central Bank or authorized dealers like commercial banks and stockbrokers.

Depending on your preference, you can open an online account from the central bank portal or through and an individual broker.

Related: How to Open a CDS Account in Kenya.

The minimum amount to buy a share is typically around Ksh1,200 per share and a monthly retainer of Ksh 100 to keep the account active.

However, the Ksh 100 retainer does not apply to brokerages, and some are free; some have a fee higher than that.

You can buy as many shares as you want to depend on the amount and the returns you want.

4. Analyze available stocks before investing your money in one

Before starting your investment, it is always advisable to be cautious about who you spend with.

Research the stock market, invest in attending investment talk shows or seminars this will help you make educative decisions on what to invest in and not through your assumptions about the company.

This research can be done in ways such as going through the company investment profile, the company’s literature, the company’s performance for the prior periods and the company’s products.

You may also be interested in the Beginners Guide to Online Stock Trading in Kenya.

Doing due diligence for a company can take time but can help you determine the risks you want to take on, the returns and the products that meet your needs.

Some companies may have lower share prices because the returns are low-quality investigation helps you analyze such occurrences.

Read also: Investing in Kenya.

List of trading stockbrokers at the Nairobi Securities Exchange (NSE)

About 24 stockbrokers are trading at the NSE currently. Some of these 24 stockbrokers have online platforms whereby an investor could log in and sell by themselves.

Some of these stockbrokers with online platforms include:

  1. Faida investment bank – this bank exists sorely to link investors to wealth creation avenues. It has both an online share trading account and equity training account which one could choose to subscribe to.
  2. AIB capital – this firm ensures that you have someone guiding you in the process of buying shares.
  3. NIC securities – The coolest thing about this online platform is that it also has an application which one can download and trade-in share through their mobile phone.
  4. SBG Securities – It’s owned by Stanbic bank and its been in the market for a while now. If you are at trading with a secure online platform, please try them out.
  5. Dyer & Blair is considered to be among one of the oldest investment companies in the market. It has over 60 years in existence, translating to better chances of getting the best advice from this platform.

Important points to note before buying shares

While buying shares can be a valuable source of income, and this is a list of things to consider before buying shares.

Before buying shares, assess how much risk you want to take on, how much returns you expect and the investment products that interest you.

Have an objective or a driving goal that will make you committed to the investment plan and the results you foresee in the future with it.

Determine how long you are prepared to wait for a return on this investment. Learn to be patient when the shares fail to perform. Work on alternatives ways to rebuild yourself.

Invest with money that you do not need in the short run and still be stable when you lose it—for example, disposable income besides your day to day financial needs.

Be optimistic of the outcome of the business, expect risks and profits in an equal measure because of the unpredictability of the market.

Benefits of buying shares In Kenya

Like any other investment, investing in stocks is a source of profits and has several advantages.

When a company you’ve invested in makes profit usually calculated after six months part of the amount is retained to support the projects of the company while the rest of the amount given to the shareholders as profits frequently referred to as dividends.

The level of dividends is calculated according to the share price.

In most cases, shares go up in price as accompany more profitable, and you can sell out the stocks and earn a higher profit than your initial investment.

Read also: How to invest one million shillings in Kenya.

Demerits of buying shares

However, investing in the stock market can be challenging especially with the rising and falling of shares.

If a company at any point falls in value, the shares automatically fall. Especially when they announce profits warnings the chances of picking up fast are always very minimal; hence you incur losses in the long run.

Another thing is, the government, through the Capital Markets Authority, controls the trading of shares.

This regulation is set to protect stock buyers from dishonest practices and ensure transparency at all costs.

Nevertheless, these share regulations, shareholders can only sell the stocks according to the market prices, which might incur small profit margins.

Buying Shares: Frequently Asked Questions

Here are some frequently asked questions when it comes to buying shares in the Nairobi Securities Exchange:

What is a Share?

A share is a piece of ownership of a company or enterprise. When you buy a stock, you become an investor and thereby an owner of a portion of the company’s profit or losses.

Why do Companies trade shares?

Companies sell shares to raise  (borrow) money from members of the public to expand their business activities to make more profits.

They invite members of the public to buy shares and by so doing have a say in the running of the company as lenders of money and owners.

Shareholders expect a profit as a reward from lending their money to expand the business of the company.

Who is a Shareholder?

A shareholder is an investor who buys shares with an expectation of profit. Profits in stocks are through dividends, gains in share prices, bonuses, rights etc.
 
A shareholder owns a piece of the company and its profits equal to the number of shares he/she owns.

What are the benefits of owning shares?

1. A share is a source of profits;
2. Stocks can be a guarantor for borrowing loans from Cooperative Societies and Banks;
3. Dividends can be a way of saving your money for the future;
4. They are an easy and a quick asset to buy and sell;
5. They are a new business activity that is beneficial in many ways. An investor can trade in other markets trade in maize, bananas, potatoes, tomatoes, onions, mangos etc.
5. You can make a profit by buying at low prices and selling at high prices;
6. Finally, shares are a solution that increases financial activity and economic growth.

What are the qualities of a good share?

1. Frequent and generous dividends
2. The company is managed productively, transparently and is accountable to shareholders
3. No wastage in the use of resources
4. Respect of shareholders and their opinions
5. Shares that are easy to buy and sell quickly in the market
6. The company abides by the rules, regulations and laws

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