By Prudence Minayo
There are many avenues of investments in Kenya from real estate, farming to company shares. Company Shares may end up being the best investment if the company is profitable enough but first what are shares?
Company Shares
A share is a single unit of ownership in a company. You pay money to a company and in
exchange become a shareholder. As a shareholder you can influence a company’s decision and or receive income called dividends. Companies sell shares in order to raise money for various purposes, such as, expansion. Stock is a general term used to refer to a slice of ownership in one or more companies.
Nairobi Securities Exchange (NSE)
NSE enables Kenyans to buy and sell shares. Only companies under NSE are allowed to sell
shares. To start trading at NSE you’ll need the following:
a) Money. It is very obvious that you need money, after all you’re buying shares. Some
companies sell shares for as low as 3/= but you have to buy up to 100 minimum shares.
The amount you’ll need to buy shares depend on the value of a company. You may need
a minimum of 5,000/= – 6,000/= to buy shares.
b) A central Deposit and Settlement Account (CDS). This works like a bank account but
instead off money it deals in shares. It can be opened at CBK (Central Bank of Kenya),
brokerage firm or other authorized dealers. To open a CDS, one needs the following
documents:
1. KRA pin certificate
2. Two recent passport size photos
3. National Identification Card or an original passport
It is free to open and also maintain a CDS account when you open with CBK. Other stockbrokers may charge 1200/= to open an account and 100/= monthly for maintenance. The account will be activated once you’ve provided all the needed documents.
C) A stockbroker. You can only trade through authorized stockbrokers. These are mainly
brokerage firm, commercial banks and investment banks. They understand the market very well and will offer an investor the type of stock to buy and sell. They also help in updating on the prices of various stock on NSE. Stockbrokers keep a close eye on the market on your behalf.
Some stockbrokers also have online trading where you can trade at the comfort of your home.
Stockbrokers in Kenya include:
AIB capital Ltd
UAP old mutual securities
Kingdom Securities Ltd
KCB capital
Suntra Investment Bank LTD
Standard Investment Bank
EA – Kestrel Capital Ltd
Sterling Capital Limited
Dyer and Blair Investment Bank LTD
Genghis Capital
ABC Capital Ltd
Research and choose the right one for you.
Tips to consider before buying shares in any company
The rate at which the shares move up or down
Whether you understand the business model.
Whether the company is profitable. Most profitable companies have no debt but if you
invest in a company with debt it is hard to get any profit. The company’s money will go
towards settling debt and accrued interests. It may take a very long time to get profit or
you may never get any profit.
The amount of dividends a company pays. Is it enough or little? Has the company been
consistent in paying it? Are the dividends increasing or decreasing annually?
Are stock prices high or low? Sometimes they drop when the company's growth rate slows down.
Summary
Understand the trading platform
Identify what you want to trade
Choose the best stockbroker
Open a CDS account
Select the ideal stock
Determine the number of shares you want to buy
Trade
Conclusion
Investing in company shares may end up being the best or worst decision of your life. It is
important to test the waters first before investing a lot of money. Start with a small amount of money and only increase when you see positive results. The market is unpredictable and it is unwise to invest all your money into it because when shares plummet you may end up losing everything. On the other hand wise investments may set you up for a lifetime. You can either get dividends annually or buy shares when they are low and sell when the market value kicks up.
