Investing in global stocks can be a more attractive option for many investors compared to investing in Kenyan stocks.
This is due to several factors that contribute to the volatility and uncertainty of the Kenyan stock market.
Firstly, international investors face the risk of both the stock and the value of the Kenyan shilling, making it a more complex and high-risk investment.
Additionally, the Kenyan stock market has historically been affected by political and economic instability, which can lead to significant fluctuations in stock prices.
Furthermore, the market is dominated by a few large companies, making it more susceptible to changes in their stock prices.
In this article, WoK seeks to breakdown why it is easier to invest in global stocks than in Kenyan stocks, according to Gichuki Kahome, the CEO and founder of Coin Connect Kenya.
In an update on X, formerly Twitter, Kahome explained that it is easier to invest in Tesla, Amazon, Meta and other multinational companies as a Kenyan than even invest in the Nairobi Stock Exchange (NSE).
He noted that compared to local stocks, one can invest in international stocks with as low as $1 depending on what broker one chooses to use.
Additionally, in international stocks, brokerage commissions are lower, less than 1%, and one doesn’t have to be an expert in the stock market to invest.
Also Read: Where The Top Ten Kenyan Billionaires Have Invested Their Money
This means one can go the passive investing route by investing in Exchange Traded Funds like the S&P 500 and the Nasdaq 100.
Additionally, international stocks have better portfolio performance compared to stocks trading on the Nairobi Stock Exchange.
For context, from 1957 through to 2023, the S&P 500 index has had an annualized return of 10.5%
Lastly, investments are backed by the United States Dollar (USD), which is a stronger and more stable currency than the Kenya Shilling (KES).
“The starting amounts required are low due to what we call fractional investing in shares. Where you don’t have to buy a whole share of a company. Instead, you can own a fraction of a share,” Kahome noted.
Kahome explains that while one Meta share is currently trading at $500, one will need at least Ksh 65,000 to buy only one share.
But since this is too high for most people, fractional ownership of shares was introduced to make the stock market easily accessible.
According to Kahome, the best brokers for investing in international stocks include the Hisa App and Interactive Brokers.
However, he warned that investors should be careful while trading, “…you want to own physical shares or paid up shares, not Contracts for Differences (CFDs).”
Kahome added that some brokers will likely charge more than 4% to own global stocks, which he said makes no sense.
“Avoid such brokers. Investment costs will eat into your returns more so for long term investments like Stocks,” he noted.
