How to invest in shares in Kenya:Beginners


Buy shares in Kenya

Investing in shares is a great way of growing your wealth. The best part about it is that you can invest as little or as much as you like, while still being able to make some good money from the share market. However, this isn’t something everyone can do on their own – and for those who don’t have any experience they might find themselves asking where to start.

In this blog post we’ll look at how to get started with investing in shares, how much money you need for investment and the best company shares to buy in Kenya.

What are shares?

When you invest in shares, you’re effectively buying a small part of the business. In return for your investment, when that company makes money through selling products or services to customers, it pays out some of those profits as dividends (a portion of their share price) and this is then returned back to shareholders.

Investing in stocks is a great way to take an active approach and share responsibility for the future of the company you’re investing in. You will get to make decisions on how it’s run by voting at AGMs, as well as having any potential gains from rising stock prices or dividends shared with you too!

In Kenya,you can buy stocks through the Nairobi Stock Exchange commonly known as NSE.It was established in 1954 by the Capital Markets Act to provide a mechanism for the trading of securities, and is regulated by the Capital Markets Authority.

Shares don’t exist in a vacuum.They adhere to the principle of supply and demand.This means that for you to buy them, there must be a willing seller who has the type and quantity that you want to purchase.

How can I invest in NSE Kenya

Below is the step by step process of investing in shares in the NSE Kenya;

Find a reliable stockbroker

A stockbroker is a company or an individual who buys and sells shares on behalf of their clients.They are typically the ones who will help you find a company to invest in, and they’ll also provide guidance on which companies are worth investing in.

Not every broker is reliable.To find one that is reliable;

  • Confirm that they are registered by the Central Bank of Kenya
  • Make sure that they have plenty of experience with investments.
  • Check the reviews for your chosen broker to see how they’ve dealt with other customers’ issues in the past.

You can have more than one broker though this is not very efficient as you have to keep tracking your portfolio performance across all brokers.

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Below is a table of the registered stockbrokers in Kenya;

StockbrokerContact
Afrika Investment Bank Ltd


0202210178/020212989
ABC Capital Ltd


020246036/020245971
African Alliance Kenya Securities

0202735013/0202735154/0202735138

ApexAfrica Investment Bank Ltd

020242170/020220517

CFC Financial Services


0203638900/42
Drummond Investment Bank

020318690/020318689

Dyer & Blair Investment Bank Ltd

0203240000/0202227803/4/5

Discount Securities Ltd.


0202219552/38
Faida Investment Bank Ltd.

0202243811/2/3

Genghis Capital Securities Ltd.

0202774756/0202777397

Nyaga Stockbrokers Ltd.


020315748/ 020315628/9
Ngenye Kariuki & Co. Ltd.

020224333/020220052/020220141

Kestrel Capital (EA) Limited

0202251758/0202251893,020251815,020250082

Kingdom Securities Ltd

020311898/020313492/020310540
0724-957345/0733-371629

NIC Capital Securities Ltd.


0202016482/3  020244272/9 0736-850516/0724-951703
Reliable Securities Ltd.


020241350/4/79
Sterling Securities Ltd

0202213914/020244077/ 0723153219/0734219146

Suntra Investment Bank Ltd

0202870000/0202223330/0202211846, 0724-257024, 0733-222216

Standard Investment Bank Ltd


0202220225/020240296/020227004
Renaissance Capital (Kenya) Ltd

0203601822

Have a CDS account

If you intend to trade in shares that have been listed in the NSE,you have to open a CDS account.To open one, visit your broker and complete a securities account opening form called CDS1. It is free to open one.

An individual should provide the following documents;

  • Two recent passport size photographs.
  • Original National ID or passport.
  • KRA pin certificate.

A company should provide ;

  • Original certificate of incorporation or certificate of registration for a sole proprietorship.
  • ID cards of directors of the company.
  • Two recent passport size photos of the company directors.
  • Board resolution minutes authorising them to invest in government securities
  • Company pin certificate.
  • Audited report for last financial year

Analyze different companies

The next step is to find an investment opportunity that you’re interested in, which can be done by analyzing the various investments available and see if there’s anything that catches your eye, or alternatively discuss with an experienced broker to find out whether they can recommend any attractive options for you!

Below are the factors that you need to look for when deciding on the best company shares to invest in;

  • Is the company profitable?

What is the track record of both management and shareholders in terms of their past performance.

Does it have a good dividend payout ratio which means that the dividends paid out as a percentage are more than 50% based on earnings per share. This shows how much of its profits goes towards paying investors with dividends.

  • Is the company’s share price trading below its intrinsic value?

A low P/E ratio compared to other companies in the same industry and a high dividend yield (dividends as a percentage of dividends per share) are both good indicators that an investment opportunity might be present.

If the company is profitable, has a good track record and trading at below its intrinsic value then it would be worth investing in it.

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It’s important for investors, who are looking into buying stocks, to have an idea about the stock market.

  • Does the company have a future?

Analyze whether the company you are interested in buying its stock of, has a future. For example Safaricom is a favourable company as it impacts every aspects of our lives.

Analyze your budget

Ensure that the size of your investment is within your own budget – it’s better to start small and build up gradually rather than over commit yourself too much at once!

Different companies sell their stock at different prices depending on the number of shares offered and the company’s performance.

Some companies offer set prices for a certain period, so you should check if there are any restrictions on your purchase as well as being aware of how many shares you can buy at one go.

For example at the time of writing this post, Safaricom was trading at Ksh 38.90. If you were interested in buying 1,000 of its shares you would require Ksh 38,900.

If you’re looking to buy Safaricom stock, an increase in profits might mean that there will be more shares available for purchase which could drive up prices or make them more expensive than they previously were. On the other hand if their profit dips , the price of their shares may decrease.

Buy your shares

One you have identified the stock that you want to buy and how much you would like to spend,login to your broker portal and buy your preferred shares.

Most brokers now have trading apps that you can trade with. One of the best trading app in Kenya is Faida M-trader by Faida Investment Bank. Once you fund your account,just get in your phone, place your order and it will go directly to the market.

When you buy shares, there are fees charged called statutory levies that are paid to the CMA, NSE, CDSC and brokerage commissions. The CDSC is an institution that holds the platform for custody of shares.

As a general rule of thumb your ought to be investing when you see panic in the market, as you will get a good buying price when prices are coming down.

The best way to invest is to spread your risks among several assets such as treasury bonds,treasury bills,stocks and mutual funds.

Another way to balance your risk is to spread your assets across various industries such as manufacturing, banking, insurance, technology e.t.c 

Analyze prevailing economic conditions

Remember that when investing , you’ll need to be on the lookout for changes in economic conditions so as not to end up losing money.

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There are a number of things that you’ll need to be aware of such as economic conditions, company performance and fluctuations in prices.

As an investor it is important to keep abreast with these trends so that you don’t end up losing money or buying out all the shares available when they’re no longer affordable.

Keep track of your investment

Once your investment has been made, it’s important to make sure you keep track of how well it is doing; this will help you decide whether to sell or hold onto it for a little longer.

You should also get advice from your broker on what to do with the shares and the appropriate time to dispose or buy more of them.

Sell your stock when there is excitement in the market.Sentiments are an important determinant factor in the direction of the market. When people are excited it reflects in the financial market and vise-versa.

If you have invested in a stock that has gone down significantly there are two remedies you can employ;

  • Buy more

If you analyze your stock and feel like it has hit bottom based on past price data,you can buy more of them to pull your average cost of the stock. If it rebounds you will start making money much sooner.

  • Sell them

If there is a still downward pressure, you can sell the stock ,take the loss right then but once the dip is done, buy them back.The spread in between, is where you recover some of your loss.

Be patient

It can take some time for a company’s stock to start growing, so it is important not be discouraged if you initial investment does not perform well from the get-go.

If your stock is doing poorly then try and remember that there could still be potential growth ahead of them in the future.

No guarantee

Lastly, remember that no one is guaranteed success when investing in the stock market so it’s important not to be too disappointed if things don’t work out quite as you hoped they would!

How much money do you need to buy shares in Kenya?

You need enough money to buy 100 shares of whatever stock you are looking to purchase.For example if Safaricom share price is 38 shillings, you will require Ksh 3,800 to buy 100 shares.

Best shares to buy in Kenya

Some of the best companies to buy shares of,are those that have been issuing dividends yearly.You can track this by analyzing their financial statements which you can find in their websites.Some of them are;

Best companies
Safaricom
Nation media group
Standard media group
NCBA
Stanbic bank
Kengen
NCBA group
KCB group
Equity group
Co-operative Bank
NSE
Kenya RE
BAT

Conclusion

If you don’t know anything about stocks and shares, it’s best to learn a little before investing in them.

In the meantime, if you’re looking for an investment that won’t take too much time away from your daily life, then this is not for you! You can read my blog post on where to invest in Kenya to find other investment options.

Investing requires more than just buying and selling of stocks. You will need to research, monitor and analyse the stocks you are interested in buying; this takes time.

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