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.
Below is a table of the registered stockbrokers in Kenya;
|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|
|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.
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.