Investing for a better future is a goal that most people want to achieve. An investment is funds set aside with anticipation; they will give some returns in terms of profits or dividends. One of the common investment vehicles is shares. In Kenya, you can invest in shares that are listed and traded in the Nairobi Stock Exchange Market (NSE). In this post, we will discuss how to invest in shares at the NSE market, how to begin and the requirements to get started for a better future.
What are shares?
A
share is a unit of ownership in a company. If you buy shares from a company,
you are purchasing part of the company, and therefore you become part of the
company members usually referred to as shareholders.
What are the benefits of buying shares?
Having a well-diversified portfolio of shares will earn you dividends annually for all shares held. Most performing companies pay good returns in terms of dividends to their shareholders. The dividends are paid in proportion to the shareholding; you get paid depending on the number of shares you have.
The shares quoted are traded daily during trading hours;(between 9:00Am to 3:00Pm on weekdays only) at NSE, you can, therefore, buy and sell your portfolio at any time to get your invested money back.
Through stocks you can gain in two ways; When the shares increase value and Trough dividends
Share prices fluctuate over time depending on several factors. such as increased company profits, company investment in potential growth niche markets etc If you bought, for example, Safaricom shares in 2010, they were selling at an average of sh 5 today the share has gained value and is selling at an average of sh 28, a gain of sh 13.
Companies also pay dividends annually; therefore if you hold a stock every year, they will pay you dividends.
What are the requirements to start trading shares?
To begin trading shares that are listed at
NSE, you will require to have the following;
Capital
A
Central Deposit and Settlement (CDS) account
A licensed stockbroker
Others;
Bank account, KRA PIN
Capital
You will need capital in the form of money to begin buying shares listed on the NSE market. There is no minimum amount requirement to get started. The only requirement is a minimum of one hundred (100) shares. There are shares that are trading from as little as Sh 2 bob, meaning with a minimum of a hundred shares, with Sh 200 you can buy those equities.
To reap a good return from the stock market, you need to have substantial holding in a well-diversified portfolio of shares from diverse industries such as communication, the banking sector, manufacturing, insurance, farming, hospitality etc.
CDS
Account
A CDS is an electronic form of an account that holds all shares of an investor. CDS accounts are a new transition from old share certificates that were issued by companies on the purchase of their shares. The use of electronic central depository systems has been implemented in the process of dematerializing and immobilizing shares.
The CDS account is synonymous with a bank account number that a bank will use to keep as a ledger account for your inflow and outflow of money. The CDS on the other hand is an account ledger that keeps records of shares bought and sold, and dividends received from listed companies in that you hold shares,
To register for a CDS account, the following documents will be required by most stockbrokers especially those that require filling of manual forms.
Two coloured passports
A copy of national ID or Passport document
KRA PIN
Bank Account Card with account details to be credited dividends
On registration, you will be issued a CDS account number that you will use for shares trading. One can only maintain and have one CDS account for trading shares. However, in the case of fixed investments i.e. Government bonds and treasury bills you have to pen a CDS account with the Central bank, more on fixed investment income in this post.
These are intermediaries that play a vital role in stock trading, the stock market is not an open market to just any trader but only limited to licensed players. Your orders to buy or sell stocks are done through licensed stockbrokers. The brokers have access to the market, and you can only trade through a stockbroker.
The stock broker who will help you in opening a CDS account will provide various option for you to trade listed shares. This includes offering an online portal where you can send instructions on which shares you want to trade, others have a manual form that you will have to fill out for them to execute your order request. However, with the wide adoption of the Automatic Trading system, most stockbrokers who are part of the Kenya Association of Stockbrokers and Investment Banks (KASIB) are moving to digital and electronic platforms.
You can choose from a list of the many stockbrokers who are licensed by the Capital Markets Authority; they include commercial banks, investment banks and brokerage firms.
To get the best stockbroker you can compare their charges because the brokers will charge fees: commissions on all buy or sell orders, accounts opening charges and account maintenance fees.
The best brokers are those that offer online trading, meaning you can place an order from the comfort of your location. However, there are very few that have implemented online ordering systems examples include;
Can Foreigners invest in Stocks quoted at (NSE) Nairobi Stock Exchange Market?
The NSE present an opportunity for foreign investors to invest in listed companies at the bourse. Kenya has sound financial system with a higher GDP compared to other countries within the East and Centrakl Africa region. As the investment hub and financial centre within the region, the NSE is open to foreign investors to invest in listed companies.
Different stock brokers have different requirements for foreign nationals including but not limited to; notarized passport documents, tax information, residential address etc.
Are you a foriger looking forward to learning more on how to get started on investing at NSE?
Can a Company Open a CDS account to buy shares of Listed Companies?
A limited company registered can open a CDS account through a stockbroker to buy shares of listed companies at the stock exchange market. This gives an opportunity for a company to earn extra income from dividends on excess capital it could be having from its normal trading activities.
The documents required by the stockbroker to open the account will include a certificate of incorporation, KRA PIN, Directors Identification documents and resolution to open the CDS.
Wrap Up
To invest in shares, you only need to walk into any stock brokerage firm or an investment bank with your national ID, two passport photographs and your KRA Pin and request they open for you a CDS account. once it’s approved and registered you are good to go.
You can then buy shares of listed companies that are performing well and keep calm for the shares to gain value as you earn dividends yearly.
You can sell off the shares anytime to get your money back either at a profit or at a loss depending on the selling price and the price at which you bought them.
It’s time to invest in shares as you also save for a better future. You can make comments or questions for this post below in the comments section.
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