How To Invest In Shares For Beginners In Kenya

How To Invest In Shares as a Beginner In Kenya

Wondering How To Invest In Shares as a Beginner in Kenya? Investing in the share market can be a rewarding way to grow wealth and achieve financial goals. That is why it’s important to have a solid understanding of the process, strategies, and key considerations. In this article, we will come to know about How To Invest In Shares as Beginners In Kenya.

People exchange shares for one reason: to benefit from buying and selling shares as well as to earn dividends and capital gains as shareholders. This beginner’s guide aims to provide valuable insights on how to invest in the share market in Kenya.

How To Buy Shares in Kenya Step By Step

Step 1: Do research on the shares you want to buy.

You must conduct research before you start purchasing shares. This entails learning as much as you can about the business and the shares you’re considering. To do this, read their annual reports, browse websites with financial news, talk to other investors, or ask the companies directly.

The Nairobi Securities Exchange (NSE) is home to roughly sixty-three (63) enterprises from a variety of economic sectors. While some businesses have been around for more than fifty (50) years, others are quite new. The top 20 businesses by market capitalization are included in the NSE 20 Share Index. If you’re new to investing, this index, which is used to gauge market performance, is a smart place to start.

Step 2: Determine how many Shares you want to purchase.

After deciding which shares to acquire, you must decide how many shares you want to buy.

Your investment objectives and available capital will determine this. If you’re a novice investor, you must start modest and increase your investment over time.

Step 3: Create a CDS Account

To purchase shares in Kenya, you need a Central Depository System (CDS) account. You can hold your shares online in this account.

By visiting any stockbroker and completing the relevant papers, you can start a CDS account. You must present identification, such as a valid ID, passport, or KRA pin.

Step 4: Select a Stockbroker

A licensed person or business known as a stockbroker purchases and sells shares on behalf of investors. When you’re prepared to purchase shares, a stockbroker must be selected. You should evaluate the fees of the various stockbrokers before choosing one. On its website, the NSE maintains a list of registered stockbrokers. There are a few considerations you should make when selecting stockbrokers in Kenya.

Here are some tips to look into:

• Compare costs: Before making a choice, it is important to evaluate the costs that stockbrokers charge for their services. A commission is charged by some brokers, while a transaction fee is charged by others.
• Look into License and registration verification: Make sure that the stockbroker has a Capital Markets Authority (CMA) registration and license.
• Reviews and References: Before making a decision, it may be beneficial to study reviews and references from other investors.
• Ease of Use: Pick a broker with a user-friendly interface that is simple to use.
• client service: In the event that you require assistance with anything, it is essential to find a broker with exceptional client service.

Step 5: Make a deposit into your CDS account and begin trading

After you’ve decided on a brokerage, you must fund your CDS account. This can be accomplished with a bank transfer, debit card, or credit card. You can begin purchasing and selling shares once the money has been deposited. There are two sorts of orders in trading: market orders and limit orders.
A market order is a buy or sell order for shares at the current market price. A limit order, on the other hand, is a purchase or sale of shares at a specific price.

Step 6: Purchase the Shares

You must pay for the shares once you have placed your order. If you purchase shares, the funds will be deducted from your CDS account. If you sell shares, the proceeds will be transferred into your CDS account. It is critical to understand that stock values might fluctuate, which means you could lose money on your investment.

Step 7: Monitor the shares

It is critical to keep track of your investments once you have purchased them. This includes monitoring the stock price and staying up to date on any news that may affect the company. You may want to sell your shares if the share price declines.
If the share price rises, you may wish to hold on to your shares or buy more. Monitoring your shares is possible online using the stockbroker’s website or app. Most stockbrokers will also send email or SMS alerts when the share price changes.

Tips for Investing in Shares

Investing in shares can be an excellent way to increase your wealth over time. However, it is important to approach share investing with prudence and to conduct thorough research before you begin purchasing. Here are a few tips to help you get started:

• Determine why you are investing: Is your goal to create income or to increase your capital? This will assist you in selecting the appropriate shares.
• Think about your risk tolerance: Do you like volatile markets or prefer more predictable investments?
• Please conduct your research: It’s critical to understand how the stock market operates and to research the firms you want to invest in.
• Make a strategy: Determine how much money you want to invest and when you want to sell your shares. This will assist you in remaining disciplined and avoiding rash judgments.
• Begin small: Don’t put all of your eggs in one basket; instead, diversify your portfolio by investing in a variety of stocks. Don’t forget to examine your investments on a frequent basis to ensure they’re still meeting your objectives.

You will be better able to weather market downturns if you invest in a variety of companies and industries.

By following these easy guidelines, you’ll be well on your way to making wise share investments.

How To Earn Money On Shares In Kenya

In Kenya, there are primarily two ways to earn money from shares:

1. Dividends

When you own shares in a company, you become a partial owner and are entitled to a share of the company’s profits. Companies may pay out certain amounts of their profits to shareholders as dividends. Dividends are usually paid out annually or semi-annually, although some companies may pay them more frequently. The amount of dividends you receive depends on the company’s profitability, dividend policy, and the number of shares you own. Dividends can provide a regular income stream for shareholders.

2. Capital Appreciation

Another way to earn money from shares in Kenya is through capital appreciation. Share prices can increase over time, allowing you to sell your shares at a higher price than what you paid for them, thereby realizing a capital gain. The capital gain is the difference between the purchase price and the selling price of the shares. This gain can be earned when you sell your shares on the secondary market to another investor. The capital appreciation potential of shares depends on various factors, including the company’s performance, market conditions, and investor sentiment.

It’s important to note that investing in shares carries risks, and the value of shares can fluctuate based on market conditions. Share prices can go up or down, and there is a possibility of losing money if you sell your shares at a lower price than what you paid for them. It’s crucial to conduct thorough research, diversify your portfolio, and consider your investment goals and risk tolerance before investing in shares. Seeking professional advice from a licensed stockbroker or financial advisor can also provide valuable insights into potential investment opportunities and risk management strategies.

Best Companies To Buy Shares In Kenya

The best companies to invest in will differ depending on your personal investing goals and risk tolerance. However, some of the most popular companies for investing in Kenyan include:

• Safaricom
• Equity Bank
• Kenya Commercial Bank
• Kenya Power and Lighting Company
• Centum Investment
• Co-operative Bank of Kenya
• Britam Holdings
• Diamond Trust Bank Group

Frequently Asked Questions

1. What is the minimum amount required to invest in shares in Kenya?

In Kenya, the minimum amount required to invest in shares depends on the rules and regulations of the specific stockbroker or investment platform you choose to use.

Some platforms allow investments for as low as Ksh. 100 while others have a minimum investment requirement of Ksh. 10,000 or more.

It is important to do your research and compare different investment options to find one that fits your budget and investment goals. Additionally, it is recommended to seek the advice of a financial advisor before making any investment decisions.

2. What advantages can be gained from investing in shares?

Investing in shares has several benefits, including:

1. Potential for high returns: Shares have the potential to provide high returns over the long term, making them an attractive investment option for those looking to grow their wealth.
2. Diversification: Investing in shares allows you to diversify your portfolio, reducing your overall risk. By investing in a range of companies across different sectors, you can spread your investments and mitigate the risk of any one company or sector underperforming.
3. Dividend income: Many companies pay dividends to their shareholders, providing a regular income stream for investors.
4. Ownership: When you invest in shares, you become a part owner of the company. This means you have a say in how the company is run and can benefit from any growth or success it experiences.
5. Liquidity: Shares are a highly liquid investment, meaning you can buy and sell them easily and quickly. This makes them a flexible investment option that can be adjusted to suit your changing financial needs.

Overall, investing in shares can be a great way to build wealth over the long term, provided you do your research and invest wisely.

3. How do I choose which company to invest in?

When choosing which company to invest in, it is important to consider several factors such as the company’s financial performance, management team, industry trends, and competitive landscape. Consider the following guidelines to support you in making a well-informed decision:

1. Research the company’s financials: Look at the company’s financial statements and evaluate its revenue growth, profitability, debt levels, and cash flow. This information can be found on the company’s website or through financial news sources.
2. Evaluate the management team: Look for a company with experienced and competent management who have a track record of success. You can research the backgrounds of the company’s executives and board members on their website or through LinkedIn.
3. Consider the industry trends: Look at the overall trends in the industry the company operates in. Is it growing or declining? Are there any disruptive technologies or new competitors that could impact the company’s future prospects?
4. Analyze the competitive landscape: Look at the company’s competitors and evaluate how it stacks up against them. Does it have a competitive advantage or is it struggling to keep up?

By considering these factors, you can make a more informed decision when choosing which company to invest in. It is also important to remember that investing always carries risk and it is important to diversify your portfolio to minimize risk.

4. Is investing in Shares in Kenya a good idea?

Investing in shares in Kenya is a good idea, but it’s important to do your research and make informed decisions. The Kenyan stock market has shown steady growth over the years, but like any investment, there are risks involved. It’s important to consider factors such as the stability of the economy, political climate, and the performance of individual companies before investing.

You can also learn about other profitable investments to make in Kenya such as: How To Invest In SACCOs In Kenya, How To Invest In Real Estate In Kenya In 2023, How To Invest In Uber In Kenya, and How To Invest In Forex Trading In Kenya.