Do you want to invest in Nairobi Stock Exchange? This article will show you how to buy shares in Nairobi Stock Exchange.
The stock market is the most powerful wealth-creation machine ever devised. This is due to the fact that it allows investors to own shares in extremely profitable companies and share profits through dividends and capital gains.
The Nairobi Stock Exchange is no exception.
Investing in stocks is one of the most profitable long-term investments in Kenya. For example, Kenya’s top billionaires, including Equity Group CEO James Mwangi, have grown tremendously into successful NSE investors.
This article will demonstrate how to buy shares in Nairobi stock exchange.
How to buy shares in Nairobi stock exchange
So, how do you buy Nairobi stock exchange shares?
In summary, here’s what to do:
- Open a CDS account at any stockbroker or investment bank for free.
- Choose the stock to purchase.
- Select the number of shares to purchase.
- Complete the transaction.
More detailed information…
How to buy shares in Nairobi stock exchange: Step-by-Step Instructions
For you to trade shares, you need a trading account (CDS account) that is facilitated by the Central Depository and Settlement Corporation (CDSC).
But what exactly is a CDS account?
Well, a CDS account is an electronic account (similar to a bank account) that holds all of your shares.
Unlike in the past, you no longer receive a share certificate when you buy stocks in Kenya, and so you need an account.
The account is the only proof that you own stock in certain companies since all your stocks are sent there.
Fortunately, setting up a CDS account is simple, free, and only takes a few minutes.
Below is the procedure of opening a CDS account.
How to open a CDS account in Kenya
You can open a CDS account with any Kenyan stockbroker, investment bank such as Stanbic, or bank such as Equity that is licensed by the capital markets authority (CMA).
It is completely free to open a CDS account, but you will be required to provide the following documents:
- Original and a duplicate of your ID or passport.
- The original KRA pin and a replica.
- 2 passport-size colored photos
- Additional documents, such as a certificate of incorporation and the company’s KRA PIN, are required for companies.
Following registration, you will be assigned a CDS account number, which you will use to trade stocks.
You can now deposit funds into the CDS account through your stock broker or bank, as you prepare for your first foray into the stock market.
Then, as I’ll explain below, you’ll need to find the best stocks to buy in Kenya.
How to identify the best shares to buy in National stock exchange
There is no exact method for finding the perfect stock but there are few tips that you can use to identify the best stocks.
All you need is a little bit of research and some sobriety to land yourself a potential gem.
Use these tips to help you find the best Nairobi Stock Exchange stocks to buy.
- Examine the overall health of your prospective company: If you want to invest in Safaricom, for example, look for its annual report first. This will provide you with a general idea of the company’s future prospects.
Of course, you want to invest in a company that is stable and growing.
- Further assess the company: Look for any useful information about the company’s shares in newspapers, on the internet, and so on. Look for the most recent Nairobi stock exchange performance data for the share on the NSE online platform as well. Knowing that the company’s stock has a lot of potential in the future is very important.
Do this for each share you’re considering and choose the most promising one.
You must now determine how many shares to purchase as well as a few other details as explained below.
How to choose the best stockbroker
Because you cannot trade your shares directly with a CDS account, you will need the assistance of a stock broker.
Needless to say, if you prefer to use a broker to purchase the shares, you will have to pay for the service.
You can compare their charges to find the best stockbroker because brokers will charge a fee that includes account opening fees, account maintenance fees, and commissions on all buy and sell orders.
And, if you value your investment returns, always choose brokers with low fees.
Importantly, use a registered broker; in Kenya, there are over 10 licensed stockbrokers (licensed by the Capital Markets Authority).
How many shares should you start with?
To invest in the Nairobi stock exchange you must purchase at least 100 shares.
Thus, the amount of money required to get started is determined by the stocks you wish to purchase.
In some cases, this may not be much. For example, if the share you want to buy is currently trading at Kshs 10, you’ll only need Kshs 1000 to get started.
However, higher amounts may be required if you choose shares with a higher value, such as Nation Media Group or EABL shares.
In any case, it is always a good idea to start small.
Having said that, here’s how to buy your shares.
- Return to your broker and make a written request to purchase the desired share. You will be given a form to fill out.
Furthermore, if your broker has an online trading platform, you can simply order online.
- Deposit more money if necessary (or if you haven’t deposited already).
That’s all there is to it.
Your stockbroker will carry out the order, and the shares you purchased will appear in your CDS account within a day or two.
Final Word on How to Buy Shares in Nairobi Stock Exchange
There are two ways to profit from your NSE brokerage account.
- Capital gains which occur when shares are sold at a higher price than when they were purchased.
- Dividend gains whereby the company distributes profits to its shareholders in the form of dividends.
It’s time to start investing in stocks while also saving for a better future.
For more information on how to buy Nairobi Stock Exchange shares, you can contact your preferred stockbroker online or in person.