Tue. Sep 27th, 2022

The stocks market is the greatest wealth created by predicting the market. In effect, it gives investors the opportunity to acquire shares of profitable companies and participate in profits through dividends and growth through financial appreciation.

Nairobi Market Exchange is no different. Despite Boss Nairobi’s recent performance, the stock market remains one of the best asset classes investors can use to build wealth.

If you are wondering how to buy shares of the most valuable companies on the Nairobi Stock Exchange: Safaricom PLC, Equity Group Holdings, Commercial Bank of Kenya or East African Breweries. Then this article is for you.

What is The Stock Market?

A stock market is a place where publicly traded companies are bought and sold.

The stock is owned by a part of the company. Assets are also called bonds or stocks.

Why invest in stocks

While investing in stocks, there are two ways to make profits. These are:

1. Dividends.

According to Investopedia, a dividend is the distribution of a company’s income to its shareholders. When a company makes a profit, it shares a portion of its profits with its shareholders in the form of dividends.

Let’s say company A made a profit of 100,000 shillings and decided to pay out a total of 50,000 Kenyan shillings to its five shareholders. If the total number of shares in the company is 100, the dividend paid is 50,000/100, or 500 shillings per share. If person X owns 50 shares, he will get 50*500, or 25,000.

This is a simple example to show you how companies pay dividends.

2. Capital Gains

You may have heard the saying buy low and sell high. Otherwise, it is a system where investors buy shares of a company at a certain price and only sell them back at a price higher than their purchase price.

For example, when Safaricom went public, one share was sold at Sh0.05. As I write this Safaricom shares are trading for Sh30. If person Y bought 1,000 shares in the IPO for 50 shillings, he can sell them for 30,000 shillings.

How To Buy Shares at The Nairobi Securities Exchange

1. Open a CDS Account

To trade stocks on the NSE, you need a trading account issued by the Central Securities Depository Corporation (CDSC).

This organization facilitates the ownership and transfer of shares sold on the stock exchange.

Where to open a CDS account?

2. Choose your Stock Broker

Open a CDS account with the help of your broker. You cannot buy or sell shares directly; you need a salesperson to help you do that.

There are many brokers in NSE as you can see on the NSE website.

How Do You Choose The Right Stock Broker?

1. Investment Costs

Retailers have fees such as account maintenance fees, trade fees, store fees, transaction fees, etc.

By comparing providers, you can find the one that charges the least. If you are concerned about the return on your money, always prioritize the sellers with the lowest prices.

On average, most brokers charge around 2% on each trade.

2. Technology

We live in a time where we can access everything on our phones. You should be able to access your work account on your phone. You don’t have to go to your merchant’s office every time you have a problem with your account.

3. Regulation

Make sure your broker is licensed by the CDSC and regulated by the Capital Markets Authority(CMA)

4. Customer Service

As a client, you want to be treated well and have a good experience throughout your investment process. Therefore, favor sellers with a good public image and good customer reviews.

Assets Traded at The Nairobi Securities Exchange

The main assets traded on the NSE are stocks; However, we also have real estate investment trusts (REITs) and gold ETFs.

How Much Is Needed to Invest?

To invest in the Nairobi Stock Exchange, you need to trade a minimum number of shares, which is 100. Therefore, the amount you need to start depends on the shares you want to buy.

For example, as I write this, East African Breweries is trading at 142.50 shillings per share. This means buying 100 shares; I will need Sh14,250.

Meanwhile, Safaricom is listed at Sh29. This means he will have to raise Sh2900 to buy Safaricom shares.

Read More On: Step-By-Step: Starting a Drop Shipping Business in Kenya

Taxes

Capital gains realized on NSE will be subject to a 15% withholding tax. Therefore, this means that when you receive your distribution, the real estate investor will pay a 5% tax.

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