The following is a detailed guideline on how to buy shares and stocks in the Nairobi stock exchange market ,firstly the stock exchange market, also known as the equity market, is a public marketplace where stocks, bonds, and other securities are bought and sold. The stock exchange market is where investors can buy and sell securities, such as stocks, bonds, and mutual funds, as well as other investment products. It is also a place where investors can obtain financial information and advice. Stock exchanges are regulated by governments and operate under specific rules and regulations, which are designed to protect investors and ensure the integrity of the market. By providing a regulated and efficient market, stock exchanges make it easier for investors to buy and sell securities.
The stock market is the most effective tool ever developed for generating money. This is due to the fact that it enables investors to hold shares in highly lucrative businesses and to share in the growth through dividends and capital appreciation.
No different is the Nairobi Securities Exchange. The stock market continues to be one of the best asset classes for investors to use to increase their wealth, despite the Nairobi Stock Exchange’s recent poor performance.
If you’ve ever wondered how to purchase stock in the most profitable companies listed on the Nairobi Securities Exchange, such as Safaricom PLC, Equity Group Holdings, Kenya Commercial Bank, or East African Breweries, this article will answer your questions.
What is the stock market?
A stock exchange market is a marketplace where publicly traded corporations can be bought and sold.
A stock reflects a portion of a company’s ownership. Securities and shares are other names for stocks.
Why Purchase Stocks?
When you invest in stocks, there are two methods to profit. Which are:
A dividend is the payment of a company’s profits to its shareholders, according to Investopedia. When a business is profitable, it distributes a portion of those profits to its shareholders in the form of dividends.
Say business A generated a profit of Ksh100,000 and decided to distribute Ksh50,000 in dividends to its five owners. If the corporation has 100 shares altogether, the dividends paid out will be 50,000/100, or Sh500 per share. Person X will receive 50 * 500, or $25,000 if he holds 50 shares.
That’s just a straightforward illustration of how businesses distribute dividends.
2. monetary gains
Most likely, you’ve heard of the phrase “buy low, sell high.” If not, it is the procedure by which investors purchase shares of a specific firm at a certain price and only sell them at a price higher than their original purchase price.
For instance, one share of Safaricom traded at Sh0.05 when it went public. One Safaricom share is currently going for Sh30 as I type this. Person Y might now sell 1,000 shares he purchased during the IPO for Sh50 at Sh30,000.
Trading of Assets at the Nairobi Securities Exchange
Stocks are the primary asset traded at the NSE, but we also have gold ETFs and Real Estate Investment Trusts (REITs).
PROCEDURE OF HOW TO BUY STOCKS AND SHARES IN THE NAIROBI STOCK EXCHANGE MARKET.
STEP 1 IS TO PICK YOUR SHARES.
One of the following analytical techniques, or a mix of both, will be used when you are looking for shares to add to your investment portfolio:
Fundamental analysis is the process of examining many aspects of a company’s management, financial statements, and place in the market and industry that might have an impact on the price of a share in the future.
Technical analysis is the process of analyzing a share’s price fluctuations by looking at price charts, patterns, and graphs that show how the price changes.
It is necessary to utilize a variety of strategies when you begin trading shares since stock prices might be
STEP 2 IS TO PICK YOUR SHARES.
You must be aware of your risk tolerance, appetite for risk, and level of risk tolerance while buying and selling shares in order to select the appropriate shares.
You must conduct research on the firms in which you wish to purchase shares once you have determined your investing style and how much you can afford to lose. To comprehend share prices, their movements, and the factors influencing them, you may look at a number of fundamentals and do technical analysis.
You may create your portfolio based on this information and select whether shares are worthwhile investments. The choice of huge stocks shouldn’t be made only on the basis of a company’s renown or brand name. vulnerable to erratic market changes. The stock prices of some of the biggest corporations frequently fluctuate just slightly, and many do not pay out much in dividends if any at all.
STEP 3 SELECT A STOCKBROKER
On the NSE, you cannot immediately purchase or sell shares. To assist your trading, you require a stockbroker. It is important to conduct thorough market and industry research before selecting a broker. These specialists may provide trading and investing solutions and alternatives.
When selecting a stockbroker, consider their level of regulation, licenses, services offered, fees assessed, level of experience, and trading platform offered.
As a newbie, it’s crucial to choose a broker who will provide you with the instruction and education you need to comprehend the stock exchange, the stock market, and the trading process.
As you can see on the NSE website, there are a lot of stock brokers at the NSE.
There is a wide range of licensed brokers that offer online and mobile trading platforms. Below is a list of brokers with online trading platforms:
AIB – AXYS Africa Limited
Dyer & Blair
Faida Investment Bank
NCBA Investment Bank Limited
Sterling Capital Limited
Standard Investment Bank
Suntra Investment Bank
STEP FOUR: CREATE A TRADING ACCOUNT
A Central Depository System (CDS) account must be registered before you may begin trading. This account, which will be particular to each investor, can be set up either individually or jointly.
The Central Depository and Settlement Corporation (CDSC) ensures that all settlements are paid out in this account, which functions like a bank account designed exclusively for the stock and securities market.
You have two options for opening a CDS account: at the Central Bank or with any nearby central depository agency. The following paperwork must be submitted together with a CDS 1 form:
two color photographs that fit in a passport
An identification card or passport
proof of address
income verification (bank statement /payslip)
STEP5. PURCHASING SHARES
It’s crucial to use a demo account with your broker first before you put money into your trading account. With this fake trading account, you may trade on the NSE with fictitious money.
You can learn a lot about the stock market and how prices fluctuate in real-time by using the sample account. You can add real money to your trading account once you have enough expertise.
From this point, you will have a better understanding of the companies you wish to invest in with your money, the market position you should take, and the performance of your shares. Market positions refer to the purchase or sale of shares. When you take a buy or long position, you buy the stocks because you think they will increase in value. When you initiate a sell or short position, you sell the stocks in order to purchase them back later at a cheaper price because you anticipate a decline in their value.
How to Pick a Reliable Stock Broker?
1. Cost of investments
Fees charged by stockbrokers include those account upkeep, trading, brokerage, and transaction costs, among many others.
It is possible to compare brokers to find one with reduced fees. Always give low-cost brokers top priority if your investment returns are important to you.Most brokers charge an average of 2% for each deal.
Today, we have instant access to everything via our phones. You should use your phone to access your trading account. When you experience problems with your account, you are not required to go to your broker’s actual offices.
Ensure that your stock broker is accredited by CDSC and subject to Capital Markets Authority regulation (CMA)
4. Consumer Assistance
You want to be treated fairly as a client and have a positive investing experience. Give preference to brokers with a stellar reputation and positive client feedback.
What is the required investment amount when buying shares in the Nairobi stock exchange market.
A minimum of 100 shares must be traded in order to invest on the Nairobi Securities Exchange. So, depending on the stocks you want to buy, you will need a certain amount of money to begin started.
As an illustration, East African Breweries is currently selling for Sh 142.50 per share. Accordingly, I would require Sh 14,250 to purchase 100 shares.
At the NSE, there is a 15% withholding tax on capital gains. This implies that local investors will pay a 5% tax while receiving their dividends.
As such, the buying of shares in the Nairobi stock exchange market is an important part of the economy and financial system. Stock exchanges provide a platform for companies to issue and trade shares and other securities, enabling investors to diversify their portfolios. They also facilitate liquidity, allowing investors to buy and sell securities quickly. Stock exchanges also promote economic growth by providing capital to companies and encouraging investment. In addition, they provide a level playing field for all investors, allowing them to compete on an equal footing. Finally, stock exchanges promote transparency and accountability, ensuring that all market participants have access to reliable and timely information.