Getting started with investing in the Kenyan securities market?
Don’t worry; I’ve got you covered! This article offers a beginner-friendly guide that breaks down the whole process of how to start investing in the Stock Market in Kenya, available investment assets in the Kenyan market, and everything you need to get started and thrive.
What is Stock Investment
Stock investment entails buying a company’s shares, which makes you a partner of the company, and you gain a profit from the increase in the value of your shares or dividends provided by the company.
- Stock trading, also referred to as shares, happens at the Nairobi Securities Exchange (NSE), where investors can buy and sell Stocks/Shares of Listed Companies and trade in bonds.
- The stock market investment has high risks but a high reward.
A beginner’s guide to buying shares in Kenya
This article focuses on the key steps when getting started in the Stock Market in Kenya, from selecting companies to invest in, identifying a licensed broker, and monitoring investments.
Factors you should consider when investing in the Stock Market in Kenya
Before investing in any venture, you should create an investment plan. Sharpen your financial literacy to help you build confidence in your investment and understand financial markets.
Understand critical issues such as
- Financial literacy/knowledge
- Financial goals
- Your risk tolerance
- Preferred investment assets
- Investment strategy
- Exit strategy for each asset
Stock Market Investing
Investing in stocks generates passive income and secures financial stability.
Investors build wealth in 2 ways;
- Growth investing – Trading, buying low anticipating to sell high. It’s usually a short-term investment.
- Dividend Investing – It is usually a long-term and more sustainable investment. Investors have pure intentions with the company as they seek to grow with the company. You share in gains (- profits – dividends -) and losses – (you don’t get dividends). Investors select the companies, carry out due diligence, find a licensed broker, and monitor their investments.
Ways to Earn Through the Stock Market
- Investors earn through dividends.
- Selling the shares
Steps to Get Started with the Stock Market in Kenya
- Choose the company you want to invest in – buy shares
- Search for a Licensed Broker
- Create an investment strategy: growth investing and dividend investing
- Open a CDS Account – Either through the broker or an authorized bank
- Invest and start earning passive income from dividends
- Monitor your investments
Key Considerations Stock Market
- Have a better understanding of the company you are selecting. Look at the vision of the company, its plans, and its long-term sustainability and longevity. This is because shares are for long-term investment
- Ensure the company has a record of making profits in the past for a range of 5-10 years.
- Avoid companies with liabilities and debts, poor leadership, and a bad reputation, as these can affect your returns.
- You can choose one or more companies to help diversify your investments and mitigate risks associated with investing in a single sector, such as market fluctuations..
- Search for licensed stock brokers with good trading platforms on the NSE website; understand how much they charge for brokerage fees and if they offer free advisory services to account holders. The fees typically range from 1.9% to 2.5% per trade.
Minimum Shares to Get Started
- Investing in the NSE requires a minimum trade size of 100 shares rather than a fixed amount of money.
Why Invest in the Stock Market?
- Shares offer a better plan for long-term Wealth Creation and pay good Passive Income where investors earn dividends and liquidity where investors easily buy and sell their shares.
- A better way for investment diversification is spreading risks.
How to Succeed in the Stock Market in Kenya
- Focus on long-term strategies for sustainable growth in the stock market.
- Staying updated with business news to get valuable insights and support your investment decisions.
Best Stocks to Invest in Kenya
The top-performing companies to buy shares from in NSE include:
- Safaricom
- Equity Bank
- KCB Group
- East African Breweries Ltd (EABL)
- Bamburi Cement
- British American Tobacco
Risks of Investing in the Stock Market
- Market Volatility, where the stock prices fluctuate
- Economic Downturns
- Company Performance Risks leading to losses
- Some stocks have poor Liquidity
Parting Shot on Stock Market in Kenya
Kenya’s Stock Market is Full of Opportunities— but you are missing out! Millions of Kenyans have a mobile money account, but very few invest in the stock market. Stop missing out and start diversifying your portfolio and growing your wealth with stocks from various sectors.
- Understanding these aspects can help you make informed decisions about investing in the Stock Market in Kenya
- Investment is a strategic move—a tool to help you achieve a well-defined financial goal.
- Invest today and let your money work for you.
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