How to Buy Shares in Kenya Step by Step Guide

In this article, we will be discussing the process of how to buy shares in Kenya.

We will highlight the various steps involved in the process and some important things to remember when making your purchase. So without further ado, let’s get started!

How to Buy Shares in Kenya

Kenya has a vibrant and growing economy, which has made it an attractive destination for foreign investors.

If you’re interested in buying shares in Kenya, there are a few things you need to know. Here is a step-by-step guide on how to buy shares in Kenya

Step 1: Research the Shares you want to buy.

Before you start buying shares, you must do your research.

This means finding out as much as possible about the company and the shares you’re interested in.

You can do this by reading their annual reports, looking at financial news websites, and speaking to other investors.

There are approximately sixty-three (63) companies listed on the Nairobi Securities Exchange (NSE), spanning various sectors of the economy.

Some companies have been operating for over fifty (50) years, while others are pretty new. The NSE 20 Share Index comprises the top 20 companies in market capitalization.

This index is used to measure market performance and is a good starting point if you’re new to investing.

Step 2: Decide how many Shares you want to buy.

Once you’ve decided which shares you want to buy, you need to determine how many shares you wish to purchase.

This will depend on your investment goals and how much money you have to invest.

Starting small and gradually increasing your investment over time is essential if you’re a new investor.

Step 3: Open a CDS Account

You must have a Central Depository System (CDS) account to buy shares in Kenya. This is an account that is used to hold your shares electronically.

You can open a CDS account by going to any stockbroker and filling out the necessary paperwork. You will need to provide identification documents such as your ID, passport, or KRA pin.

Step 4: Choose a Stockbroker

A stockbroker is a licensed individual or firm that buys and sells shares on behalf of investors. When you’re ready to buy shares, you must choose a stockbroker.

There are many stockbrokers to choose from, and you should compare their fees before deciding. The NSE has a list of licensed stockbrokers on its website.

When it comes to choosing stockbrokers in Kenya, there are a few things you need to keep in mind. Here are some tips:

1. Compare Fees: Stockbrokers charge different fees for their services, so it’s essential to compare them before deciding. Some brokers charge a commission, while others charge a fee per transaction.
2. Check Licensing and Registration: Ensure the stockbroker is licensed and registered with the Capital Markets Authority (CMA).
3. Reviews and References: It can be helpful to read reviews and references from other investors before deciding.
4. Ease of Use: Choose a broker that is easy to use and has a friendly interface.
5. Customer Service: It is crucial to choose a broker with good customer service in case you need help with anything.

Step 5: Deposit Money into your CDS Account and Start Trading:

Once you’ve chosen a stockbroker, you must deposit money into your CDS account.

This can be done via bank transfer, debit card, or credit card. Once the funds have been deposited, you can start buying and selling shares. Regarding trading, there are two types of orders: market orders and limit orders.

A market order is an order to buy or sell shares at the current market price. n the other hand, a limit order is buying or selling shares at a specific price.

Step 6: Pay for the Shares

Once you’ve placed your order, you must pay for the shares. If you’re buying shares, the money will be taken from your CDS account.

The money will be deposited into your CDS account if you sell shares. It is important to remember that stock prices can go up or down, so you could lose money on your investment.

Step 7: Monitor your Shares

Once you’ve bought shares, it is crucial to monitor them.

This means tracking the stock price and keeping up with any news that could impact the company. If the share price falls, you may want to sell your shares.

On the other hand, if the share price rises, you may want to hold onto your shares or buy more. Monitoring your shares can be done online via the stockbroker’s website or app.

Most stockbrokers will also send email or SMS alerts when there are changes in the share price.

What are shares, and why should you buy them

Shares are essentially a piece of ownership in a company. When you purchase shares, you become a part owner of that company and have a say in how it is run.

This can be a great way to invest your money and see returns on your investment over time.

There are many reasons why you should consider buying shares. Firstly, it is a very stable investment – shares usually go up in value over time, providing you with a good return on your investment.

Secondly, it gives you a voice in the company – as an owner of shares, you will have a say in how the company is run and what decisions are made.

Lastly, it is a very liquid investment – you can sell your shares at any time if you need to cash out.

So if you’re looking for a stable, long-term investment, then buying shares may be the right option!

Tips for Investing in Shares

Investing in shares can be a great way to grow your wealth over the long term.

However, it’s crucial to approach share investing with caution and to do your research before you start buying. Here are a few tips to help you get started:

• Decide why you’re investing: Are you looking to generate income, or are you aiming for capital growth? This will help you choose the right shares.
• Consider your risk tolerance: Are you comfortable with volatile markets or prefer more predictable investments?
• Please do your research: It’s essential to understand how the share market works and to read up on the companies you’re interested in investing in.
• Have a plan: Decide how much money you’re willing to invest and when you’ll sell your shares. This will help you stay disciplined and avoid making impulsive decisions.
• Start small: Don’t put all your eggs in one basket – diversify your portfolio by investing in various shares. And don’t forget to review your investments regularly to ensure they’re still meeting your goals.

By investing in various companies and industries, you’ll be better able to weather any market downturns.

By following these simple tips, you’ll be on your way to making smart investments in shares.

FAQs about buying shares in Kenya

How do I start buying shares in Kenya?

To start buying shares in Kenya, you’ll need to open an account with a stockbroker. You can find a list of licensed stockbrokers on the Capital Markets Authority website.

Once you have opened an account, you can start buying shares in Kenyan companies. The best way to do this is to study the markets and find the best companies to invest in.

You can buy shares either through your stockbroker or online. However, it’s important to remember that not all shares are traded online, so you may need to contact your stockbroker if you want to buy shares in a company that isn’t listed on the exchange.

When buying shares, it is essential to remember that you are investing in a company and not just a stock. Make sure you research the company and its management before investing.

Which is the best company to buy shares in Kenya?

There is no one-size-fits-all answer to this, as the best company to buy shares in will vary depending on your individual investment goals and risk appetite.

However, some of the most popular companies to invest in Kenya include Safaricom, Equity Bank, East African Breweries, and Kenya Commercial Bank.

How do you earn money from shares?

When you buy shares in a company, you become a part of it and own a piece.

As the company grows and prospers, its share price will also increase, meaning you can sell your shares at a higher price than you bought them.

In addition to selling your shares, you can receive dividends if the company pays out profits to shareholders.

Dividends are usually paid out once per year and are a percentage of the profits made by the company.

Finally, capital gains can be earned when you sell your shares for more than you bought them.

This is the most common way to make money from shares, as it’s rare for a company’s share price to stay static over time.

Final Thoughts

Investing in shares can be a great way to grow your wealth over the long term, but it’s crucial to approach share investing with caution and to do your research before you start buying.

By following these simple tips, you’ll be on your way to making smart investments in shares.