Not just traders but I know most Kenyans have asked themselves this question of how to buy shares on the stock exchange market in Kenya. Well, investing in the stock exchange can be one of the most profitable ways to grow your wealth over time, but it can also seem intimidating, especially if you’re new to it.And by intimidating I don’t mean trading in the stock market is like gambling like most people presume –the stock market is influenced by an array of factors ranging from inflation, GDP growth, interest rates to unemployment.

In Kenya, the Nairobi Securities Exchange (NSE) provides an accessible platform for anyone looking to buy shares, bonds, or other financial securities. Before I take you through on how to buy shares on the stock exchange market in Kenya, I will highlight for you some important insights of the stock market in Kenya.

This is the equivalent of New York Stock Exchange. The Nairobi Securities Exchange is a marketplace where shares of publicly listed companies are bought and sold. Trading on the NSE can provide two types of income:

Dividends: A share of profits paid out by the company.
Capital Gains: The profit made when you sell a stock at a higher price than what you purchased it for.
The NSE has 64 listed companies, and trading in their stocks allows you to become part-owner of those businesses. You can also invest in bonds, which are low-risk securities issued by companies or the government to raise funds.

Of course, there are factors you need to consider before you think of how to buy shares on the stock exchange market in Kenya. One key reason to consider investing in the stock market is its potential for long-term growth. Unlike businesses that may face downturns due to unpredictable events (like the COVID-19 pandemic), fixed-income securities, such as bonds, can provide consistent returns through semi-annual coupon payments.

The stock market also allows for diversification. By investing in different sectors, you spread your risk and increase your chances of getting good returns.

Getting started with trading in the NSE is simpler than many think. Here’s a step-by-step guide on how to buy shares on the stock exchange market in Kenya.

The first step of getting started in how to buy shares on the stock market in Kenya is having a CDS account. A CDS (Central Depository System) account is a requirement for anyone looking to trade at the Nairobi Stock Exchange. This account stores all the shares you purchase.

To open a CDS account:

Visit a licensed stockbroker or trading participant (they act as intermediaries between you and the market).
Provide a copy of your ID, KRA PIN, passport photo, and a utility bill (for address verification).
Some brokers now offer online applications through mobile apps, making it possible to open your CDS account from anywhere.

You will need a licensed stockbroker to facilitate your trades. A list of all registered stockbrokers is available on the NSE website or mobile app. You can find brokers who offer personalized services, advice, or even apps that allow you to trade directly.

Once your CDS account is active, you need to deposit funds into it. Depending on your broker, the minimum investment can be as low as KSh 1,000. Your broker will then use these funds to buy shares on your behalf.

With 64 companies listed on the NSE, selecting the right stocks can be daunting. Stocks are often referred to by ticker symbols (e.g., Safaricom’s ticker symbol is SCOM).In choosing the right stocks, you should have a long-term investment plan rather than reacting to short-term market fluctuations.

It’s important to understand your risk profile before investing:
Risk Averse? Consider investing in stable companies that offer regular dividends, like Safaricom or major banks.
Willing to take on more risk? You could explore growth stocks, which may have higher potential returns but also higher volatility.
To ensure you’re making informed decisions, do your research on a company’s financial health, industry, and future prospects. Many brokers provide this guidance to clients as part of their services.

Once you’ve bought your shares, it’s important to monitor the stock market regularly. The NSE operates Monday to Friday, from 9 AM to 3 PM. Stocks are priced based on demand and supply, which means prices can fluctuate throughout the day. You can access real-time market data via your stockbroker’s online platform or the NSE website.
Avoid panic selling during downturns. Buy when others are selling and sell when others are buying. Having a long-term strategy is key to weathering market volatility.

Now you are done worrying on how to buy shares on stock exchange market in Kenya and you should start thinking of the benefits you will get after buying your first shares. There are two major ways to earn returns when investing in the stock market:
Dividend Income: Some companies regularly pay dividends to their shareholders from their profits. These payments can be reinvested or withdrawn.
Capital Gains: The difference between the purchase price and the selling price of your shares is your capital gain. For example, if you bought Safaricom shares at KSh 25 and sold them at KSh 40, your capital gain is KSh 15 per share.

The stock market is inherently risky, but you can minimize this by:
Diversifying your portfolio: Don’t put all your money into one stock. Spread your investments across different sectors and companies.
Staying informed: Regularly review company performance reports and the broader market trends.
Avoiding emotional decisions: avoid panic selling when prices drop. Stick to your plan and consult your broker before making significant changes.

The NSE provides a valuable opportunity for Kenyans to grow their wealth through long-term investments in stocks and bonds. By starting with a small amount, doing proper research, and maintaining a long-term investment plan, you can benefit from the potential growth that the stock market offers. New graduates or someone with savings and have had interest in buying shares, I hope this guide on how to buy shares on the stock exchange market in Kenya helps you. Stop looking for the right opportunity, now is a great time to open a CDS account and start investing in the stock market.

The post How to Buy Shares on the Stock Exchange Market in Kenya: 8 Key Steps first appeared on viraleflare and is written by Steven Kabila