How To Buy Stocks In Kenya

Stock market being one of the greatest machine for wealth creation have helped investors to own shares in profitable companies by sharing profits through dividends and growth through capital appreciation. This means that an investor owns a part of that company. Investing in stock market in Kenya generates money to an investor through Dividends and Capital gains. A good example of money gain through dividends is, say a company X makes a profit of Sh. 200,000 and decides to give a total dividend of Sh. 100,000 to its ten shareholders. If the total number of shares of the company is 100, the dividends issued will be 100,000\100 which gives Sh.1,000 per share. If a person B owns 40 shares, he will get 40*1,000 which is 40,000.

For a capital gain, an investor buys stock of a company and sells them at a higher price. For example, if a company trade share at Sh. 0.05 and an investor buy 1,000 shares for Sh. 50 then that company increase their shares to Sh. 30, that particular investor will sell them at Sh.30,000.  The following are steps followed in buying stock in Kenya:

Step one:  Choose your Shares.

Choosing shares in the stock market one have to be very keen since it forms part of your investment. An investor must analyse factors that might influence future price of the shares i.e in terms of company management, financial statements and position of the company in industry market.

Step two: Choose a stockbroker.

A beginner cannot buy and sell shares directly in the stock market. Choosing a stockbroker will enable the investor to access the stock market with ease understanding the stock exchange and trading activities involved.

Step three: Open a trading account.

Before an investor of stock market start trading, he must be registered in Central Depository System (CDS) account. This account can be opened by an individual or as joint basis. CDS can be opened in the Central Bank or at any local central depository agents by filling CDS form 1 and submitting the following documents; Two colour passport-sized photos, KRA pin, National ID or Passport, Proof of residence, Payslip or bank statement.

Step four: Buying stock.

Before you deposit capital into your trading account, first use a demo account with your stockbroker to gain valuable insight of how the stock market works. On gaining enough experience you can now deposit real money into your trading account.