The last few years has seen a significant growth in African economies with Kenya being at the forefront in the East African region. The ongoing implementation of the vision 2030 by the government of Kenya has increased foreign investments in the country.
To encourage this, the government has improved various regulations towards foreign investment. For instance, the country now has improved the ease of doing business by instituting better banking and taxing laws.
For local investors, the government has also made attempts to stabilize inflation in the banking sector. These reforms are to encourage Kenyans to borrow and make favorable returns on their investments.
How Do I Start Investing In The Nairobi Securities Exchange?
The Nairobi Securities Exchange, (or Nairobi Stock Exchange, NSE) is a one-stop shop for financial securities being publicly traded in the country. Whether you are a local or international investor, purchasing shares on the stock market can be simple and straightforward.
Investing in the securities market can be one of the best ways to accumulate your wealth over time. But, it is important to note that positive gains are not always guaranteed. On the other hand, volatility is almost a sure thing.
In order to ensure your investments are a success when you start to invest in the NSE, here are some few tips you can follow:
- Start by Strengthening your Finances
Before you decide to invest in the securities market, you must have disciplined and responsible financial habits. You must also allocate the intended investments in your budget so you do not affect your master plan. Furthermore, determine your financial goals as you invest and monitor them constantly. It is vital that your finances be solid. You can start by asking yourself:
- If you prone to spend more than you earn in a specific month?
- If you have completed payments of all your debts?
- If you have emergency funds available to cater for six months of your average expenses?
If your answer to these questions is positive then you are in a position to begin investing in the NSE.
- Find a Stock Broker
Before you begin investing in the NSE, it is advisable to find an authorized stockbroker who will undertake transactions on your behalf. They are supposed to first assist you with opening a CDS (Central Depository Systems) account.
The CDS is an online platform that facilitates the trading of stocks on the Nairobi Securities Exchange. Presently, they are over 20 authorized stockbrokers trading on the NSE.
- Have the Relevant Documents
When you are starting out, you will be required to fill out some forms and provide your broker with the following documents:
- 2 color passport photos
- Tax registration certificates
- Certified copy of an ID card or passport
After the broker has received your documents, they shall proceed to activate your account with the necessary authorities. Now, you can commence buying and selling shares. Once your account is established your broker should advise you on how to put money into it and how to place orders for stock purchases.
How Can I Make Money By Trading On The NSE?
Share prices in the NSE are determined by a number of various factors. Some of these are internal and others are external. You can make money on trading in NSE by:
- Anticipating capital gains: This is where the stocks you purchased are sold for higher prices than what they were bought at a much later date.
- Receiving dividend gains: This is where the firm shares its profits among its shareholders (you as the investor) by distributing dividends.
What Can I Invest In?
Taking into account the state of the African stock market, and examining trends in the NSE, as a first-time investor, here are some options you can invest in:
- Insurance companies
- Tier-one banks
- Telecommunication and information technology companies
- Blue-chip companies
Can Foreign Investors Participate in the NSE?
If you reside outside Kenya, collecting dividends may be a challenge. Usually, local companies send dividends through direct deposits into bank accounts or via cheques that are denominated in Kenyan Shillings and because of this, it would be a bit difficult to access these funds from abroad.
Therefore, you can instruct your broker to open a nominee trading account. The dividends they collect on your behalf will be deposited in that account.
If you would like more information on the right securities to invest in the NSE, it would be best to consult with a broker or inquire from any capital markets authority expert for advice. All the best!
What do you think about investing in the NSE? Share your thoughts in the comments section below.
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