Many people have been changing how they invest their income in Kenya. One of the options considered is investing in stocks in the various stock markets. This article will show you how to invest in stocks at the Nairobi Securities Exchange.
The Nairobi Securities Exchange (NSE) is Kenya’s principal stock exchange. It was founded in 1954 and is one of Africa’s largest stock exchanges. The NSE is headquartered in Nairobi, Kenya’s capital, and serves as a marketplace for purchasing and selling stocks, bonds, Real Estate Investment Trusts (REITs), and other financial instruments. The National Stock Exchange (NSE) is governed by the Capital Markets Authority of Kenya (CMA).
Investing in stocks requires a clear mindset, determination, and patience. To get good returns from shares, you have to be willing to take risks and wait for the right time to earn good returns.
This article provides oversight on how to invest in stocks at the Nairobi Securities Exchange, the biggest trading powerhouse in Kenya.
How to Invest in Stocks at the Nairobi Securities Exchange
Investing in stocks at the Nairobi Securities Exchange involves a few essential steps. Here’s a comprehensive guide:
1. Locate a Licensed Stockbroker: You must open an account with a stockbroker or investment bank that is licensed to operate on the NSE. I used AIB-AXYS AFRICA to make NSE transactions. You can trade using their internet platform or a mobile app.
2. Open a CDS Account: A Central Depository System (CDS) account will electronically store your shares. Your broker will walk you through the account opening procedure. To finish the setup, you’ll need identification and other papers.
3. Conduct Research: Before investing, conduct research on the companies listed on the NSE. Examine their past performance, dividends, market position, and prospects. This is when your analytical skills will come in handy.
4. Funding: Deposit into your brokerage account. The sum will be determined by the type of shares you desire to purchase as well as the minimum investment necessary. I utilized EFTs to transfer money to their accounts, but MPesa is also an option.
5. Place a Purchase: Once your account has been funded, you can place a share order. You have the option of specifying a price (limit order) or purchasing at the current market price (market order).
6. Settlement: The NSE uses a T+3 settlement term (the transaction date plus three days). This is the amount of time it takes for your shares to be moved to your CDS account and your payment to be processed.
7. Maintain Records: Make a habit of keeping all transaction receipts and conversations for future reference.
8. Begin Small: If you’re fresh, start with firms you know or ETFs that track the entire index. Typically, the minimum lot size is 100 shares.
9. Dollar-Cost Averaging: Invest a set amount on a regular basis regardless of share price. This method mitigates the effects of market volatility.
NSE stocks that could be undervalued
An undervalued stock is trading at a price that is much lower than its inherent value. For example, if a stock is selling for $50 but is worth $100 based on expected future cash flows, the stock is undervalued. Buying undervalued shares from good businesses could lead to better returns in the future.
The following Kenyan stocks may be undervalued:
1. Cooperative Bank (COOP)
The Co-operative Bank of Kenya Limited, which trades at KES 11.85, along with its subsidiaries, provides corporate and retail banking, as well as investment and asset management services in Kenya, Juba, and South Sudan. The company was started in 1968 and currently employs 4,864 people.