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The past few months have been an eye opening moment for me
as I decided to take part in the purchasing of shares that have been listed in
the Nairobi Securities Exchange (NSE).
The main reason for doing this is to diversify my investment
portfolio instead of letting money stay idle in my MPESA and other current
accounts.
The NSE is a common term among the Kenyan youths but the truth is that a majority of the youth have not taken the initiative of understanding how it operates. With the right financial education, there lies so many opportunities to increase your wealth and become financially stable. You dont need millions to start investing in NSE, with as little as 50,000 Kenyan shillings, you can start your investment journey.
In this guide, I will be providing you with tips on how and what you need to start investing in NSE.
The Nairobi Securities Exchange was established in the year
1954. Statistics have it that it is one of the largest securities exchanges
platform in the entire African continent.
This particular platform, provides the people with a market
to buy and sell financial instruments such as shares, bonds and Real Estate
Investment Trusts (REITs) among others.
For credibility purposes, it is good to note that the NSE is
regulated by the Capital Markets Authority of Kenya (CMA).
For you to trade in the NSE, youll need to open an account with a licensed stockbroker. Alternatively, you can open an account with an investment bank that is licensed to carry operations on the Nairobi securities exchange.
A Central Depository System (CDS) Account
You need to open a CDS account for you to trade in the NSE.
The CDS account is used to hold your shares electronically. Don’t worry, once
you find a broker, they will guide you through the process of setting up the
CDS account. For you to complete this setup, you should carry with you the
basic identification documents i.e Identification Card (ID) and KRA PIN.
The next process after finding a broker and opening a CDS
account is conducting an in-depth research on the companies that are listed on
the NSE. Examine the performance of this companies, market position and future
outlook.
Read also: A list of companies that are listed by the NSE
Now that you have conducted your research, it is time to deposit some money in the brokerage account that you opened.
After depositing some money in the brokerage account, you can go ahead and place an order to acquire some shares on the company of your choice. While placing an order, you can choose to specify a price that you want to purchase your order at (limit order) or buy the shares at the current market price which is also known as the market order.
The NSE follows a T+3 settlement period (Transaction date plus 3 days). This is the time it takes for your shares to be transferred to your CDS account and for payment to be finalized.
Ensure you keep all transaction receipts and communications for future reference.
If you're new, consider starting with companies you understand or ETFs that track the entire index. The minimum lot size is typically 100 shares.
Invest a fixed amount regularly regardless of the share
price. This strategy reduces the impact of market volatility.
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