The terms “stocks” and “shares” are interchangeable. When you purchase shares in a company, you become a shareholder. You will also be given a stake in the company. Similarly, you will be entitled to a share of the company’s profits and losses. However, you will make a long-term investment. To put it another way, it is a simple method of saving money that will provide you with more opportunities to earn in the long run. Here’s how to invest in stocks.
Required Documents
To buy shares, you’ll need a copy of your ID or passport, Kenya Revenue Authority pin certificate, two passport-sized photos, proof of income (3 month bank statement or payslips), your postal address and a current utility bill/Google Maps screenshot of your physical location. After that, you’ll fill out the account opening form.
A Reasonably Priced Brokerage Firm
Stockbrokers, online brokers, Investment Managers, and Financial Advisors will all help you buy stocks. It’s important to select a brokerage firm with a low maintenance fee for the services you’ll need the most. They usually charge the fee yearly for most of them. There is a 2% broker’s fee that the broker can subtract when purchasing and selling your stocks. Calculate the total cost of selling, purchasing, and keeping stocks in your portfolio.
Open a CDSC Account
You will need to open a CDSC account, also known as a Central Deposit and Settlement Account, to trade on the Nairobi Stock Exchange (NSE). Normally, this account allows you to buy and sell stocks. You can open the account with an authorized dealer as mentioned in Point No.2.
Examine Stocks Before Investing
Prior to investing in any company or business, conduct market research and attend investment talk shows or seminars. This will assist you in learning how to buy stocks and making informed decisions about which companies to invest in. You should also investigate the company’s investment profile, annual financial statements, and products. Perform due diligence to gain a better understanding of the company and the risks involved. Scrutinize companies with low returns. Choosing stocks with caution is necessary.
Minimum Shares to Purchase
In Kenya, the minimum number of shares that can be purchased is 100. You can buy from a variety of companies or businesses, with a minimum purchase of 100 shares from each.
Shareholders Meetings
The company from which you purchased your stock will hold an annual shareholder’s meeting. Every year in June, it will hold the meetings. Fortunately, there will be no admission fee to attend. The company’s financial statements will be provided to you during the meeting. This document contains information on how the company is performing as well as future goals, providing you with clear evidence.
Receiving Dividends
When a company in which you have invested makes a profit, it distributes it to its shareholders. These are known as dividends. They pay dividends out annually. And this is one of the most important benefits of trading in stocks.
Investing in Dividends
This implies that you buy stocks with high dividend yields. Some firms and corporations pay out large dividends. You can earn more dividends if you purchase more shares.
Dividends Calculations
When you purchase 1000 shares and the company from which you purchased stocks, give it’s shareholders dividends @ Ksh.30 per share, you will be paid Ksh.30,000. This is how you do the calculation; Ksh.30 (dividends) x 1000 (shares) = Ksh. 30,000 (total dividends).
Stocks Increasing in Value
You will benefit from selling your stocks. As a result, you can do so when the selling price of your stocks increases above the price at which you bought them. If you buy 1000 stocks for Ksh. 4 per share and the price rises to Ksh. 10 after a while, you can sell a portion or all of them to benefit.
This is how you calculate how much money you’ll make.
Purchase 1000 shares * Ksh. 2 = Ksh. 2,000 + the broker’s fee (2% * 2,000 = Ksh.20). The purchase total cost Ksh. 2,020.
Sale 1000 shares *Ksh. 10 per share = Ksh.10,000 plus the broker’s fee (2% * 10,000) = Ksh. 200. The selling price is Ksh.10,000 – Ksh.200 = Ksh.9,800.
Profit: Ksh. 9,800 – Ksh. 2,020= Ksh. 7,780.
Choose the Stocks you want to Invest in
Investigate how the business performs in the market before making a purchase decision. If you’re considering investing in the agricultural industry, for example, compare how different agricultural firms are doing. Fortunately, your stockbroker can give you weekly reports with suggestions for stocks you can purchase.
Some available resources
Please see the link below for more details about stock trading;
https://www.nse.co.ke/ https://live.mystocks.co.ke/
For more information on how to calculate the profit you get when you sell shares, see the link below;
https://www.cma.or.ke/index.php?option=com_content&view=article&id=443&Itemid=293