📈 Introduction to Equities/Shares in Kenya
Updated: Mar 29, 2021
Equities are the greatest wealth driver in the modern-day world 💰.
Equities are commonly referred to as shares, but what you call them doesn't matter. You are buying a piece 🍉of a company. This means you are entitled to a small fraction of the assets (including building, equipment, trademarks) and earnings (money made by the company for buying and selling goods or services).
All share owners become shareholders of a company, but people with a higher shareholding always control the company decisions.
Why would a company want to share its assets and earnings with the public 🤔?
The company needs money to run its operations and expand. Companies often shy away from banks due to the high interests that are attracted by bank loans.
The company turns to the public to raise the money and in return, the public gets a share of the company.
There are two ways in which a company can raise money from the public:
Initial Public Offering (IPO) - the company issues shares in the market in exchange for cash from the investors. Some investors stay away from IPO and refer it to as Imaginary Profits Only.
Rights issues – When the company requires more money, it can offer shares to existing shareholders in proportion to their respective shareholdings in exchange for cash.
The wrong thought about equities ❌
New investors might mistake the stock exchange for a legalized gambling agency by thinking that you place your money in a random stock based on your instincts and when the price goes up, you win and when it drops, you lose.
However, more goes into stock investing and you must spend time learning how to choose the correct company that will give you decent returns in the future.
Time frame ⌛
The more time you spend learning about stocks, the more you understand them. One mistake many new investors make is thinking that stocks are a short-term game. In fact, stocks are a long-term game, and you must be willing to hold on to a stock for at least 3 years.
Chilled 😁. I’m up for it, what do I need?
In Kenya, the buying and selling of shares have become easy with the digital age.
How do I start? 🐣
Register with one of the certified brokers in Kenya (see list below). Visit their offices with the supporting documents and they will facilitate the opening of your CDS account. Supporting documents include: ID / Passport copy, color passport size photos, evidence of physical address (utility bill, lease or tenancy agreement) - mostly waived and evidence of income (bank statement or payslip)
You will wait for a couple of days and the broker will confirm with you the successful opening of the account.
Some brokers have an online portal like Dyer & Blair and CFC Stanbic. Please enquire with them about the process of activating the online portal. The online portal also supports M-pesa payments.
Watch tutorial videos on how to use the online portal.
After identifying a company you want to buy, either use your online portal to place a buy order, visit the broker, fill in the paperwork, or email them the required paperwork to facilitate your buy order. This will also apply during selling.
Snapshot of companies you can invest in in Kenya 📈.
💡 Here is a comprehensive list of all publicly traded companies view here.
List of brokers that offer online services you can register with ✍️.
AIB Capital (Website)
Dyer & Blair (Website)
Faida Investment Bank (Website)
Genghis Capital (Website)
Kingdom Securities (Website)
NIC Securities (Website)
SBG Securities (Website)
Suntra Investment Bank (Website)
Find a comprehensive list of brokers here.
Extra tips for aspiring stock investors 💡
You’re not buying a stock; you’re buying a company.
The primary reason you invest in a stock is that the company is making a profit and you want to participate in its long-term success.
If you buy a stock when the company isn’t making a profit, you’re not investing — you’re speculating.
A stock (or stocks in general) should never be 100 percent of your assets.
In some cases (such as a severe bear market), stocks aren’t a good investment at all.
A stock’s price depends on the company, which is dependent on its environment, which includes its customer base, industry, general economy, and political climate.
Your common sense and logic can be just as important in choosing a good stock as the advice of any investment expert.
Always have well-reasoned answers to questions such as “Why are you investing in stocks?” and “Why are you investing in a particular stock?”
Even if your philosophy is to buy and hold for the long term, continue monitoring your stocks and considering selling them if they’re not appreciating or if general economic conditions have changed.
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Disclaimer: The views expressed in this publication are those of the writers where particulars are not warranted. This publication is meant for general information only and is not a warranty, representation, advice or solicitation of any nature. Readers are advised in all circumstances to seek the advice of a registered investment advisor. Full Disclaimer