How to Buy Shares in Kenya – A Step-by-Step Guide

Buying shares in Kenya can be a great way to invest your money and earn a return. This article provides a comprehensive guide on how to buy shares in Kenya, including tips on selecting a broker, opening a trading account, and making your first trade.

What is the Stock Market?

The stock market is a marketplace where investors can buy and sell publicly traded company shares. When a company goes public, it issues shares of stock that represent fractional ownership of the company.

The Benefits of Investing in Stocks

The stock market can be risky, but the potential rewards can be significant. Here are some of the benefits of investing in stocks:

1. Dividends

If you are a company shareholder, you may be entitled to regular earnings payments in stock or cash. The company’s board of directors determines dividends and is subject to the company’s profitability. With regular dividends payout, you can decide to reinvest in the company. Investing in the stock market is a great way to make your money works for you.

Not all stocks will pay dividends to their shareholders.

2. Capital Gains

A capital gain is a profit you get when you sell an asset at a higher price than what you had purchased it. In other words, it’s buying low and selling high.

It demands patience to buy and hold assets long-term. Investing in the stock market generally yields better returns when you think of long-term

3. Diversification

Diversifying your portfolio will help you reduce your overall risk exposure. You can diversify by investing in different asset classes, companies, and industries. A well-diversified portfolio will help you to spread your risk across sectors and build your wealth by leveraging growth in different sectors of the economy, resulting in a profit even if some individual company stocks lose value.

4. Liquidity

Stocks are highly liquid assets. This allows you to buy or sell your stocks immediately without searching for buyers or sellers in the market. This allows you to adjust your portfolio, cut losses, or rebalance your holdings.

How To Buy Shares in Kenya

Here are the steps on how to buy shares in Kenya:

  1. Select your stock broker
  2. Open a CDS Account
  3. Choose your Shares to buy
  4. Fund your Account
  5. Buy Shares

Now let’s dive into each of the above steps to

1. Select Your Stock Broker

You must choose a licensed stockbroker to help you buy and sell shares. Many stockbrokers are available at the NSE. You can search for a list of licensed stockbrokers on the Nairobi Securities Exchange (NSE) and Central Depository & Settlement Corporation Limited (CDSC) websites.

How to Choose the Right Stock Broker

A good stock broker will help you navigate through the stock market easily. Factors to consider when choosing the right stock broker include:

1. Regulation

You must select a regulated broker by a reputable authority such as the Capital Markets Authority and Central Depository & Settlement Corporation Limited (CDSC). Choosing a broker who follows the laid down rules and regulations to protect your investments will give you peace of mind.

2. Investment Costs

Stockbrokers typically charge fees such as transaction costs, brokerage fees, and account maintenance fees. Some brokers charge higher fees than others, so it’s important to research and compare charges to find the best deals. Most brokers charge anything between 1 – 2 percent.

Remember that cheaper is not always better, as some stock brokers may offer lower fees but may not provide a high level of service or access to investment opportunities.

3. Customer Support

Regarding stock market investing, having excellent and reliable customer support is essential. Look for a broker with good customer reviews and multiple ways to contact customer support, such as phone calls, emails, or live chat. Also, consider the response times to ensure that you can get help when you have questions or concerns.

4. Technology

In this modern era, you don’t necessarily need to visit a broker’s office whenever you have an issue or want to buy shares of your favorite company. Nowadays, most brokers have developed Android or iOS online trading platforms that provide real-time market data and are easy to navigate. With the mobile apps, you can access your CDS account and trade anytime you want. Also, consider choosing a broker who offers a high level of security to your personal data and financial information.

5. Access to Investment Research

Investing in the stock market requires research and analysis to make informed decisions. Always look for brokers that offer easy access to investment research, such as market analysis, stock reports, and financial news. These will help you stay up-to-date on the latest trends and make informed investment decisions.

Market analysis reports will also help you assess a stock’s strengths, weaknesses, and growth prospects.

2. Open a CDS Account

At this stage, you can open a Central Depository System (CDS) account with the help of your stock broker. With a CDS account, you can buy, sell or hold shares at the NSE. Opening a CDS account is completely free and will only take a day or two to have an account.

Requirements for Opening a CDS Account.

To complete the account application process and comply with the Know Your Customer (KYC) policy, you will be required to submit the following documents:

  • National ID or Passport
  • KRA Pin Certificate
  • Proof of Residence
  • Two recent color passport-sized photos
  • Utility Bill/1-page Bank Statement

3. Choose Your Shares

Choose the shares to buy by researching the companies you want to invest in. You can do this by conducting technical or fundamental analysis to better understand the share prices and their movements. Additionally, consider your risk profile and appetite. Based on your analysis and risk tolerance, you can settle on shares to buy and invest.

4. Fund Your Account

Once you’ve selected the shares you want to buy, fund your CDS account. You can do this through several payment options available with your broker, including bank transfer, MPesa Paybill, and credit/debit card. The Mpesa Paybill option is perhaps the easiest way to fund your account and is widely accepted by most if not all, brokers.

How to fund your CDS Account via MPESA:

  1. Open MPESA Sim Toolkit
  2. Select Lipa an M-Pesa, then Pay Bill Option
  3. Enter your broker’s Paybill number
  4. Next, enter your CDS account number as your Account Number
  5. Enter the Amount to buy shares
  6. Enter your M-Pesa Pin and send.

5. Buy Your Shares

Finally, place a buy order through your broker by providing the number of shares you want to buy and the price per share. Your stockbroker will then execute the order on your behalf, and the shares will be credited to your CDS account.

The best time to buy shares at the Nairobi Securities Exchange is during the market open. The stock market opens on weekdays at 9 am and closes at 3:30 pm East African Time. The market NSE is closed during holidays and weekends. Otherwise, you can submit an off-market buy order and specify the validity period for the order.

The Minimum Amount Needed to Buy Shares in Kenya

The minimum number of shares one can purchase at the Nairobi Securities Exchange at any time is 100. This means that to buy shares of any company, for example, Equity Bank, you will need a minimum investment amount of KES 4,500 to buy 100 shares of Equity Bank as of Thursday, 30th March 2023.

Additionally, as I write this, the price of a KenGen share is KES 2.20. Thus to own 100 shares on KenGen, you will need around KES 220.

Also, note that there are small brokerage and transaction fees.

How to Buy Shares in Kenya
Snapshot on how to buy 100 Shares of KenGen

Withholding Taxes On Capital Gains

The withholding tax rate on gains made at the NSE is 15%.

What Is the Minimum Number of Shares to Buy in Kenya?

Investors at the NSE are required to buy a minimum of 100 shares per transaction under local capital market regulations.

Which Is the Best Company to Buy Shares in Kenya?

Here are some of the best companies to buy shares in Kenya in no particular order.
1. Kenya Commercial Bank (KCB)
2. Equity Bank (EQTY)
3. Standard Chartered Bank (SCBK)
4. British American Tobacco PLC (BAT)
5. Umeme Limited (UMME)
6. Williamson Tea Kenya PLC (WTK)
7. Absa Bank (ABSA)
8. Kapchorua Tea Kenya PLC (KAPC)
9. Car & General (K) Ltd (CG)
10. Safaricom PLC (SCOM)

How Can I Buy Shares in a Company in Kenya?

To buy shares in a company in Kenya, first, select a broker, open a CDS account, fund your account, and buy your shares.

Buy Shares in Kenya and Hold Long-term

I hope this guide has helped on how to buy shares in Kenya. Recently, Safaricom and NSE partnered to allow investors to redeem their accrued bonga points to buy shares. Now that is some exciting news!

Stock market investing is a long-term game. Buy shares in Kenya and hold them for an extended period, say ten years, and you will be rewarded with great returns.

Historical data proves that buying stocks and holding long terms is a successful strategy. This strategy is preferred by stock market veterans such as Warren Buffett and Charlie Munger.

There are other ways to make money online in Kenya that you can explore and earn passive income. The goal is to be financially free and afford our daily needs.

Also, read: How to Safaricom Buy Shares in Kenya.

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