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How to invest in the NSE - Thursday, February 01, 2007
Introduction
More and more people are turning to the Nairobi Stock Exchange (NSE) as a source of additional income for various reasons. Some are out to make quick returns while others are in it for a longer time frame.
Whatever your reasons, you need to do a few things before you are able to buy and sell stocks (or shares) on the NSE. In summary, these include the following steps
* Identify a stock broker / agent
* Open a CDS (Central Depository System) Account
* With the help of a Professional Financial Advisor, identify stocks to invest in
* Make payment for the stocks via stock broker/agent
* Keep learning and track of stocks via stockskenya.com
Identify a stock broker / agent
Your stock broker or agent is your link to the Nairobi Stock Exchange. As an individual you currently cannot directly place an order on the NSE to buy or sell shares.
A Stock Broker in effect acts as the link between the NSE (‘the market’) and the investor (‘you’). The NSE is composed of these stock brokers and thus provides the environment or market where shares can be traded. A Stock agent is a representative of a Stock broker and processes orders (buy/sell) on behalf of you, the investor, at a commission. In many cases, Stock Brokers can be swamped with large volumes of clients. Stock Agents thus usually enable stock brokers by reducing the amount of clients they have to deal with. Stock agents are also able to provide personalized service and sometimes general guidance on investments.
While identifying a stock broker, it is important to keep in mind several things. Some stock brokers maintain a minimum portfolio value (the amount you can maintain invested in various shares) while others may have a large number of clients and thus personalized service may somewhat be lacking. It is also important to be cautious when dealing with individual stock agents and when negotiating commissions with them.
Stockskenya.com provides an online platform for you to manage your stock portfolio from anywhere in the world, should you choose to work with our partnersJM. You can contact any of our partners. All our partners are Stock Agents who provide personalized service at reasonable commissions.
Open a CDS (Central Depository System) Account
Once you have identified a Stock Broker or Stock Agent with whom to work with, you will need to open a (Central Depository System) CDS Account. A CDS account facilitates the easy and electronic transfer of shares when you make purchases or sales. It is an electronic record and thus you will not receive a share certificate when you make share purchases. The CDS Corporation (a company owned in part by the NSE) is responsible for the running of the CDS.
Opening a CDS Account is a simple process that takes a few days to complete at most. You will only need to provide a recent passport size photos and copies of identification (National ID for Kenyans / Passport) and complete the form provided by the broker/agent. If you would like to open a joint account (for example a married couple), each person will need to provide photos and copies of identification as well as fill the form accordingly. Your broker/agent will guide you through this process.JM
Most brokers will also require that you open an account with them, in addition to opening the CDS Account. The requirements (Photos and Identification Copies) remain the same. Your broker/agent will also guide you in this process.
After this process, you receive a CDS Account Number. Usually the CDSC will send by ordinary mail a summary of transactions made through you account every month.
Investment Advice
Now that you have a CDS Account Number, you are now almost ready to start trading! However, you still need to identify what shares that you would like to invest in. The investment language used by ‘seasoned’ investors may seem alien to you at first but with time you can too learn what terms like price/earnings ratio mean!
In your early days trading on the NSE, your broker/agent can guide you in the general direction that you should be investing. However, several organizations and individuals provide professional advice. It is therefore advisable to seek professional advice especially when investing large amounts of money. After all it is your hard-earned money, thus take some time before making your investment decision!
Trade!
Once you have identified the shares which you would like to purchase, contact your broker/agent and place your order. This is usually done by filling a form that will be provided to you. Some brokers/agents also allow you to make orders by sending an email. This is particularly convenient when you are not in a position to visit your broker/agent. With the newly introduced (Automated Trading System) ATS, your orders are executed at a reasonable fast rate. It is quite possible to make a sell order at 0900 hrs and have it executed at 1100 hrs (in the first hour of trading at the NSE).
Keep learning and track of stocks via stockskenya.com
You have made your investment and you are possibly quite anxious to see whether you have made the right choice, and would also like to track the price of the shares you have purchased (or perhaps the price of shares you would like to purchase).
Stockskenya.com is your online investment channel and provides you with useful tools like and up to date information that you can use to monitor the performance of your stocks. You can also participate in the discussion forums to see what others are saying about the stock exchange and related news and happenings.
We hope that you have found this HOW-TO document useful. If you have any comments and suggestions, please contact the Stockskenya.com via email: [email protected].
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