How to invest in the Nairobi Securities Exchange like a pro

Trading at the NSE
There is no a minimum amount of money that you can invest in the NSE. PHOTO/FILE
The Nairobi Securities Exchange (NSE) operates by trading in shares of 65 companies from different sectors of the economy.

There are two ways of making gains at the NSE. The first one involves selling shares at a higher price than the one they were purchased at while the second one is where the company shares its profits by dispensing dividends to its shareholders.

Buying and selling of shares in the NSE is an easy, fast and straightforward process for both local and foreign investors.

Where to start
As in any other investment the first step before committing your hard earned cash should be to do some due diligence.

This involves doing a comprehensive research on the market trends, how big a company is, its profit margins, balance sheet, its stock price history and future outlook among others. It is also important to analyze any risks for the company or the industry.

Most of the companies listed at the NSE have websites where all the above details and several investor guides can be viewed or downloaded. You can also visit the NSE website for live and historical data on the listed companies.

After analysis and choosing a company to invest in, the next step should be to identify a licensed brokerage firm.

Beside making transactions on your behalf at a fee, stock brokers offer great insights in step one above therefore it is crucial to share your findings and listen carefully to their opinion. It is important to pick a broker that offers an online trading platform since it allows you to sell or buy shares anywhere and at any time.

There is a standard commission /fee which a broker can charge for trades usually regulated by Capital Markets Authority (CMA). The commission for transactions below Sh100,000 is capped at 1.78% of the total value traded while amounts above have a limit of 1.50%. However, it is possible to negotiate for lower rates when trading in large volumes.

CDSC account
The third step involves opening a Central Deposit and Settlement Corporation (CDSC) account. This is a portal which electronically stores and eases buying and selling investors’ securities across the NSE.

In order to open a CDS account, you are required to fill a CDS 1 form and present a copy of your original national id, two colour passport size photos and a copy of the KRA pin certificate to the broker you have chosen.

With proper documentation, the account is activated instantly and an investor can start making buy and sell orders. Though all investors are allowed to have multiple accounts and separately trade in each of them, you can only have one account with each agent.

There is no a minimum amount of money that you can invest in the Nairobi Securities Exchange but the set minimum trade size is 100 shares of any listed company.

It is also important to open a bank account since the industry regulations dictate that dividends should be deposited in a bank account and not the trading account.

All bought shares are credited instantly to the CDS account, while money obtained from the sale of your shares is credited into your bank account 3 days after the sale was made.

The NSE is open from Monday to Friday between 9:00 am and 3:00 pm local time except on public holidays.