Thinking of Investing In Shares? Here’s What You Need To Understand Before Buying

With the advancement of financial literacy in the country, majority of Kenyans, especially the youth, are now engaging in share trading as a means of investment for future planning.

A share or stock is an ownership in a company – whereby in the case of the Nairobi Securities Exchange (NSE), it represents ownership in part of a listed firm.

One of the most common ways through which such investments are done is by buying shares on publicly traded companies. Buying shares looks like a very basic process yet it comes with some mandatory elements one must understand before getting into share-buying business.

In Kenya, one must understand the roles of the Capital Markets Authority (CMA), Nairobi Securities Exchange (NSE) and the Central Depository and Settlement Corporation (CDSC).

Lets have a look;

1.] Capital Markets Authority (CMA)

It is the government regulator charged with licensing and regulating the capital markets in Kenya. It supervises, licenses and monitors activities of markets intermediaries like brokers, investment banks, investment advisers, fund managers, security dealers and credit rating agencies.

CMA also facilitates mobilisation and allocation of capital resources to finance investments. CMA was set up in 1989 as a statutory agency.

2.] Nairobi Securities Exchange (NSE)

It is incorporated in Kenya as a company limited by shares and has the responsibility of developing the securities market and regulating activities.

NSE facilitates dissemination of information in the market to the investor including price lists, material announcements, and other substantial shareholder notices.

NSE was founded in 1954 when it played a voluntary association of stock brokers in European community registered under the Society Act in British Kenya.

3.] Central Depository and Settlement Corporation (CDSC)

The body was incorporated in Kenya in 1999 and started operations in 2004. It subscribes to CMA and provides automated clearing, delivery and settlement services for NSE transactions.

According to NSE, owning shares  means you possess part of a publicly traded company no matter how big it is.

The minimum number of shares of any listed company that an investor can purchase is 100 in order to become a shareholder. Meaning if a company’s share trade at Ksh28.05, you will need at least Ksh2,805 plus brokerage commissions.

Brokerage commissions are 1.8 per cent for amounts above Ksh100,000 and 2.1 per cent for amounts below Ksh100,000. This is, however, negotiable in some cases with the specific brokerage firms depending on the volumes of shares that you are buying.

A shareholder or a company owner is a person, company, or organization that owns at least one share of a company’s stock.

Shareholders are not personally responsible for the company’s debts and financial obligations.

They are also not responsible for the day-to-day running of the businesses that they invest in. The listed companies are run by management and supervised by the boards of directors.

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