Share investment can be intimidating because people do not understand the process of buying/selling shares on the stock exchange and how the market works. Others still believe that share investment is an activity only reserved for sophisticated investors.
With the advent of technology, more investors can enter the market. There are many regulated and reputable stockbrokers in Kenya that accommodate investors — even if they do not have prior experience in buying, selling, or trading shares
The main reason people trade in stocks is to make money. The profitability of your trades depends on the timing of the market, market conditions, risk factors, supply and demand for shares, performance, stock mispricing, and several other components.
The choice of shares
When looking for shares to add to your investment portfolio, you can use either one of the following analysis methods or combine the methods to your suitability.
- Fundamental analysis is like a game of poker. The players, company management, the company’s financial statements, and the position of the company in its industry and market. You bet on the game by making an educated guess about which player will win.
- Technical analysis – is based on the notion that you can predict price movements by viewing price charts, patterns, and graphs.
The right shares fit your risk profile, appetite for risk, and willingness to face risk when buying and selling such assets. Once you understand what type of investor you want to be, there is no turning back. Do not wait until your portfolio is in a hole before deciding on a better mix of stocks that can help boost your returns.
When you start trading shares, remember that stock prices can be as unpredictable as the weather. And while it is prudent to use a combination of fundamental and technical analysis to determine whether or not you should get out of bed, it is crucial to remember that trading shares are a lot like gambling.
Get a stockbroker
You can’t buy and sell shares directly on the stock exchange; you need a broker to facilitate your trades. Like choosing a good doctor or lawyer, choose a good broker by researching their background, licenses, fees, and services.
A beginner in the stock market should also make sure that the brokerage firm provides adequate training and education, helping a new trader understand how stocks work and how the exchanges operate.
You don’t have to be a rocket scientist to trade stocks. After all, it’s not brain surgery. These brokers are designed for people of all skill levels and have everything you need to succeed. They offer a wide range of stocks and educational resources that help you start and make your first trade.
Open a trading account
To trade on the stock market, you will need to open a bank account—except that it’s not with a bank. This bank is called the Central Depository System (CDS). The CDS is run by a company called the Central Depository and Settlement Corporation (CDSC). The CDS ensures that all settlements are paid out. You can open an account at the Central Bank, or open one with a local central depository agent. You’ll need to fill out a CDS 1 form and submit the following documentation:
- Kenya Revenue Authority(KRA) pin
- 2 Passport-sized photographs
- Your National identity card or military ID
- Proof of evidence
- Proof of income and residence
Before you start trading in the real world, it is prudent to get used to trading using a demo account. This is the equivalent of practicing a sport before competing in a real game situation.
From here, you will have an improved idea of which stocks you want to buy with your capital and which positions to take. Market positions mean buying or selling shares. When you enter a sell or short position, you believe the stocks will depreciate and therefore sell them and buy them at a lower price.
Conclusion; Always invest in companies you feel are the best for you.