The other day a friend was asking how they can invest Sh5,000-10,000 aside from business. When I suggested shares I could actually picture how she winced and contorted her face.
“Those things are so complicated, I want something simple. How about lending someone money in exchange for a certain interest when refunding?”
I don’t know what’s more complicated than having to incessantly call someone reminding them to pay back. Somehow, even when you call them thirty times, they just seem to be far away from their phone.
Probably what people with debts do most of the time aside from picking their phones is staring at it ring till the last beep wishing it didn’t ring.
But are shares as complicated as some of us think? Or is it just the trauma that took over our minds after many years of listening to business jargon?
Some of us actually sit through the whole of business news just to see if we’ll catch a bit more of information on shares than how “they rose and fell” like waves on Peruvian waves
But somehow everything happens so fast, vocabularies are thrown around, charts, graphs and numbers are shown and used. By the time you’re blinking, we’re already “on to other news”.
So where exactly do I begin?
1. first select the company you want to invest in
The most advisable way to do so is to list out different sectors from telecommunications, energy, finance etc. Then below each sector list out different companies respectively that you may have an interest in. Doing this make things simpler for you to exhaust companies and do the next step.
2. okay, after picking the companies you now have to make sure your choice is profitable by heading to company website or the NSE website and doing the following research:
- Study the history of the company, how has it been fairing so far?
- Note if the profit margins between different years is stable and increasing (could be five or more)
- Have they been making sales?
- How competitive is the company?
- What does their dividend policy state?
- What are their future plans? could they be expanding, selling the company etc
- What is the history of the share price in that company
3. You have narrowed your interests, what now?
You can visit the organization you’ve decided on. and ask how to go ahead on purchasing their company shares. Or you can opt to visit a stockbroker.
Tip: most banks are stockbrokers but aside from that a list can be found on the NSE website or if you Google ‘list of Kenyan stockbrokers’ you will have endless options.
4. So now I have a portal, how does it work?
It works like other online sites with buttons for different purposes. So if you want to sell your shares you select the sell button and the sale is done. This is also the same with buying.
5. Sounds smooth, but can I delegate the whole work to someone and receive my cash after the sales?
Yes you can. There are actually agents who do that kind of work with a commission charged for any transaction made. But from my explanation you can actually tell the process is simple you just need to dedicate some time per day to learn the ropes. You could divide the time you use on social media for this.Trading normally begins from 9:00am to 3:00pm
6. So, in summary, how does this stock market work?
A buyer places a bid then investors decide whether the price is good for them. If it’s too low they hold the shares. When this happens normally there’s a short supply of shares. Like the laws of the demand curve state a low supply leads to a high demand and a high price for shares
On the other hand, if investors start offering shares there will be a high supply resulting to over supply thus a low price
7. What normally influences this demand and supply or rather “the rise & fall” of shares?
High demand of shares (rise) is influenced by high profits made by company, new products or innovations that increase sales, expansion into a new market etc. High supply of shares (fall) is influenced by losses, bad publicity or anything that affects the company negatively.
8. What’s the catch in investing in shares?
First, at the end of every financial year all shareholders are given dividends. That’s what I can call company gifts for the loyalty shown. So a dividend is given as per every share you own. The dividend price ranges from as low sh5 for every share you own as a shareholder to as high as sh20 but this dividend price varies from company to company.
Second, sometimes companies give bonus shares.
Third, obviously, when you sell shares at a higher price than you bought them, you make money.
9. Can you estimate the price of a share?
For new comers sakes, different companies have different price variations. Some can be sh5, sh10, sh100 or more. But what you should note is there is a minimum amount of shares you can buy as per company rules. Though for most, the minimum ranges from 100 shares.
10. What are the requirements? Can students become investors? Do I need a bank statement to qualify?
Most of the time you require an ID , passport photo and a few other documentations but no income or bank statement is required.
All this sounds really good but just like any other investment there are lows .
People have lost lots of money through the stock market. Some people even go ahead to get loans only for them to get terrible losses. You can seek professional guidance because it can be pretty ugly but with research, always been updated with current news, patience and determination you can learn the ropes and make money.
By Evon Mercy