One of the highlights of our life is the campus experience. A lot characterize this campus experience, ranging from the last minute rush to revise for exams, the legendary and not so legendary parties, the relationships, the goons and blowing our HELB Loan.
That is the path taken by many. Be that as it may, there is a different path. One where you are always prepared for exams, one where you keep your head when all around you are losing theirs, one where the Helb Loan is used frugally. The greatest mistake that we as young people make is not saving in our youth. We seem to be seated at the precipice of life spectating on the happenings of life. It’s as if we are warming up for the game of life. We are under the illusion that our game of life kicks off once we leave the gates of campus with a degree in hand. We are under the impression that we start shooting towards success once we land our first jobs.
The lack of financial prudence among campus students is alarming. A large number of campus students have not as yet embraced the saving culture. Financial prudence is the ability of the individual to govern oneself as to matters pertaining to how they spend their money. The principle rule of financial prudence is that people should spend less than they earn. This is the only sure way of gaining financial independence. As young people, we are best aligned to leverage on the fact that our country is on the brink of an economic take off. After the general elections, the new constitutional dispensation is now under full effect.
Devolution shall see the concentration of resources at the county level. Every facet of business and industry shall need a presence at the county level. Another factor to take into consideration is the fact that Kenya is among the leading destination of foreign investment in Africa. The NSE is one of the best performing market having topped the Meryl Lynch index with an appreciation of 31.9%. So how does one go about investing in the NSE, the Stock market, in Kenya?
What is a share/stock?
A share or stock represents a unit of ownership of a company. Simply put, once you buy a share of a certain company, you are part owner of the company in question.
How then does one go about investing in the Nairobi Securities Exchange (NSE)? The first thing that an individual needs is to open a CDS Account.
Opening a CDS Account
A CDS account is an electronic account that holds shares only. It is an automated system that provides investors an efficient central clearing of securities traded on the NSE. It replaces the long and tedious system of issuance of share certificates by company registrars. The CDS account speeds up share trading and facilitates the safekeeping of the shares. To open a CDS account, you need:
- 2 recently taken passport photographs
- Original national ID or passport
- In case of a company, you need: an original copy of the certificate of incorporation or a certificate of registration.
While opening a CDS account, it is done in the presence of a CDA, a Central Depository Agent. This may be a stockbroker or an investment bank registered by the Capital Markets Authority.
So in going about to open a CDS account, you need to have identified a Stockbroker or an investment bank that you are comfortable working with.
After having opened the CDS account and having an agent, the stockbroker or investment bank of choice, you are ready to start trading in buying or selling of stocks. After depositing money in your account enough to buy shares, you are set to start.
Seeing as one can either make or lose money in the stock market, it is important that an individual has that in mind. It is mandatory for an individual to undertake a personal evaluation and determine their risk appetite, coming up with a working investment strategy.
There is a clear distinction between speculation and investing. With every investment there is the potential risk in incurring losses for example through share value depreciation. In addition, there is the hope of realizing returns through dividends and share appreciation.
In short, the attitude that you take while going into the markets is very crucial. People are under the notion that we realize success in the markets by minimizing risk. They look at the market from the point of reward only thereby taking unnecessary risks to realize it.
Buying and Selling of Shares
Trading in shares may seem very easy: just placing a buy bid for a certain stock and sell it at a higher price. However, there are movements in the markets to look out for. Movements in the markets tend to have a relationship to each other. It is important to understand why share prices move up or down. It is an important prerequisite for individuals to take time and understand the management of the companies they are buying into, their products, their competitiveness and corporate governance.
The key is singling out the industries that are most likely to grow in the future and choosing the most promising companies.
We all harbor hopes, dreams and aspirations of making it big in life but it is not enough. Just as faith without action is lifeless, dreams that are not backed up by action are well… just that: dreams. Why not take the first step in the journey of financial prudence and start saving by investing in the securities exchange?