Investing in Stocks

What is the least amount you can invest at the Stock Market?

When it comes to investing in stocks in Kenya, the minimum requirement is to purchase 100 shares from any company that is listed in the stock market. However, some stock brokers might require you to invest at-least Kshs 1,000 or more. This means that you can start investing with less than Kshs 100 since some shares cost less than one Kenya shilling.

Can I lose my money in the Stock Market?

The short answer is yes. Therefore, you need to be a wise investor. Investors lose money when the companies they have invested in no longer offer enough value to consumers to continue buying their products and services or due to mismanagement. A loss in value is demonstrated in losses that the companies make. When a company makes losses the shares lose value and the prices plunge. Example; If you bought stocks from company A for Kshs 20 and company A  makes losses in the next two years with no profits in sight then the stock price is likely to drop to Kshs 10 or less. That means as an investor you are not receiving dividend payments and if you sell the stocks you will lose Kshs 10 for every stock. 

Companies are also suspended from trading at the NSE because of malpractice or when they are facing liquidation. That means the investor will lose their investment if the company is liquidated. 

What are the gains for investing in the Stock Market?

There are several ways you can gain form the stock market;

i) Dividends: - A dividend is part of the profits made by a company that is paid to investors. Value investors focus on companies that pay good dividends. 

ii) Capital Gains: - Capital gains is the positive difference between the buying price and the selling price. Example; if you buy a stock for Kshs 5 and sell it for Kshs 15 then the capital gain is Kshs 10. This is the best way to make money in the stock market. 

There are other benefits like discount that is given to shareholders of some companies.

How secure is my money in the Stock Market?

For companies to get listed in the stock market there are stringent measures that they must meet to ensure investor confidence. In addition, there is a regulator in Kenya known as Capital Markets Authority (CMA) which is tasked to make sure that small investors are protected and that companies are doing business in the right way. In my view, investment is a risk but investors are cushioned from losing their investment by CMA. However, please note that companies still fail and investors lose their investments in rare cases.