Thread by @WanjiruNatasha_

Everything you need to know about stocks/shares. THREAD 1/
Objectives:
*What are stocks/shares
*How does it work?
*What to consider before investing in stocks?
*Advantages and dis-advantages?
*How to choose stocks?
*How do i invest /Requirements?
#IMFStopLoaningKenya Gede

When companies need to raise capital, they can either borrow from the bank-loans ,issues stocks, approach individual investors(private equity) etc.
Today we focus on stocks.

When an investor buys a stock, that person is not lending the company money but rather is buying a percentage of ownership in that company. Each of the unit of a stock is considered a share. These terms are often used interchangeably although they are different.

Public listed companies are found on the Nairobi Security Exchange(NSE). NSE is where investors trade in stocks.On 2016 it introduced an Automated Trading System, ensures orders are matched automatically and are executed by stockbroker on a first come/first serve basis.

Capital Market Authority approves public offers and listings of securities traded at the Nairobi Stock Exchange. Approximately 66 companies are listed.

How do you make money as an investor?
Once you buy shares from a company, you become a shareholder. You earn money in 2 ways: dividend payouts or stock appreciation(SA). Minimum number of shares you can buy or sell is 100.
I explain the two ways below.

1)Businesses aim to make a profits so when profits are made you as a shareholder get a cut(dividends). NB: not all companies issue dividend.
2)Share Appreciation this is selling after a company value increases, exa. bought the share at ksh.35 & now it is at ksh.40. ksh 5 profit

Exa of share appreciation. Saf is at 37.50 per shares, you choose to buy 100shares(minimum) .( 37.50*100= 3750). After some time it increases to 40 per share(40*100= 4000) . Profit is 250.
Dividends are charged a 5%WHT to Kenya or E.A residents and 10% to non-residents.

Example of Dividend investing: in Feb 2020, BAT announced dividend payout of 33.50sh per share.
If you held 1000shares (33.50*1000 = 33500) Now there is a brokerage commission which is usually between 1.7-2.1%. Most brokers charge 2%. 2%of 33500 is 670/=.
Dividend left is 32,830.

For you to buy or sell shares you need a stockbroker(execute buy and sell orders on your behalf). You also need to open a Central Depository Security (CDS)account- free to open. Your shares are held at the CDS. Shares are bought and sold mon-fri, 9:00am to 3:00pm except holidays.

Disadvantages
1.Shares are high risk type of investments, ask people who held on to Mumias company. Meaning you can buy at 40 and if it experiences a bad year (drops to 20)or company closes down . Machozi my friend. You lose all your money.

2. If your main aim of investing in shares is dividend and the company that year refuses to declare dividends. Again machos
3. Stockbrokers sell and buy shares for you but it doesn't main they will give you the best advice. As long as you conduct a trade they get a cut. RESEARCH.

Advantages
1)Dividend payouts
2)Share Appreciation
3)High risk, high rewards also the reverse is true.
4) You do not need to set up a business fully, you buy shares they do the work.

Factors to consider before investing in shares:
1) Management, who are making decisions in that company. 👀cough! Cough! GOK
2) Revenue, profits, growth,earning per share. Are you in for the dividend or capital appreciation
3) Trends, how has the company been the last few years

4.Perform an analysis, there are 2 types: technical and fundamental analysis.
Technical is analysing through charts, patterns and graphs in anticipation of price movements. Good for short term trading, for profits.

Fundamental analysis involves analysing factors that influences a stock's future price, based on company's management, financial statements, company's market and industry position. Helps you figure out if a stock is over-priced or under priced.

Requirements:
1.If you can afford a financial adviser, get one.
2.stockbroker
3. CDS account: to open an account as of 2020, you need 2 color passport-sized photographs, KRA pin, National ID or passport, evidence of residence & evidence of income(payslip or bank account)

You open a CDS account at the Central Bank Kenya or local central depository agents where you need to fill a CDS1 form and submit those personal docs listed above. Everything looks daunting, na thinking about doing it, does not make it happen. Instead do it. One step at a time.

In conclusion, remember this is just basic top layer info and as usual i cover finance topics, if this is a topic you are interested In and find useful, retweet, like and follow me for more. Questions are welcomed. Next we will look at everything you need to know about tax(Kenya)