Many potential investors remain excluded from participating in the stock market due to the complexities of buying and selling shares. Nevertheless, it continues to attract significant interest, especially among the younger generations and mid to low-income earners seeking opportunities to invest and grow their wealth. To simplify the process, the Nairobi Stock Exchange (NSE) has teamed up with Safaricom to introduce Ziidi Trader, a feature that enables Kenyans to buy and sell shares directly through the MPESA app.
All you need to start your investment journey in the NSE is a smartphone, the Safaricom MPESA app, decent financial market knowledge and some money.
What is the Nairobi Stock Exchange
The Nairobi Stock Exchange is the leading investment market in the region that provides a reliable avenue for investors to trade in stocks and bonds of publicly listed companies.
Making a profit on the NSE depends on a predictive strategy on whether the price will go up or down. If you can make an accurate prediction, then your trade can be profitable. Additionally, you need to know which assets to invest in to ensure that your shares are profitable. A share’s future value is influenced by various factors including the company’s success, industry position and stock price movement.
Market hours at the NSE open from Monday to Friday, 9.30 AM to 3.00 PM. You can access the market outside these hours but you can only browse and plan trades.
Once you purchase a share, you own part of that company. Companies usually sell these shares to raise money to expand their business. In exchange, shareholders expect a profit in form of dividends, increase in share price, bonuses and rights.
Benefits of investing in shares
Dividends
Companies pay dividends annually or semi-annually when they make a profit. It is the board’s discretion to decide whether the company will pay a portion of the profits to the shareholders, reinvest or pay off debts. The amount of dividends you receive depends on the number of shares you have invested in.
Capital growth
The stock market provides better returns over time compared to other investment options. It is also one of the most popular ways to grow capital and secure future financial goals. Patient investors often reap good returns from long-term investments.
Protection from inflation
Unlike fixed-income investments, shares can increase in value during an inflation depending on the strength of the business. Some companies are able to pass price increases to consumers making their business remain profitable.
Security for loans
Shareholders can pledge their shares as collateral to get loans from certain financial institutions. This is known as Loans Against Shares (LAS) and it provides up to 50% of the share value. Investors still maintain ownership of the shares and can receive dividends from the company.
Passive income
Stock trading can be a great side hustle. With dedication and strategy, it offers a lucrative opportunity to boost your income. However, stock trading isn’t a get-rich-quick scheme. It requires time and effort to learn the fundamentals.
Ziidi Trader app
Ziidi Trader app is a stock trading platform that enables everyday Kenyans to buy and sell shares listed on the NSE using the app. The app is integrated in the MPESA app allowing users to use their MPESA money wallet to fund their transactions.
Unlike the traditional stock trading system, Kenyans don’t need paperwork or a brokerage account to buy shares using the Ziidi Trader app. This is because the app has partnered with brokerage firm, Kestrel Capital, to process trades without having to open a CDS account guaranteeing investors a seamless trading experience. Every investment is handled through an omnibus account which is managed by Kestrel Capital.
The app operates under the oversight of the Capital Markets Authority ensuring integrity, transparency and market authority. Trades are executed by licensed brokers and standard trading practices are applied.
Things to note
- You can buy as little as one share. There are no transaction fees charged for moving money in and out of the app. However, a brokerage fee of about 1.5% per trade applies.
- Trades depend on market matching, which means there must be a willing seller and buyer at the price indicated. Investors choose between “best price” or “own price”. Best price means the lowest price a seller is offering or the highest price a buyer is willing to pay. Own price means you can set the maximum amount you’re willing to pay or the lowest price you’re willing to accept.
- Once you process a trade, the money is reserved from your M-PESA account and the trade is labeled as “Good Till Day” meaning it’s valid until 3.00 PM the same day. If it matches a seller or buyer, the trade goes through. If it doesn’t, the money automatically goes back to your M-PESA account after the market closes.
- You must be over 18 years old to invest in the stock market. Since the app uses the M-PESA database, you don’t need verification documents when signing up.
How to sign up
- Open the M-PESA app and go to the Financial Services tab
- Select the Ziidi Trader mini app, enter your M-PESA pin, read and accept the Terms & Conditions
- Select your source of funds i.e Business or Employed then accept the disclaimer and choose Start Trading
How to buy shares
- On the bottom menu bar, select Trade then choose the company you want to buy shares in
- Select buy and enter the number of shares you want
- Choose your pricing option i.e Best Price or Own Price
- Review your purchase then tap Buy Shares and Proceed
- Enter your M-PESA pin to complete the transaction
How to sell shares
- On the bottom menu bar, select Trade then choose the company you want to sell shares in
- Select Sell and enter the number of shares you want
- Choose your pricing option i.e Best Price or Own Price
- Review your purchase then tap Sell Shares and Proceed
- Enter your M-PESA pin to complete the transaction