Could someone please explain in the simplest English possible, and in the simplest way without adding madoido what shares and stocks are, and how they can be purchased and how one makes losses or profit through them
Thats a four year course.
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Summarize like to a four year old.
Stock is a share in the ownership of a company. Stock represents a claim on the company’s assets and earnings. As you acquire more stock, your ownership stake in the company becomes greater. Whether you say shares , equity, or stock, it all means the same thing. Holding a company’s stock means that you are one of the many owners ( shareholders) of a company and, as such, you have a claim to everything the company owns. As an owner, you are entitled to your share of the company’s earnings as well as any voting rights attached to the stock.
To purchase shares, visit a stockbtoker of your choice or a central bank branch and open a CDS account. Any money/shares that are in your name will be linked to this account. You can have your stockbroker buy you shares and sell them whenever you want to cash out.
Making money on the stock exchange depends on how long you want to invest but the general rule is buy when the prices are low and sell when the prices are high. A good example is an IPO. Don’t buy when the IPO is open, buy sometime after it has closed. Like safaricom, the share price per unit was five shillings during the IPO. Sometime after, it dropped to two bob. That was the best time to buy coz a lot of people were selling theirs. There’s also a saying, be fearful when others are greedy and greedy when others are fearful. I know I was. Sometime later, the unit price shot up to 12 bob. That’s an increase of 10 shillings to the unit price. If you buy 50k shares at 2 bob then offload at 12 bob, what’s your profit?
The other way is to wait for dividends, which are a share of the company’s profits given to the shareholders. This will be determined by BoG. This happens once a year.
Kuwa fisi wa stock exchange. Fisi wa mizoga ni pesa tu inapotea.
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stock ni ile amount of stuff or goods stored in a store or shelves especially in shops and bars while shares is what you get after distributing something among yourselves
villager aletewe kiti afanye assignment
maze nmeelewa, thanks tu sana
@grandpa answered this query some time back wacha nione kama nitapata iyo thread… quite comprehensive by the way and in a simple language
Edit: Nairobi Stock Exchange share Rates History - Business - Kenya Talk
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You have been told a share/stock/equity is a unit of ownership in a company.
These units are bought and sold on a market i.e. the Nairobi Securities Exchange in Kenya.
In order to participate in this market you need a CDS account. Which is basically like a bank account that stores the number of shares you have instead of money. So it will read something like 1000 shares - Safaricom, 2000 shares - Equity etc.
All trades are placed through a broker e.g. SBG securities by CFC Stanbic, Kestrel Capital. All banks have a brokerage arm so you just talk to your bank. The brokers act as representatives and are the ones who sell for the sellers and buy on your instructions. A commission will be charged for each trade. 2.1% on all trades below Kshs 100k and 1.8% on all trades above that. So if you want to buy 1000 shares at 50 bob a share. You will incur a total cost of 1000050bob plus 2.178% of Kshs 50,000 which is the value of the transaction. If you want to sell 1000 shares at 60bob per share. You will incur 600002.178% price charge.
There are 3 ways to make money on the stock market.
1. Capital gains. i.e. you buy a stock for 5bob today and the value appreciates to 10bob hence you make a profit of 5 bob for share you sell. You will pay a capital gains tax of 5% on the total profit you get.
2. Dividends. At the end of the financial year, if a company declares profits they may decide to dedicate a small portion of the profits to pay back the shareholders
3. Bonus Shares. A company may decide to do a share split and award existing shareholders bonus shares according to the shares you hold. e.g. a share split of 1:3 means that the company will give 3 shares for every share. So if you have 1000 shares you now have 3000 shares. This is one of the ways in which companies raise money as it increases the total number of shares issued. You making a profit here is contigent on the company performing well after this split. Why, it is because the share price diminishes in the same ratio. The main aim of a share split is to reduce the price per share especially when the share price of the company has increased so much that it has now become unattractive to small investors. e.g. Limuru Tea was once trading at Ksh 1500 and did a split of 1:2 to trade at Kshs 750 per share. Equity also did this a while back.
Skeptical?
Let’s see. If a stock called XYZ is trading at Kshs 90 per share and you have 1000 shares it means your investment is worth: Kshs 90,000
If XYZ did a share split of 1:3 it means that you now have 3000shares but the share price is Kshs 30 So your total investment is still worth Kshs 90,000 and you have not lost any money. Now many peasants think the stock is now more affordable and buy the stock, they end up boosting demand and drive up prices.
Now let us analyze a stock.
EQUITY Group Holdings referred to as EQTY on the market
Current price - Kshs 30.75 - this means that this is the price of the share right now.
Listing Price - Ksh 90.00 - this is the price of the company when the did an IPO
Listed Shares - 3.8bn - These are the total number of shares of the company.
Market Capitalization - Kshs 116bn - this is the worth of the company. It is obtained by doing Number of ListedShares * Current Share Price
EPS - 4.65 - This means Earning per share. It is an indicator of how profitable the company is. It is obtained by doing Net Income/Number of Listed Shares . The higher it is the better
DPS - 2.00 - Dividend per share. Obtained by doing the Total Dividends Paid Out/Number of Listed Shares. The higher the value the better.
P/E - 6.61 - Means Price/Earnings ratio. Obtained by doing Current Share price/EPS. When the P/E is high it means that the share price is expensive or even overvalued compared to it’s performance. When it is zero or negative it means that the company is not profitable compared to the price. I am personally attracted to EPS values of 4-20 but I have of course bought even on negative if the company has good fundamentals
DivYld - 6.5% - a dividend expressed as a percentage of the share price. i.e. it means at the current share price of Kshs 30.75 i can expect a dividend of Kshs (6.5/100*30.75=Kshs 2) per share. Hence if I have 1000 shares i.e. Ksh 30750 worth of investment at equity right now, the dividend payout would be around Kshs 2000
Things you do not want to hear when you own a share
1. Rights Issue - Mainly offered by companies in trouble. i.e. A company is in so much debt that they need to raise more money to pay back their debts or in order to undertake a venture. KenGen recently did this and KCB was planning to do one but they got a large subsidised loan from somewhere else. It is basically an invitation for existing shareholders to purchase more stock at a discounted price. If you do not have this cash at the moment you end up being diluted.
Questions are welcome if there is anything you want a further explanation of. Got tired of typing
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Aki maze thanks, ndo nmeelewa zaidi
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