The Youth and the NSE

The youth are today getting gainful employment at an early age due to better qualification. This comes from the fact that the youth are yearning for higher education due to the belief that ‘papers’ will earn them decent jobs. Secondly, the free primary education program started by the immediate former President Mwai Kibaki and the current government’s priority of funding the youth and women to a tune of Kshs6 billion will see the youth acquiring wealth at an early age. It is thus of paramount importance to advise them that the Nairobi Securities Exchange (NSE) should be their “Aden Farm” for their saving.

The Case for NSE
The Nairobi Security Exchange has many products that the youth can invest in as they learn and mature in their investment culture before embarking on other capital intensive investment opportunities. The following are the  main advantages of starting your investment ladder at the bourse;
Ease of entry - The youth can easily enter into the market by registering with the Central Depository and Settlement Corporation (CDSC) with brokers and financial institutions which are spread all over the country. The requirements are copies of identification (ID or passport), two passport photographs and evidence of income or resident. Opening an account takes a few minutes if all the documents are in order. It is important to highlight that the youth can form a group and open a CDS account using the groups registered name or open a joint account.
Low start-up capital - With as little as Kshs500, a potential investor can start investing at the NSE. This means that an employed youth capable to save say Kshs2,000 a month can accumulate a good portfolio before venturing to other capital intensive investments as he will have acquired a solid portfolio during his amateur investment period.
Numerous products of choice - The NSE has over 60 listed companies. A good number of them are known to pay good dividend every year. There are currently 57 treasury bonds and 10 corporate bonds. In addition there are many unit trusts, off shore trading (foreign companies) and a number of shares and bonds sold over-the-counter (not listed but allowed to trade on buyer to seller basis). The youth are educated and can be able to make a good selection from the numerous products by studying their financial status, divided policies, growth strategies etc. It is important to be guided on this selection by a competent investment advisor.
Minimal group disputes - Majority of the youth start investing as a group. One major reason why many investment groups break-up is disagreements especially on the type of business, cost of sourcing for goods, where to source, who to buy, money saved etc. These disagreements can be minimized by investing at the stock exchange. The statement given by the stockbroker and the CDSC are so elaborate that no dispute can arise. Moreover the commissions charged by stockbrokers are uniform.  
Tested products - When investing in new businesses there is always an inherent risk that the business might not be profitable. Although the bourse has at time seen investors making losses, people who have invested with a long term view have reaped good capital gains. It is important that you invest in shares that have good history of capital appreciation and good divided pay-out policy before you diversify to avoid despair and disappointment in non-profit making ventures.
It is a ‘digital’ market - By 30th of November this year when the NSE is expected to complete the dematerialization process, shares for all companies listed at the market will be in ‘digital form’ (or say soft copy). This is an automated system known as CDS account. Share certificates will cease to be a legal document to prove ownership of shares. Therefore the youth who are IT savvy can be able to do the following online; send money to one’s broker bank, make orders, view transactions, receive CDS alerts on any order executed and have your money wired directly to your account any moment you sell. This therefore means you can buy and sell shares from your mobile phone at the comfort of your chair.
Minimum management skills required - Many challenges face the youth when they start investing in areas where they luck experience like in matatu business, cyber cafes, stationeries among others. But when one invests in shares, bonds or unit trust no management skills are required other than regularly reviewing your portfolio. The listed companies are run by competent and qualified personnel. Big listed companies are known for poaching the best brains in their specific industry to be able compete effectively with their peers and make good profits for their shareholders and staff.
However, it important to mention that there is no business or investment without risks. Trading at the bourse have at times been characterized by falling prices, some shares being suspended from trading due to bad management and boardroom squabbles (CMC Motors and East African Portland Cement Company are good examples). I am happy that Kenyans have started forgetting the losses some investors incurred a few years ago on the hands of some rogue stockbrokers and some market fraudsters. I do appreciate the work done by the Capital markets Authority and other stakeholders in taming them and bringing back ethical practices in the market.
The writer is the Investment Director at Venture stocks Ltd.     
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