How to Invest in the NSE

Now that you have a little nest egg built up you want to try your hand at the stock market, but the volatility on Wall Street makes you a little nervous. So you decide to try your hand at trading on an international exchange, like the NSE, but you can't figure out how. It's really quite simple once you know where to go to get started.

Nairobi Securities Exchange

The Nairobi Securities Exchange has been around since 1988 and in 2006 implemented electronic trading. The shares at the exchange are divided into four sectors -- agriculture, commercial and services, financial, and industrial and allied. You can also purchase bonds. The NSE offers treasury bonds backed by the Kenyan government, and corporate bonds. Nineteen investment houses are listed as eligible to trade on the NSE.

Signing Up

To get started, contact one of the firms listed on the NSE website and set up an account. The firms are located in Kenya. For example, Dyer & Blair Investment Bank has you complete a form, send two passport-sized photos and a copy of a government issued ID, such as a driver's license or passport. Those are the only requirements to get you trading on the NSE with them.

Miscellaneous Information

All shares of NSE stocks are listed and traded in Kenyan shillings so you will have to convert your currency to trade. On the bright side, as of May 2012, one U.S. dollar is worth 83 Kenyan shillings. This gives you much more purchase power than you would have on a U.S. or European exchange. You also have to pay fees and commissions as you do in the U.S. For example, Dyer & Blair charge a different commission rate depending on the value of the shares you purchase. You also have to buy a revenue stamp for each trade worth KSh 10,000 or more. This company's commission fees are from 1.8 to 2.1 percent of the value of the shares you purchase.

Investment Amounts

On the NSE, there are no restrictions on the maximum number of shares you can purchase. However, there are minimums for most markets. On the main market boards, you have to buy a minimum of 100 shares. Some markets have higher minimums. You can buy less than 100 shares on the odd lots market. If you aren't sure how much you want to tie up in this new trading environment, you can get a few friends to pitch in some money and invest with you. This way, because you are investing less than you otherwise would have, you have less at risk. If you choose to invest with one or more other people, you must go through the exchanges money manager. Bonds are sold bundled in instruments worth at least KShs. 50,000. You can also pool your money to buy bonds with the help of a money manager.

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