Learn to Invest on the
Nairobi Securities Exchange

Investing means putting your money into something that can grow in value over time. Think of it like planting a mango tree. You spend a little money on the seedling today, you water it, and years later it gives you mangoes you can eat or sell. That tree keeps giving you mangoes year after year without you having to buy a new one.

When you invest in the stock market, you are buying a small piece of a real company. If that company does well and makes more money, your piece becomes more valuable. Some companies even share their profits with you directly, just like that mango tree sharing its fruit.

Why Not Just Save in the Bank?

A savings account in Kenya might give you 3-7% interest per year. But inflation (the rising cost of things like food, rent, and transport) is often 5-8% per year. This means your money in the bank is actually losing buying power over time. A loaf of bread that costs KES 55 today might cost KES 70 in a few years.

The stock market has historically given higher returns than savings accounts, though it comes with more risk. The key is learning how to manage that risk, which is exactly what this course teaches you.

The Nairobi Securities Exchange (NSE) is like a big market, similar to Gikomba or Marikiti, but instead of clothes or vegetables, people buy and sell pieces of companies. It has been operating since 1954 and is one of the largest stock exchanges in Africa.

Over 60 companies are listed on the NSE. These are some of the biggest companies in Kenya: Safaricom, Equity Bank, KCB, East African Breweries, BAT Kenya, and many more. When you buy shares on the NSE, you become a part-owner of these companies.

How Does Trading Work?

• Trading hours: Monday to Friday, 9:30 AM to 3:00 PM
• Settlement: When you buy shares, the trade settles in T+3 (three working days after you buy)
• How to buy: You can now buy shares directly from your phone using Safaricom's Ziidi Trader on M-PESA, or through a licensed stockbroker
• CDS Account: Your shares are held electronically in a Central Depository System (CDS) account. With Ziidi Trader, this is handled automatically through a pooled omnibus account — no paperwork needed

Key Market Indicators

The NSE 20 Share Index tracks the 20 most actively traded companies. The NASI (NSE All Share Index) tracks all listed companies. When people say "the market went up," they usually mean these indices increased.

Imagine a whole chapati represents a company. Now cut that chapati into thousands or even billions of tiny pieces. Each tiny piece is a share. When you buy one piece, you own a tiny part of the whole chapati (the company).

For example, Safaricom has about 40 billion shares. If you buy 1,000 shares at KES 28 each, you spend KES 28,000 and now own a tiny fraction of Safaricom. You are now a shareholder: a real part-owner of the biggest company in East Africa.

How to Buy Your First Share

There are two ways to buy shares on the NSE. The easiest is through Ziidi Trader, Safaricom's M-PESA stock trading platform. If you have M-PESA, you can buy your first share in minutes.

Option A: Ziidi Trader (Fastest Way to Start)

Launched in February 2026, Ziidi Trader lets you buy and sell NSE shares directly from the M-PESA app. No paperwork, no CDS account application, no broker account needed. It is operated in partnership with the NSE and Kestrel Capital (a CMA-licensed broker), so your trades are fully regulated and your shares are legally yours.

1. Open M-PESA — On the Safaricom M-PESA app, go to Financial Services and select Ziidi Trader
2. Set up your profile — Accept the terms and verify your identity. Ziidi handles your CDS registration automatically through a pooled omnibus account. Must be 18+.
3. Choose a company — Browse listed NSE companies, check prices, and pick the shares you want to buy. You can buy as little as 1 share.
4. Buy with M-PESA — Confirm your order and pay directly from your M-PESA balance. Fees are about 1.52% all-inclusive (e.g., roughly KES 70 on a KES 4,500 purchase).

Option B: Traditional Broker Route

You can also buy shares the traditional way through a licensed stockbroker. This gives you a personal CDS account in your own name and access to more detailed research platforms.

1. Get a KRA PIN — You need this for tax purposes. Apply free at itax.kra.go.ke
2. Choose a licensed stockbroker — Examples: Genghis Capital, AIB-AXYS, Dyer & Blair, Faida Investment Bank, SBG Securities. Full list at CMA Kenya website.
3. Open a CDS Account — Your broker will help you open this. You need: National ID, KRA PIN, passport photo, and a filled application form.
4. Deposit money — Send money to your broker's account. You can start with as little as KES 5,000.
5. Place your order — Tell your broker what company you want to buy and how many shares. Many brokers now have online or mobile platforms.
6. Confirm your purchase — You will receive a CDS statement showing the shares in your account after settlement (T+3).

When a company makes a profit, the board of directors can decide to share some of that profit with shareholders. This payment is called a dividend. Think of it like owning a rental apartment: even if you do not sell the apartment, you receive rent money every month. Dividends are like the "rent" you receive for owning shares.

Not all companies pay dividends. Some companies prefer to keep all their profits and reinvest them to grow the business faster. But many established Kenyan companies pay dividends regularly.

How Dividends Work

• Declaration: The company announces the dividend amount per share
• Ex-dividend date: You must own the shares before this date to receive the dividend
• Payment date: The date the money hits your bank account or M-PESA
• Withholding tax: The government takes 15% tax on dividends before you receive them

Dividend Yield

Dividend yield tells you what percentage return you are getting from dividends alone. The formula is simple:

Before you invest in any company, you should look at its financial statements. This is like checking the health of a cow before you buy it. You would not pay good money for a sick cow. Financial statements tell you if a company is "healthy" or "sick."

Every listed company on the NSE is required by law to publish their financial results. You can find them on the company's website or the NSE website. There are three main statements to look at:

1. The Income Statement (Profit & Loss)

This tells you how much money the company earned and how much it spent over a period (usually one year). The key numbers are:

• Revenue — Total money coming in from selling products or services
• Operating expenses — Costs of running the business (salaries, rent, materials)
• Net profit — What is left after all expenses and taxes. This is the bottom line.

If revenue is growing year after year and net profit is positive and increasing, the company is doing well.

2. The Balance Sheet

This is a snapshot of what the company owns versus what it owes on a specific date. Think of it as the company's "net worth" statement.

• Assets — Everything the company owns (cash, buildings, equipment, loans given out)
• Liabilities — Everything the company owes (debts, money owed to suppliers)
• Equity — Assets minus liabilities. This is the shareholders' share.

A strong balance sheet has more assets than liabilities and growing equity over time.

3. The Cash Flow Statement

A company can show a "profit" on paper but still be running out of actual cash. The cash flow statement shows real money moving in and out. It has three parts:

• Operating cash flow — Cash from the company's main business (should be positive)
• Investing cash flow — Cash spent on buying assets or investments
• Financing cash flow — Cash from borrowing or paying back loans, and dividends paid

Financial ratios help you compare companies and decide if a share is cheap, fairly priced, or expensive. Think of ratios as "scores" that summarize a company's performance in one number.

The Essential Ratios

What Do the Numbers Mean?

P/E Ratio: If a share has a P/E of 6, it means you are paying 6 years' worth of earnings. Lower P/E can mean the share is cheap (or has problems). Higher P/E can mean it is expensive (or expected to grow fast). Most NSE bank stocks trade at P/E of 4-8, which is low globally.

P/B Ratio: A P/B below 1.0 means the share trades below the company's book value. Many Kenyan bank stocks trade at P/B of 0.7-1.5, meaning you can buy them for less than or near their net asset value.

ROE: Above 15% is generally very good. Many Kenyan banks have ROE of 18-25%, which is excellent by global standards.

The NSE has companies from different sectors of the economy. Understanding sectors helps you diversify so that if one sector does poorly, others can balance it out.

Buying shares without a strategy is like going to Gikomba without knowing what you need. You will spend money on things you do not need and miss what you actually came for.

Three Common Strategies

1. Dividend Investing — Buy companies that pay regular, high dividends. Your goal is steady income. Best NSE picks: BAT Kenya (8.5% yield), ABSA (8%), Co-op Bank (7%), Stanbic (7%).

2. Growth Investing — Buy companies whose earnings are growing fast. You care more about share price growth than dividends. Best NSE picks: Equity Group, Safaricom.

3. Value Investing — Look for shares trading below their true value (low P/E, low P/B). Buy cheap, wait for the market to recognize the real worth. Best NSE picks: KCB (P/B ~0.9), Co-op Bank (P/B ~0.8), NCBA (P/B ~0.7).

Practical Rules

• Only invest money you do not need for at least 3-5 years
• Keep 3-6 months of expenses as emergency fund first
• Start small. Even KES 5,000/month adds up over time
• Be consistent. KES 5,000 every month beats KES 60,000 once a year
• Diversify across at least 3 sectors and 5 companies
• Do not invest money you need soon. Share prices can drop short-term

Let us walk through a real company analysis step by step using Safaricom, the largest company on the NSE. Apply this same process to any listed company.

Step 1: Understand the Business

Safaricom provides mobile voice, data, and financial services (M-PESA) to over 40 million subscribers in Kenya. M-PESA processes over KES 35 trillion in transactions annually and is the world's leading mobile money platform.

Step 2: Revenue Breakdown

• M-PESA (mobile money): ~40% of revenue and growing
• Mobile data: ~20% of revenue
• Voice calls: ~25% (declining as people use data more)
• Other (SMS, fixed data, devices): ~15%

M-PESA is the growth engine. Voice is shrinking. Watch whether M-PESA growth can offset voice decline.

Step 3: Financial Health

Step 4: Competitive Moat

A "moat" protects a company from competitors, like a moat around a castle. Safaricom's moat is M-PESA. Over 30 million Kenyans use it daily. Competitors like Airtel Money exist but have not come close. When everyone uses M-PESA to send money, it is almost impossible for people to switch. This is called a "network effect."

Step 5: Risks

• Government regulation (excise duty on mobile money)
• Competition from fintech apps and banks
• Ethiopia expansion has been costly and uncertain
• Voice revenue continues declining

Step 6: Investment Verdict

High-quality company with a strong moat, solid profitability, and consistent dividends. The higher P/E is justified by its dominant market position and growth potential. A good core holding for any Kenyan portfolio.

Valuation means figuring out what a share is actually worth, so you know if the current price is too high, too low, or just right. You would not buy a phone without comparing prices. Same idea with shares.

Method 1: P/E Comparison

The simplest method. Compare a company's P/E ratio to similar companies.

Method 2: Dividend Discount (Simple Version)

If you buy a share for the dividends, estimate its value based on future dividends.

Method 3: Price-to-Book Value

For banks and financial companies, book value is very useful.

No Single Method is Perfect

Use multiple methods together. If P/E says cheap, P/B says cheap, and dividends are strong, that gives you more confidence. If methods disagree, dig deeper.

Portfolio construction is how you put all your investments together. A good portfolio is like a balanced meal: you need different food groups (sectors), the right portion sizes (allocations), and it should suit your needs (risk tolerance).

The Core-Satellite Approach

• Core (60-70%) — Your most reliable, stable investments. Blue-chip companies with consistent performance. Examples: Equity, Safaricom, KCB.
• Satellite (30-40%) — Smaller positions in companies with higher growth potential or higher dividends. Examples: Stanbic, ABSA, NCBA.

Position Sizing Rules

• No single company more than 25% of your portfolio
• No single sector more than 40%
• Hold at least 5 companies to reduce risk
• No more than 10-12 companies (too many is hard to track)

When to Rebalance

Check your portfolio every 6 months. If a position has grown more than 5% above its target allocation, consider selling some to rebalance.