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Finance

How to Buy Shares on the NSE: Complete Step-by-Step Guide

10 min read
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Easy Access Staff

Overview: What You Need

To buy shares on the NSE, you need:

  1. CDSC account (Central Depository & Settlement Corporation) - holds your shares electronically
  2. Stockbroker - executes your buy/sell orders
  3. Money - to buy shares
  4. National ID - for account opening
  5. KRA PIN - for tax purposes

Total time: 1-2 weeks from start to owning your first shares

Step 1: Choose a Stockbroker

Stockbrokers are licensed firms that buy and sell shares on your behalf. You cannot trade directly on the NSE.

1. Genghis Capital

  • Online platform: Easy to use
  • Low minimum: From KES 5,000
  • Research: Good reports
  • App: Available

2. Faida Investment Bank

  • Beginner-friendly
  • Good customer service
  • Educational resources
  • Offline and online

3. AIB-AXYS Africa

  • Established broker
  • Good for regular investing
  • Standing orders available

4. Standard Investment Bank (SIB)

  • Part of Standard Bank Group
  • Reliable platform

5. Dyer & Blair

  • Long-standing broker
  • Good research
  • Personal service

6. Britam

  • Also offers insurance and investments
  • One-stop financial services

What to Compare

Commission/Fees:

  • Typically 1.3-2% of transaction value
  • Some have minimum fees (e.g., KES 100)
  • Compare total costs

Minimum Investment:

  • Some require KES 50,000+ to start
  • Others accept as low as KES 5,000

Platform:

  • Online trading platform quality
  • Mobile app availability
  • Ease of use

Service:

  • Customer support responsiveness
  • Broker advice (some charge extra)
  • Educational materials

Account Opening:

  • How long it takes
  • Documentation required
  • In-person vs online

Verify Your Broker

IMPORTANT: Only use licensed brokers

Check at: cma.or.ke (Capital Markets Authority)

  • Go to “Market Participants”
  • Check “Licensed Stockbrokers”
  • Verify your chosen broker is listed

Step 2: Open CDSC Account

The Central Depository & Settlement Corporation (CDSC) holds all shares electronically. You must have a CDSC account to own shares.

Two Ways to Open CDSC Account

Option A: Through Your Broker (Easier)

Most brokers will open your CDSC account for you as part of their account opening process.

Advantage: One-stop process Disadvantage: May take slightly longer

Option B: Directly with CDSC (Faster)

Visit CDSC office or authorized agent to open account yourself.

Advantage: Faster, can use with any broker Disadvantage: Extra step

Documents Needed

  1. National ID (original + 2 copies)
  2. KRA PIN certificate (from iTax portal)
  3. Passport-size photo (2 copies)
  4. CDSC Account Opening Form (from broker or CDSC office)
  5. Bank account details (for dividends)

Opening Process

Step 1: Fill CDSC Account Opening Form

  • Personal details
  • Contact information
  • Bank account for dividends
  • Signature

Step 2: Attach required documents

Step 3: Submit to broker or CDSC office

Step 4: Wait for approval (1-7 days)

Step 5: Receive CDS Account Number (via SMS/email)

  • Format: Usually 8-10 digits
  • Keep it safe—you’ll need it for all transactions

CDSC Fees

Account opening: Free

Annual custody fee: KES 50-100 per year (minimal)

Note: CDSC is a government-mandated system, not optional.

Step 3: Open Broker Trading Account

Even if broker opened your CDSC account, you need their trading account to place orders.

Documents Needed

  1. National ID (copy)
  2. KRA PIN (copy)
  3. CDS Account Number (if opened separately)
  4. Bank account details
  5. Proof of residence (utility bill, rental agreement)
  6. Passport photo
  7. Client Account Opening Form
  8. Risk Disclosure & Agreement Forms

Opening Process

Online:

  1. Visit broker’s website
  2. Find “Open Account” or “Register”
  3. Fill application form online
  4. Upload documents (scan or photo)
  5. Submit
  6. Wait for verification (1-5 days)
  7. Receive account credentials (username, temporary password)
  8. Activate account

In-Person:

  1. Visit broker’s office
  2. Request account opening
  3. Fill forms
  4. Submit documents
  5. Receive account details
  6. May get access same day or within few days

Account Activation

Most brokers require you to:

  1. Fund your account (initial deposit)
  2. Verify your phone number
  3. Set up security questions
  4. Change temporary password

Step 4: Fund Your Trading Account

Before you can buy shares, you must have money in your broker account.

Funding Methods

1. Bank Transfer

  • Get broker’s bank account details
  • Transfer from your bank (online, mobile app, or branch)
  • Use your trading account number as reference
  • Allow 1-2 hours for processing

2. M-Pesa/Mobile Money

  • Broker provides Paybill number
  • Use M-Pesa to send money
  • Use your account number as reference
  • Usually instant

3. Cheque

  • Write cheque to broker
  • Deliver to their office
  • Takes 2-3 days to clear

4. Cash Deposit

  • Deposit directly at broker’s bank
  • Use broker account details
  • Include your account number
  • Get deposit slip as proof

How Much to Deposit?

Consider:

  • Minimum investment requirement (if any)
  • Price of shares you want to buy
  • Broker commission (1.3-2%)
  • Other fees

Example:

  • Want to buy KES 10,000 worth of shares
  • Commission: 2% = KES 200
  • Total needed: ~KES 10,500

Tip: Deposit slightly more than you plan to invest to cover fees.

Step 5: Research & Choose Shares

Don’t buy randomly. Do some homework first.

Where to Research

1. NSE Website (nse.co.ke)

  • Company profiles
  • Financial statements
  • Announcements
  • Current prices

2. Company Websites

  • Annual reports
  • Quarterly results
  • Company news
  • Future plans

3. Business News

  • Business Daily
  • The Star Business section
  • Standard Business
  • CNBC Africa

4. Broker Reports

  • Many brokers publish research
  • Available to clients (sometimes free)
  • Recommendations and analysis

What to Look For

Financial Health:

  • Growing revenue and profits?
  • Manageable debt levels?
  • Positive cash flow?

Dividends:

  • Does company pay dividends?
  • History of dividend payments?
  • Dividend yield?

Stock Price:

  • Current price vs historical prices
  • P/E ratio compared to industry
  • Recent price movements

Industry & Competition:

  • Is the industry growing?
  • How does company compare to competitors?
  • Future outlook?

Management:

  • Experienced leadership?
  • Good corporate governance?
  • Clear strategy?

Beginner-Friendly Stocks

Large, stable companies good for beginners:

  1. Safaricom (SCOM): Telecoms leader, stable, pays dividends
  2. Equity Bank (EQTY): Strong bank, growing regionally
  3. KCB Group (KCB): Large bank, reliable
  4. EABL (EABL): Breweries, consistent performer
  5. Co-operative Bank (COOP): Stable, good dividends

Why these: Large market cap, liquid (easy to buy/sell), proven track record

Warning: Past performance doesn’t guarantee future results. Always do your own research.

Step 6: Place Your First Order

You’re ready to buy!

Types of Orders

1. Market Order

  • Buy at current market price
  • Executes immediately (during trading hours)
  • Best for beginners
  • You’ll get whatever price is available now

Example: Safaricom trading at KES 20.50. You place market order for 100 shares. You’ll buy around KES 20.50 (might be KES 20.45-20.55).

2. Limit Order

  • Buy only at specified price or better
  • May not execute if price doesn’t reach your limit
  • Good if you want specific price

Example: Safaricom at KES 20.50. You set limit order at KES 20.00. Order only executes if price drops to KES 20.00 or below.

Tip for beginners: Use market orders—they execute immediately.

How to Place Order (Online Platform)

Step 1: Log in to broker’s trading platform

Step 2: Search for stock

  • Type company name or stock code (e.g., “SCOM” for Safaricom)

Step 3: Click “Buy” or “Place Order”

Step 4: Enter details:

  • Number of shares you want
  • Order type (Market or Limit)
  • If limit: Your price

Step 5: Review:

  • Total cost (shares + commission)
  • Check you have enough funds

Step 6: Confirm order

Step 7: Wait for execution

  • Market orders: Usually instant (if market is open)
  • Limit orders: When price reaches your limit

Step 8: Receive confirmation

  • SMS and/or email
  • Check “Portfolio” or “Holdings” in platform

How to Place Order (Phone/Email)

If no online platform or you prefer:

Step 1: Call or email your broker

Step 2: Provide:

  • Your account number
  • Stock you want (name or code)
  • Number of shares
  • Order type (market or limit)

Step 3: Broker confirms details

Step 4: Broker places order

Step 5: Receive confirmation (SMS/email)

Trading Hours

NSE Trading Hours:

  • Monday-Friday: 9:00 AM - 3:00 PM
  • Closed: Weekends, public holidays

Order Timing:

  • Orders placed during trading hours: Execute immediately (market orders)
  • Orders placed after hours: Queue for next trading day

Costs Breakdown

Example: Buying KES 10,000 worth of Safaricom shares

  • Share cost: KES 10,000
  • Broker commission: KES 200 (2%)
  • NSE levy: KES 2
  • CMA levy: KES 3
  • CDSC fee: KES 5
  • Total cost: ~KES 10,210

Fees vary slightly by broker—check their fee schedule.

Step 7: Confirm Your Purchase

After order executes:

Check Your Portfolio

On broker platform:

  • Go to “Portfolio” or “My Holdings”
  • You should see your shares listed
  • Number of shares
  • Current value

Receive Contract Note

Within 24 hours, broker sends Contract Note:

  • Details of transaction
  • Number of shares bought
  • Price paid
  • All fees
  • Settlement date

Keep this document—it’s your proof of purchase.

Settlement (T+3)

Settlement = Shares officially transferred to your CDSC account

T+3 means: 3 business days after trade

  • Trade on Monday → Settle on Thursday
  • Trade on Friday → Settle on Wednesday (skips weekend)

Before settlement:

  • Shares appear in broker platform
  • But not yet in your CDSC account

After settlement:

  • Shares in your CDSC account
  • You’re the official owner
  • Eligible for dividends (if purchased before ex-dividend date)

Check CDSC Account

After settlement:

  1. Visit CDSC website or use their portal
  2. Log in (or create account if you haven’t)
  3. View your holdings
  4. Confirm shares are there

Step 8: Hold or Trade?

For Beginners: Buy and Hold

Strategy: Buy good companies, hold for years

Why:

  • Avoid transaction fees from frequent trading
  • Let compound growth work
  • Less stress
  • Time in market beats timing market

Action: Check portfolio monthly or quarterly, not daily

Collecting Dividends

When companies declare dividends:

  • Announced at AGM
  • Check ex-dividend date (must own shares before this date)
  • Dividend paid to your bank account (the one registered with CDSC)
  • Usually within 30-60 days after AGM

Don’t forget: Update your bank details with CDSC if you change banks!

Adding to Your Position

Regular investing:

  • Buy more shares monthly or quarterly
  • Dollar-cost averaging (buy in small amounts over time)
  • Reduces risk of buying all at wrong time

Example:

  • Instead of KES 50,000 all at once
  • Invest KES 10,000 per month for 5 months
  • Average out price fluctuations

Common Mistakes to Avoid

1. Following Hot Tips Without Research

Mistake: Friend says “Buy XYZ, it will double!” and you buy blindly

Fix: Do your own research; understand what you’re buying

2. Investing Money You Need Soon

Mistake: Invest school fees, rent money, emergency fund

Fix: Only invest money you won’t need for 5+ years

3. Panicking During Market Drops

Mistake: Market falls 10%, you sell everything at a loss

Fix: Expect volatility; hold through downturns; buy more if possible

4. Putting All Money in One Stock

Mistake: “Safaricom is great” → 100% in Safaricom

Fix: Diversify across at least 5-10 different stocks, different sectors

5. Ignoring Fees

Mistake: Trading frequently, fees eat up profits

Fix: Minimize trading; hold long-term

6. Not Keeping Records

Mistake: Lose contract notes, can’t track cost basis for taxes

Fix: Save all documents (digital or physical)

7. Checking Prices Every Hour

Mistake: Obsess over daily price movements, stress yourself

Fix: Check monthly; focus on company fundamentals, not daily noise

Selling Shares (When the Time Comes)

Process is similar to buying:

  1. Log in to broker platform
  2. Select stock from your portfolio
  3. Click “Sell”
  4. Choose number of shares
  5. Market or limit order
  6. Confirm
  7. Receive confirmation
  8. Money credited to broker account (after settlement)
  9. Withdraw to your bank account

Costs: Similar fees (commission, levies)

When to sell:

  • Need money for goal you invested for
  • Company fundamentals deteriorate
  • Found better investment
  • Rebalancing portfolio

When NOT to sell:

  • Stock price dropped (temporary)
  • Friend told you to
  • Panic from market crash
  • Impatience (held only few months)

Tax Implications

Dividends:

  • Withholding tax: 5% (usually deducted before you receive)
  • No further action needed

Capital Gains:

  • Currently, capital gains on stocks may be exempt
  • Check current KRA regulations
  • Keep records of buy/sell prices

Consult: Tax advisor for your specific situation

Tips for Success

  1. Start small: Buy 1-2 stocks first, learn, then expand
  2. Invest regularly: Set up standing order for monthly investing
  3. Reinvest dividends: Use dividend money to buy more shares
  4. Diversify: Don’t put all eggs in one basket
  5. Think long-term: Minimum 5 years, ideally 10-20 years
  6. Stay informed: Read business news, company reports
  7. Don’t trade emotionally: Make decisions based on facts, not fear/greed
  8. Review annually: Check if stocks still meet your criteria
  9. Keep learning: Markets and companies change; keep educating yourself
  10. Be patient: Wealth builds slowly, consistently

Checklist: Ready to Buy Your First Shares

✅ Emergency fund in place (3-6 months expenses) ✅ High-interest debt cleared ✅ Chosen and verified a licensed broker ✅ Opened CDSC account ✅ Opened broker trading account ✅ Funded broker account ✅ Researched and chosen first stock ✅ Understand order types (market vs limit) ✅ Know trading hours (Mon-Fri, 9am-3pm) ✅ Calculated total cost (shares + fees) ✅ Committed to holding long-term (5+ years) ✅ Ready to stay calm through market ups and downs

Next Steps

  1. If you haven’t: Open your CDSC and broker accounts this week
  2. Choose your first stock: Research 2-3 companies, pick one
  3. Place your first order: Start small (KES 5,000-10,000)
  4. Document everything: Save contract notes, track your investment
  5. Set calendar reminder: Review in 3 months, then quarterly
  6. Keep learning: Read next articles on dividends, trading psychology, avoiding scams

Remember: Every successful investor started with their first share purchase. Don’t let fear of the unknown stop you. Follow these steps, start small, stay disciplined, and you’re on your way to building wealth through the NSE. Welcome to stock ownership!