Choosing stocks
On the forefront of bridging the knowledge gap between retail investors and the more sophisticated and financial savvy is Kenya Association of Stockbrokers and Investment Banks (Kasib).
Many decisions that investors make today are not backed by expert knowledge of how the stock market works',says Ms Jane Njeru,the Kasib chief executive.
The association will be launching its investor education programme on July 30.
This programme will impart pertinent knowledge that every retail investor should be armed with while investing in the equity and bond markets.
'Some retail investors think the stock market is like gambling in a casino,where one’s person’s loss is another’s gain. What they fail to realize is that the market trades in cycles,' says Njeru.
She adds that a better-informed and educated investor is able to read key indicators which reflect market sentiments about certain stocks and therefore is better equipped to make a wise and informed investment decision.
Kasib’s investor education programme will be implemented in four key pillars. The first is the face to face sessions between Kasib trainers and investors. These sessions will be organised on a regular basis and will mostly be directed towards organised groups.
'We have in mind Saccos,chama’s,farmers,business clubs,teachers,doctors,policemen,matatu operators and others in this group,' says Njeru.
The second pillar will be done online and will involve interactive training via the Kasib website. Lessons and the training manual will be downloadable in PDF format from the website.
Quick tests will also be downloadable for investors to grade their grasp of the information.
The third is outreach and will involve Kasib trainers travelling to other towns across the country meeting and interacting with investors. This will be done through formal and informal training sessions.
The fourth is distribution of investment literature through the network of stockbrokers,investment banks and agents.
'Investors should know that the market works in cycles between bear and bull runs. It is therefore prudent to invest more during a bear run when prices of stocks are depressed,' says Njeru.
This is because prospects of registering capital gains when the prices improve in a bull run are high.
Further,when an investor buys more when prices are low,like they are currently,this has the effect of reducing the average cost of purchase of any given stocks. This is called averaging down.
mwana wa kahii. . . .