THE NSE AND A TALE OF TWO INVESTORS

 THE NSE AND A TALE OF TWO INVESTORS

I have noticed a big hype over the last few months as regards investing in the stock market. I have also got questions from a number of my friends on how to go about investing in the stock market and hopefully, I answered in a helpful way. Having invested in Nairobi Stock Exchange(NSE) before, am not so much of a greenhorn in this area but maybe to delve more on the subject could be helpful to someone. But first, for the sake of someone who doesn't want to read further, we can hereby summarise this whole story by saying that making money from NSE requires character which we can also call patience. The second thing is understanding the business of the company whose shares one wants to purchase including prospects for future profitability. For patience, if you cannot lock your money for one year without meaningful profits or growth of your investment, maybe the stock market is not for you. Just to explain, KPC has an IPO chance for investors to buy shares until 19th this month and so, at only 9 bob per share. The question is, should someone  buy the shares or not? An understanding of  business will tell you that KPC enjoys monopoly in storage and distribution of petroleum products in EA region and still growing after recent acquisition of KPRL. It could be a good investment but only for the patient. To illustrate  let's take Safaricom as an example. Safaricom IPO was in 2008 and sold a share at Ksh 5. On the first day trading, shares sold at  Ksh.7 but went later on a downward trend hitting a low of Ksh.2.5 for a long time. The share price rose above the initial Ksh 5. only after 5 years. The same share is Ksh 33 today meaning that the patient over the years are reaping the benefits. Simply put stock trading is more of a long term trade unless one has several millions to make substantial gains with even a shilling change in share price. To conclude is a tale of two investors and we start with yours truly. He understood the businesses of around 5 companies that he bought and true to it between 6 months and one year, he sold out all and made on average close to double the investment but truth be told, he had only invested like 200K in it. Happy exit? Yeah. But he still thought a year was too long and alternatively, he invested in other ventures that promised quick short term returns that never was to be. He can now tell you for free that short term ...huge returns... is most of the time a fallacy. We call the second investor John. He is about 70 if not approaching there and has been in stock business for long. John is a billionaire and one of top ten highest individual investors at the NSE. I used to serve him somewhere and he was very knowledgeable sometimes reading the market months before major shifts. He moved around with an old car manufactured in early 2000's and always wore his trademark white photographer jacket which would sometimes get torn after being worn year after year. Maybe that is the extent of the  patience that is required to succeed at the NSE. But he is top ten at NSE with a portfolio of over 2B but in him, you read patience in walk, talk and conduct. He is wealthy but not bent on showing wealth in pomp and color but rather growing wealthy in strategic painstaking stock trades. He is always growing his portfolio, adding and adding, never concerned about quick gains coz his policy, wealth grows slowly with patient strategic purchase of prospective stocks. And so, even with NSE hype, do not try the stock market if you are a short term investor or short of character because to make wealth in NSE, someone has to be vereeerrrrryyyyy paaaaaatttttiiiiiieeennnnnt. Need I say more?

@Stephen Mungai