In a typical market, you go directly to the vendor, negotiate prices and get your goods. However, trading in shares is a bit different. Shares are traded through stock brokers. Unlike the land or house brokers, stock brokers are licensed by the Capital Markets Authority and must meet a certain criteria.
Their main purpose is to analyse the prospectus of particular companies listed on the stock market. Then, advise on which company to invest in depending on one’s investment needs, the period for which they want to invest.
Companies operations behave differently. They operate in varying industries, generate different returns which trickle in at different times. The broker looks at all these factors and is able to recommend the best company one can invest in their money.
The minimum number of shares one can buy is 100. If you are to invest in Uganda Clays for example which is trading at Ugx24, all what you need is just Ugx2400! Besides this, you will incur a 2% commission to the brokerage firm.
Stocks; worth investing in?
If you are looking for quick wins, try your luck elsewhere. The stock market is not like land where you buy and sell tomorrow at a relatively higher price. It takes time. Take the example of Umeme. The company came to the stock market in 2012. At the Initial Public Offering (IPO), each share at that time was costing Ugx245. If one bought 1000 shares, they invested Ugx245,000. Four years down the road, Umeme is trading at Ugx530. The investment has now doubled.
“While you can invest as low as Ugx 13,000, it is important to understand that if you are looking at making an investment, focus on how much you are putting in to get a reasonable return. The lower your investment, the lower your returns,” notes Charles Nsambya, Communications and PRO at CMA.