Equity Trading

Explore the fundamentals of equity trading, explaining what shares are, how companies list on the stock exchange, and how investors buy and sell equities through licensed brokers. It also covers the key ways investors earn returns, the role of the Nairobi Securities Exchange, and the risks and opportunities associated with trading shares.

Equity trading is the act of buying and selling shares of publicly listed companies on a stock exchange like Nairobi Securities Exchange. Simply, when you engage in equity trading, you are essentially buying a small piece of ownership in that company. This piece of ownership is referred to as a share or stock.

A private company goes public and performs an Initial Public Offering (IPO) to issue shares and raise capital for expansion. These shares are then listed on a stock exchange. An investor (or trader) uses a licensed broker like Fintrust Securities to place an order to buy or sell a specific number of shares of a specific company. The order is sent to the stock exchange. The trade is executed when a buyer's bid price matches a seller's ask price

An equity trader or investor can potentially earn returns in two primary ways: either Capital Gains or dividends. This is the most common goal for traders.

Equity trading is dynamic and offers significant potential for returns, but it also carries high risks due to the volatility of stock prices

Risk Considerations and Disclosures

Investments in fixed income securities carry risks common to debt instruments, including credit risk, liquidity risk, interest rate risk, and prepayment or extension risk. Bond prices move inversely to changes in interest rates, meaning a general rise in interest rates may cause bond prices to fall. Securities with variable or floating interest rates are generally less sensitive to interest rate movements than fixed rate securities, however, if interest rates do not change as expected or if they fall, variable or floating rate securities may not increase in value and may even decline. Credit risk arises when the issuer fails to pay interest or principal, and this risk tends to be higher for high yield or lower rated bonds. Prepayment risk occurs when the issuer repays principal sooner than anticipated, while extension risk occurs when repayment happens more slowly than expected. As a result, fixed income investments may be worth less than the original amount invested at redemption or maturity.

This material does not constitute an offer or solicitation in any jurisdiction, including Kenya, where such an offer or solicitation would be unauthorised or unlawful.

Prospective investors should familiarise themselves with any legal, tax or exchange control obligations that apply in Kenya or in their country of residence or domicile, as these may affect the investment.

This information is provided for educational and informational purposes only. It should not be interpreted as investment advice or as a recommendation to buy, sell, or hold any security. It is not a substitute for personalised guidance from a qualified financial adviser. The suitability of any investment depends on an investor's financial situation, objectives, and risk tolerance.

Past performance does not guarantee future results. The value of investments and the income generated from them can fluctuate and may go down as well as up. Loss of principal is possible.

This material may refer to general market, economic, industry, or sector conditions in Kenya or globally. It does not constitute research or financial analysis and should not replace independent due diligence.

Fintrust Securities Ltd, a licensed securities dealer regulated by the Capital Markets Authority of Kenya, applies internal risk management procedures. However, this does not imply that fixed income or other securities investments are low risk.

Any reference to a specific issuer, company, or security does not constitute a recommendation to invest in that issuer or security. There is no assurance that future investment decisions will achieve profitability or match the performance of any securities mentioned.

Views and opinions expressed in this material are current as of the date of publication and are subject to change without notice. This information may not reflect the most recent market or regulatory developments.