What to look out for when buying shares in Kenya

  

Date Posted: 8/19/2012 7:39:01 AM

Posted By: moff J  Membership Level: Silver  Total Points: 485

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Trading in shares can be a lucrative business for those who know the secrets of choosing the shares to buy. For those who buy shares without making a through research and doing a critical analysis of the company whose shares they want to buy, it can be a loss making venture which will only siphon their resources.

Some of the factors to look out for are:
1. The company's share history- it is always necessary to closely examine the share prices of a company in the previous one year and note key data such as the year's high price and the lowest price. You also have to note the volume of shares that were traded during that period.

2. The current price of the share- after a careful evaluation of the history of that share price, you need to compare it with the current price of that share in order to estimate how the share is likely to trade. There are various financial management techniques of evaluating the value of a share which can be provided by the stock broker. You therefore need to engage the broker or your investment adviser in finding out the value of a share.

3. The management of the company- a company with sound management fundamentals is likely to have its shares stable and can easily appreciate. The management play a key role in determining the direction of the company and subsequently the direction of the share price.

4. Profitability of the company- companies that report high consistent profits attract a lot investors as they can afford to pay the owners high constant dividends.

5. Company's product line- The operations of a company determine its level of profitability. Companies which operate in volatile industries may have risky shares. It is important to evaluate the operations of a company and

align this with the direction of the country's economy in order to make a decision.

The above factors are not exhaustive but they provide a general guideline on what to look out for when investing in the stock market.

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