🔑 Building Wealth in Stocks: Entry Timing, Portfolio Balance & Exit Timing

🧠 Trading Mindset – Short vs Long Term

When it comes to the stock market, every investor has to decide:

👉 Am I here for quick wins or for long-term growth?

Both approaches can make money, but they require different mindsets.

⏱️ Short-Term Trading

Buy low, sell high — profits come from frequent trades.
Requires constant timing, analysis, and fast decisions.
Traders rely on charts, price patterns, and market news.

⚡ Example: If Safaricom shares dip to KES 14 and you buy, then sell a week later at KES 16, you pocket the difference.

👉 Short-term trading is like flipping a house: you buy, fix quickly, and sell for profit.

🧘 Long-Term Investing

Focus is on holding strong companies for years.
Benefits from dividends + compounding over time.
Investors study fundamentals instead of daily price changes.

📌 Example: If you invested in Equity Bank shares 10 years ago and held, you’d have earned dividends plus capital gains from the share price growth.

👉 Long-term investing is like planting a mango tree: you wait patiently, but harvest fruits for many years.

🔍 What to Check Before Buying Shares

Before putting money into any company, think of it like buying land — you wouldn’t just pay blindly.

You’d check soil quality, documents, and future plans.

Similarly, with shares, you must check the company’s fundamentals.

🩺 Company Fundamentals Made Simple

Think of it like a medical check-up before marriage 😅.

You need to know if the company is “healthy” enough for your money.

📈 Profits – Is the company making money consistently?
💸 Revenue – Are sales growing or shrinking?
🏦 Debt – Do they owe too much, or manage loans well?

🧾 Example:

Safaricom → High revenue, growing profits, low debt = ✅ strong fundamentals.
Kenya Airways (KQ) → High debt, unstable profits = ⚠ risky investment.

🏛️ Corporate Actions (Bonus, Dividends, Rights Issues)

Companies sometimes take actions that directly affect shareholders.

💵 Dividends – Company shares part of its profits with you.
🎁 Bonus Shares – Free extra shares for loyal shareholders.
🧨 Rights Issue – Chance to buy more shares at a discount (but you must pay).

👉 Analogy:

- Dividends = Rent from land you own.

- Bonus shares = Getting an extra plot for free.

- Rights issue = Your landlord offers you another plot at a discount — but you must buy it.

📢 Sources to Use Before Buying

Don’t just guess! Always check for latest company news and reports:

NSE (Nairobi Securities Exchange) & CMA websites
Broker reports (AIB-AXYS)
Business media (Business Daily, Nation, Standard)
Google News or X/Twitter finance pages

⚠️ Tip: If a company is always in court, under audit, or posting frequent losses — that’s a red flag 🚩.

🌱 Focus on Sectors That Are Growing

Not all industries perform the same every year.

Some thrive, others struggle. Smart investors plant their money where growth is happening.

🔥 Hot Sectors in Kenya (2025):

📲 Telecom – Safaricom (mobile money, data)
🏦 Banking – Equity, KCB, Co-op
🏭 Manufacturing – EABL, BAT, Bamburi Cement
⚡ Energy – KenGen, KPLC (renewables & electricity demand)

👉 Analogy: Sectors are like different farms. Some produce more in certain seasons. You plant where the soil is fertile.

✅ Checklist Before Buying a Share

Profits going up 📈
Dividends or bonus history 💵
Company in the news for good reasons 📰
Sector is active and promising 🌱
Debt not too high 🏦
You understand what the business does 💡

👉 If most answers are “Yes”, you’re on the right track.

📉 When to Sell a Stock

Knowing when to sell is just as important as knowing what to buy. Don’t just hold blindly — watch for signals and act smart.

1️⃣ Red Flags — Time to Rethink!

Sometimes, a stock starts showing warning signs. If you spot these, it may be time to get out:

✅ Falling Profits – If earnings keep dropping quarter after quarter, the company may struggle long-term.
Example: Company made KES 3B profit last year, now only KES 1B — not a good sign.
🚫 No Dividends – If a company suddenly stops paying dividends with no plan, it may mean cash flow problems.
Example: If BAT Kenya suddenly stops paying dividends = worry!
⚠️ Governance Issues – Frequent director resignations, failed audits, or endless court cases are major red flags.

🧠 Analogy: If your boda boda has engine problems, fuel leaks, and shady mechanics, do you still keep riding it?

2️⃣ When to Lock in Profit

The goal of investing is to grow your money, not just hold forever.

💰 If your share price has risen significantly, it may be wise to sell and secure profit.
📊 Example: You bought EABL at KES 130. It rises to KES 170 → 30% gain! You can sell some (or all) to lock in profits and reduce risk.

🧠 Tip: Always set a “target price” when you buy, and stick to it.

3️⃣ Recycle into a Better Stock

Sometimes, another stock looks more promising. Move your money where it works harder.

📌 Example: You hold Kenya Airways (KQ), which hasn’t grown in years. But KCB just announced strong profits and a dividend. 👉 Sell KQ and buy KCB.

🧠 Analogy: It’s like moving from a dry farm to a green one before planting season.

4️⃣ Rebalancing Your Portfolio

Too much money in one stock or sector = dangerous.

📉 If banking stocks drop, and all your investments are in banks, your whole portfolio suffers.
🔄 Solution: Sell some overweight positions and invest in undervalued sectors.

Example: You hold 70% in Safaricom. Sell part and spread into Energy (KenGen/KPLC), Manufacturing (BAT), or Banking (Equity) for balance.

📋 Summary – When to Sell Checklist

✔️ Profits are falling
✔️ Dividends stopped without reason
✔️ Governance issues / frequent audits
✔️ You’ve hit your profit target
✔️ Better opportunity elsewhere
✔️ Too much exposure in one stock/sector

🪙 Dividend vs 🚀 Growth Stocks

🪙 Dividend Stocks (Buy & Hold)

Pay regular income (dividends)
Examples: BAT, KCB, Safaricom
Ideal for: passive income seekers, retirees

🚀 Growth Stocks (Buy & Sell – capital gains)

Reinvest profits into expansion instead of dividends
Ideal for: long-term capital growth

🧠 Analogy: Dividend stocks are like rental houses giving you rent now. Growth stocks are like buying land to sell at a higher price later.

📊 Strategy – Technical vs Fundamental Analysis

📈 Technical Analysis

Focus: price charts, trends, volume
Tools: Moving Averages, RSI, candlesticks
Ideal for: short-term traders

📘 Fundamental Analysis

Focus: financial health, earnings, business model
Tools: P/E ratio, revenue, debt
Ideal for: long-term investors

🧠 Tip: The best investors combine both!

🛠️ Must-Have Tools for Stock Research

📃 NSE Price List – Daily updates of prices, volume, top gainers/losers
📊 AIB Reports – Analyst insights, sector reviews, future outlook
📈 Company Financials – Revenue, profit, debt, cash flow

🧠 Tip: Always cross-check multiple sources.

🔢 Key Ratios — Explained Simply

P/E Ratio (Price to Earnings): Price ÷ Earnings per Share = shows how expensive a stock is.
Example: P/E of 10 means you pay KES 10 for every KES 1 in profit.
Dividend Yield: Dividend ÷ Share Price = how much cash return you get.
Example: Share price KES 100, dividend KES 5 → 5% yield.
Market Capitalization: Share Price × Total Shares = company size.
Example: Safaricom is a large-cap; Eveready is a micro-cap.