Why Investors Lose Money at the NSE

Investing at the Nairobi Securities Exchange (NSE) can be rewarding — but it’s also risky. Many investors have bought shares, only to see their wealth shrink. The good news? With the right strategy, you can recover and even grow stronger.

🚩 Reasons Why Investors Lose Money at the NSE

1. Buying Without Research

Too many investors buy shares because of hype, rumors, or tips from friends.

👉 Example: Buying company A just because it’s cheap, without checking the company’s heavy debt.

2. Panic Selling

When prices fall, investors rush to sell at a loss instead of holding or buying more.

👉 Example: After Safaricom IPO, it dropped to below the IPO price, what is current price and highest it have gone over time? Those who sold then may have lost.

3. Chasing Quick Profits

Short‑term trading without skill or tools often leads to losses.

👉 It’s like gambling — sometimes you win, often you lose.

4. Concentrating in One Stock

Putting all your money in one company = risky.

👉 Example: If you had only invested in some stocks, you’d have lost nearly everything or locked your money in suspended stocks.

5. Ignoring Dividends

Some investors only look at share price, forgetting that dividends are real cash returns. Missing this perspective makes them sell too early.

💪 How Investors Can Recover

Hold Strong Stocks: If you own companies with solid fundamentals (profits, dividends), give them time to recover. Basically hold and pass on to your beneficiaries.
👉 Example: Banks like KCB, Equity, Co‑op have dipped before but bounced back.
Buy in Phases (Averaging Down): If you bought at a high price, buy more when the stock dips — lowering your average cost.
👉 Example: Bought Safaricom at 40, buy again at 25, your average is ~32.
Shift to Dividend Stocks: If price recovery is slow, focus on companies that pay dividends so you still earn income.
Diversify: Spread across banks, telcos, energy, ETFs, and bonds. This cushions losses.

🛡️ How to Avoid Losing Money in the Future

✅ Do research (profits, debt, sector trends)
✅ Don’t follow hype — check official reports, CMA, NSE updates, and broker research
✅ Set targets: Know your “buy” and “sell” points
✅ Reinvest dividends (compounding effect)
✅ Regularly rebalance your portfolio

💰 How to Make Money at the NSE

Capital Gains (Buy Low, Sell High):
👉 Example: Buy EABL at 130, sell at 170 — pocket the profit.
Dividends (Passive Income):
👉 Example: BAT paying dividend per share = instant cash return.
Dividend Reinvestment: Use dividends to buy more shares → compounding grows wealth.
Long‑Term Holding: Great companies reward patient investors.
👉 Safaricom since listing at KES 5 is now worth over KES 5 + huge dividends over the years.
ETFs & Bonds: ETFs give exposure to gold, global markets. Bonds/T‑Bills offer safety and steady returns.

🪙 Why Dividend Stocks Are a Winning Strategy

Dividend‑paying stocks are a reliable way to build wealth at the NSE:

📈 Regular Income – Paid whether price rises or not
🔁 Reinvestment Option – Use dividends to buy more shares
🛡️ Lower Risk – Dividend stocks tend to be stable companies (banks, telcos, BAT, EABL)
🎯 Double Benefit – Earn from dividends + potential price growth

👉 Example:

If you own 1,000 KCB shares and it pays KES 2 dividend = you get KES 2,000 cash.

If you reinvest that into more shares, next year’s dividends grow even bigger.