A veteran investor's guide on investing in the stock market

Alois Chami is a self-made investor with shares in over 60 listed firms in the Nairobi Stock Exchange. The veteran investor, who has made a fortune from stock market, has been at it since 1973.

GET SOME STOCKS If you get a bit of capital, invest in the stock exchange. Start with at least Sh50,000. You only give the money to the stockbroker; they trade for you and give you the profits later on. Once you give out your money, you become a sleeping partner and the company becomes active. Later on you get profits and dividends. The initial capital you gave, which is your money, is protected. Nowadays there are regulations from the CMA and the NSE that protect shareholders in case a company goes under.

BE BOLD When you want to invest, you have to have some confidence about it. When I started out, I would invest half of my salary in shares. I started alone, without anybody advising me. I went to the stock exchange back in 1973, found people on the trading floor and I got about three brokers. They told me "If you buy from this counter, if it is low today and goes up tomorrow and you come and sell, you will get additional money." I was inspired because I figured that since I will not have physically worked for that money, unlike in my 9-5 job, there was a good future in it. I started right away.

GO TO THE BANKS If you want to start from scratch, approach any stockbroker for advice. We depend on them for whatever we do; buying and selling. Nowadays they are found within banks, which have taken over stock broking through subsidiaries and it is the best way because they keep money and cannot be broke. If the stock broker is weak, the bank supports the brokerage side with its own money, unlike before when it was done by companies owned by individual people who would sometimes lose money. Banks have departments to advise you and departments of selling and buying.

BUY WHILE THE PRICES ARE LOW The best time to invest is when the company prices are low. This has been my guiding principle all through. Watch them, and if the company works well and the shares prices go high, then you can offload some.

YOU WILL NOT ALWAYS GET IT RIGHT We invested in some companies that went under later, like Kenya Finance. Nowadays that does not happen because there are regulations, but sometimes we also buy into companies that do not give dividends. Those mistakes are unforeseen. They only appear when you have already bought shares. If you invest in a company which is starting out, you can buy shares at Sh10 and then it slows down and starts selling at Sh5. It is not a mistake of your own making but of the company that has listed itself on the stock exchange. You cannot avoid that, sometimes.

READ THE SIGNS Monitor the stock exchange to see how share prices are performing. Also, if a company has good results yearly and quarterly, it gives you an upper hand of knowing whether it is doing well. You compare the half year with the other year and that will show you whether it is going to do well or not.

STAY INFORMED Companies announce their quarterly reports in the press. For shareholders, they also post brochures and sometimes brokers know how different companies are performing. So invest, buy shares and when your name is on CBS/CDS records, they get your contacts and you will start getting information. Performance of a company also depends on the CEOs and Finance Directors. Business news reports in the press also let you know which individuals are doing well and which ones are not.

KEEP THEM ON THEIR TOES You do this by asking questions. I ask so many questions and sometimes I call companies I have invested in, wanting to talk to CEOs and they give me a chance. AGMs are must attend events for me as it gives me the opportunity to continue asking questions. I tell them what I would like to understand and they explain to me, and sometimes they do that so that you do not take touchy questions to the public domain.

LEARN SOME ACCOUNTING BASICS When you go to the AGMs and meetings where companies announce results, they will give you a big booklet that has balance sheets, cash flow statements, profit and loss statements and so on. I did accounting in 1965, so I know a bit of it. When you understand accounting, you are able to ask the right questions. That way, you get specific answers. Those who do not understand accounting just ask general questions. And if you smell a rat, you can sell your stock.

DIVERSIFY YOUR PORTFOLIO I decided to have many companies which are listed on the stock exchange in my portfolio, so that if one does not do well, another one doing well will recover my loss. I wanted to buy in many because some do not pay dividends, while others will pay big dividends and that covers the weak ones.