What are the benefits of Investing within the Capital Mark.
Tax Advantages: Withholding tax on dividends and bonds is 5% and 15% respectively for locals, very low when compared to alternative nvestments, which attract higher taxes.
Collateral: securities represent stocks of wealth, and can be used as ollateral to secure financing such as loans from lending institutions.
Confidentiality: Investing in securities guarantees confidentiality in he management of wealth, as financial securities are intangible in nature.
Flexibility: Shares are traded in units and lots that are affordable by nvestors of different income levels. Bonds are also fairly affordable ith a minimum of Kshs. 50,000 when compared to alternative nvestments such as real estate. As such, investment in securities can be customized to the specific incomes of investors.
Operating Convenience: As investing in securities represents the separation of ownership from management, it therefore does not require the personal commitment of the investor for it to give a return. Investors are therefore saved the occupational hazards of careers, as opposed to other businesses that need the personal presence and involvement of the entrepreneur.
Liquidity: Shares and bonds are easily transferable at low transaction cost as compared to other assets such as real estate. Therefore an investor can buy and sell at considerable convenience.
Hedge against inflation: Securities prices over the long term tend to outperform inflation, therefore investment in securities can be a reliable hedge against inflation in the long term.
Spreading of Risk and Maximization of Returns: The range and variety of securities listed in stock exchanges provide investors an opportunity to minimize their exposure to specific company risk by spreading their investments across a wide selection of stocks. This benefit is made more concrete by the use of collective investment schemes such as Mutual Funds and Unit Trusts, which invest pooled savings using specialized expertise that is beyond the ability of an individual investor.
The Capital Market Authority
Finally it is important to note that among other things the Authority is charged with the role of protecting investor interests. Any investor with any complaint is advised to contact us at the Capital Market Authority.
