Today, when you think of an online broker, you no longer have to think of a single person, such as an insurance agent or mortgage expert. Rather, most brokers in the online broker comparison are classic service companies. Not infrequently, large banks also offer such a service as part of a CDS account to be set up there. You can find out which offer has the best conditions in just a few minutes by using the online broker comparison on our website.
You will also get a lot of knowledge about the topic if you read the following paragraphs of our guide. We not only go into the best way of trading in securities or managing a securities account, but also explain basic investment strategies.
Modern online brokers have revolutionized stock trading. While years ago investors had to pay monthly fees for the CDS account alone, some online brokers will even waive an order fee. The depot is free of charge with most providers these days. This makes trading in shares and ETFs attractive for private investors and small sums. But which provider is the best online broker with the best price-performance ratio for you? In this article you will find some details and analysis for the best online broker comparison in Kenya.
Do you want to invest your money in funds or stocks in Kenya? Then you need a CDS account in which your securities are stored and managed. The operation is usually not much more complicated than with online banking. We present brokers suitable for beginners.
However, the providers differ greatly in terms of costs and service. With our broker comparison we help you to find the right depot. This is how you take the first important step towards a successful investment.
What is an online broker?
When it comes to an online broker, most consumers imagine a man in a suit sitting in his office using conversational tricks to trick clients into overpriced stocks. The film landscape in recent years has helped establish a certain image of an online broker. Today, a broker, whether online or not, is no longer a single person, but a company that deals in securities on your behalf. A broker is an intermediary or middleman. He works at the interface between investors and the securities market and is responsible for executing securities orders, the so-called brokerage. In this work, the broker trades securities such as shares, foreign exchange, goods or commodities on stock exchanges, but also on over-the-counter trading places, for the account of the customer. An online broker essentially does the same thing. The only difference: In contrast to the broker, online brokers enable brokerage predominantly or exclusively via the Internet.
Overall, an online broker serves as an extension of the customer. Even today, as a private individual, you still need a broker who acts as a kind of intermediary or middleman if you want to take action in the markets. The online broker forms the link between you as an investor on the one hand and the stock exchanges on the other.
Of course, the service of an online broker is not free. He receives a brokerage fee for his activities, just as a real estate agent would charge a commission for real estate brokerage. This commission is often referred to as brokerage. Exactly what that participation looks like at the end of the day varies greatly from broker to broker. And this is also where your savings potential lies if you use the online broker comparison on our website. This way you will always find the best online broker for your needs.
Many Kenyan banks now offer an online broker service. But there are also online brokers who have focused purely on this activity. For the trading itself, however, all providers now rely equally on appropriately programmed computers instead of real people – one more reason why the image of the broker wearing a suit and walking around the world with a headset on the phone is no longer entirely accurate.
What should you know about stock brokers?
Unlike the direct banks, the cheap online brokers have only been on the market for a few years. We will therefore introduce them to you in a little more detail.
It is typical of so-called neo-brokers that they only charge you a symbolic fee or no fee at all when you buy shares or ETFs. Instead of the investor, the brokers get money for their services from these stock exchanges , through which they process your transactions. Depending on the price model, you pay, for example, 0 or few shillins – and the stock exchange pays another fee to the broker. This is fine as far as it goes and is listed in the statement.
What Can You Trade Through a Broker?
Modern trading offers you as an investor a wide range of options if you use the services of an online broker. Whether stocks, derivatives, bonds or funds: Anyone who has not yet dealt extensively with the possibilities of trading will be surprised at how many options are available to you. At this point we want to give you a brief overview of exactly what you can trade on such a platform. These include:
- bonds
- Shares
- derivatives
- CFDs
- ETFs
- forex
- fund
- raw materials
The range of options is overwhelming. Don’t be tempted to start with too many things at once. Some areas such as the foreign exchange market are not intended for the layman, but only for experienced traders. As a beginner, on the other hand, you should rather approach the different options step by step. Ideally, an online broker will offer you a comprehensive package with explanations, information and tips to start with, so that you can quickly immerse yourself in the topic. In any case, remember: Only invest manageable sums at the beginning until you feel safe enough to tackle a larger project.
Advantages and disadvantages of online brokers
Pros of brokers
- Low fees for account management and orders
- Trade on both national and international trading venues
- Location-independent access to your depot for faster reactions to market events
- Participation in over-the-counter direct trading possible
- Often: Special information on marginal branches or spectra
Cons of brokers
- Usually no individual investment advice like in a branch bank
- Increased risk of loss for inexperienced investors and trade
- You have to read up on the topic yourself – which is why it can take a lot of time
How do you open a CDS account?
If you have chosen a provider, you can now open the securities account (CDS account) .
First steps in the new CDS account
Your bank or broker will let you know as soon as the new CDS account has been set up. You can then transfer money from your checking account to the clearing account with a normal transfer (this step may not be necessary with direct banks if it is the same account). And off you go – you can set up a savings plan or buy ETF shares.
How do you change your CDS account?
If you want to change your depot provider, this is relatively easy. To do this, first open a new account with another bank or another broker. Most banks offer a change service. To do this, you fill out a form that authorizes the new bank to transfer the securities from your old CDS account. Before that you have to delete open orders and, if there are any, sell fragments (i.e. the fractional parts from a savings plan).
You can also select individual stocks or funds for a transfer. Check beforehand whether the securities can also be traded with the new CDS account provider – otherwise a transfer would be neither possible nor sensible. Transfers to direct banks and from well-known individual stocks and large ETFs are usually unproblematic. Before the transfer, however, you should check whether a security can be traded with the new provider. If this is not possible, then it cannot be transferred. If in doubt, customer service can help you.
However, the providers may pass on the costs of third parties, such as custodians, to you.
The online broker comparison at a glance
An online broker nowadays serves as an extension of a customer who would like to trade stocks or securities. Even today, private individuals still need a broker who acts as an intermediary or middleman if they want to take action on the stock exchange. It forms the link between you as an investor on the one hand and the stock exchanges on the other.
As a private individual, you can under no circumstances only trade in securities, shares or bonds – you will find a compact explanation of all these terms in our glossary. So-called forward transactions, for example on raw materials, water or energy, have also become increasingly popular in recent years.
The service of a broker is of course not free. After all, you can’t get cheap construction financing without a commission from the intermediary. A good online broker gets a commission for his activities, which you can also find on many websites under the nice term broker days. What exactly this participation looks like varies greatly from broker to broker – which is why an online broker comparison is always a good idea.
With the online broker comparison on this website, you can find the right broker for your project in just three steps. We have explained in detail how to use the comparison calculator directly after this overview. You can also find the complete procedure in full detail below in our guide.
The right strategy – long-term, medium-term or short-term – is crucial for every financial investment. We will explain how to find your right strategy and what you should definitely consider when it comes to security. In the FAQ area, we also give you compact answers to the most important questions that consumers keep asking when comparing online brokers.
How secure is a CDS?
Securities remain your property, they are only kept by the custodian bank. If they file for bankruptcy, you have the right to have the securities issued – they do not fall into the bankruptcy estate. You could then transfer the securities to another CDS account.
The performance of your ETFs or shares, on the other hand, is not secured. There is no guarantee that you will get X total at any given time in the future. It is therefore important that you balance the risk and make an overall plan for your investment.
Understanding the key stock broker-related terms
Have you seen the “Wolf of Wall Street” with Leonardo DiCaprio and already know everything about online brokers and their businesses? As you of course know, this entertaining film does not ideally represent the exact conditions in the trading market, but rather uses terms and words that are confusing at first glance. Below we highlight some important terms that you should understand regarding online brokers in Kenya.
Shares
Stocks are shares in a company that you as an investor can buy. If the company is economically successful, the shareholders also benefit in the form of rising stock prices and corresponding share profits. On the other hand, however, there is always the risk that the share price will fall and that a share will therefore lose value. For most Kenyans, stocks are still the entry point into the world of online trading. Especially in times of low interest rates on classic forms of investment, they promise a relatively safe alternative for more returns and higher earnings.
Bonds
Technically speaking, a bond is a fixed-income security. A typical example of bonds are government bonds such as the well-known federal securities. Roughly speaking, with these you lend money to the state through a purchase through an online broker and after a fixed term you receive a fixed interest rate after the state has bought back its bond – it undertakes to do this before the start of the contract. In contrast to stocks, bonds and especially government bonds are a very safe form of investment. Banks and various companies also offer bonds to you as a private individual. You should always check how well the company is doing financially before you decide to invest.
Assets
Assets represent different areas, different ‘financial instruments’ in which you can become active as a trader. Typical examples of assets in the context of online brokers would be bonds, stocks, commodities or foreign exchange. Cryptocurrencies have also become increasingly important in recent years. We can recommend that you spread the total investment amount as widely as possible, keeping goals such as profitability, liquidity and security in mind – more on this below in the detailed guide. Different asset classes offer you the possibility of diversification.
CFDs
The abbreviation CFD stands for ‘Contract for Difference’ and originally comes from English. A CFD is a payment agreement whose value results from the difference in the prices of the underlying asset, such as a currency or a share, at the time the CFD is sold or bought. The special thing about CFDs is that you don’t even have to own this base value yourself in order to place corresponding bets. You can also generate returns by betting on rising or falling prices instead. The risk of loss is high when trading CFDs, which is why this form of investment is only suitable for absolute beginners to a limited extent. Trading in CFDs is also usually handled by our own specialized CFD brokers.
Depot (volume)
A securities account, or more precisely a securities account, is an account in banking that is used to process securities orders such as purchase, sale or transfer and to book securities holdings. In the case of investment funds, the term investment depot is also common. The term CDS account volume refers to the current value of the securities held by a consumer that he or she has in his or her CDS account. Or to put it more simply: The corresponding value in shillings indicates how much your securities are currently worth in total. When looking for a suitable online broker, you should definitely know how high your average portfolio volume will be.
Derivatives
Derivatives are financial products whose development is directly influenced by the price of another financial product. This means that you ultimately use a derivative to speculate on how the price of another financial product will develop in the near future. A typical example would be betting on whether a company’s share price will go up or down. If you bet on falling prices and this happens, you usually get a decent return. But if the opposite occurs, you lose at least most of the capital invested. The risk with this form of investment is therefore correspondingly high, which you as a consumer must be aware of.
ETFs
The abbreviation ETF hides the designation ‘Exchange Traded Funds’, which are exchange-traded index funds. That means: As a consumer, you don’t just rely on a single share, but on an entire index. An ETF reflects exactly those values that also belong to the corresponding index. The risk of loss is comparatively low with ETFs due to the broad diversification, which is why they are an interesting option for you as a private investor. Further advantages: The effort is lower than with an investment in conventional funds and the running costs are usually kept within limits.
Fund
Funds are a comparatively safe way of investing in securities that you can order through an online broker. Nevertheless, the return on funds is significantly higher than on call money accounts or time deposit accounts, with which you have to be happy these days if you get any return at all. Funds are characterized by a broad spread of capital, which significantly reduces the risk of a total loss. If you also invest your money in various funds, you are on the safe side here. Examples of funds would be classic real estate funds or equity funds, but also bond funds or, for some time now, so-called eco-funds.
Forex
Forex is just another word for the foreign exchange or foreign currency market, which is a part of the financial market where the supply and demand for foreign exchange meet and are exchanged at a negotiated exchange rate. As an investor, you invest in foreign exchange or currencies in order to trade them. Here, the resulting leverage effects can result in immensely high profits, but the risk is correspondingly high. Anyone who wants to venture into this terrain should therefore be very familiar with the foreign exchange markets and have a good strategy in order to trade successfully. In comparison, you will find a large number of specialized forex brokers if you want to fully enter the field.
Order
Orders are a key concept in trading. An order is nothing more than your request or your order to an online broker to carry out a specific order for you. The broker has to fill an order by a certain time before it expires again. With online brokers, it is common for you to place an order over the Internet – for example via our online broker comparison. There are different types of orders, such as stop and limit orders, in which the broker should only sell or buy up to a specified price.
The costs should not be your deciding factor!
Basically, you cannot call an online stock broker the “best online broker” because they offer you the lowest costs. More factors than just the price play an important role in stock trading. A cheap trading platform that performs poorly in all other areas will not do you much good. So what else should you look out for when comparing online brokers?
For a beginner, a comprehensive range of services is much more important than the price, so that you can quickly familiarize yourself with the topic. Free demo accounts, simulations and general information about trading are ideal. In addition, you should generally pay attention to the equipment of the broker that it also includes the trading places you prefer.
To get an overview of the advantages and disadvantages of different online brokers, you should use the online broker calculator offered by different corporations. However, do not rush anything when you have the search results in front of you: take your time when choosing the right provider. If the costs are also low with a good provider, that’s the icing on the cake.