When it comes to the world of investing most people don’t know where to start, how to start and what to focus on. If that sounds like you, then keep reading.
I’ll be breaking down all you need to know to start investing today (what to focus on, the key items in investment (securities) and the benefits of investing in these securities).
Understanding certain financial terms is key tonavigating the world of investing. Let’s look at a few:
Financial securities are financial instruments or financial assets that can be traded in a financial market. Examples: mutual funds, bonds, stocks/shares, etc.
There are two main types of financial securities that are mostly traded in Ghana. These are equity and debt securities.
Equity security is a share of ownership in a company or an organization. The most common type of equity security is a common stock. Some mutual funds can be considered as equity security.
Debt security is also call fixed income security that provides returns in the form of regular or fixed interest payment and repayments of the principal when the security reaches maturity. Examples are; bonds, treasury bills, money market instruments, etc.
Having understood these, let’s get to know something here;
Benefits of investing in equity.
1. Dividends: They are paid from profit after tax of the company. Dividend are often paid at the end of financial year but some companies pay an interim dividend based on their dividends policy (6months)
2. Capital gain: Is when the share price increases over time. Let’s say at the beginning of 2021 MTNGH share price was 0.64 and at the end of the year it was 1.11- the price went up by 0.47. The capital gain difference (1.11-0.64) = 0.47 per share. This shows a return of 73.44% within the year.
Benefits of investing in debt security.
1. Return on capital: debt securities such as bonds, are designed to reward investors with interest and the repayments of capital at maturity.
2. Regular stream of income from interest payments: debt security provides investors with a regular stream of income throughout the year and they are guaranteed, promised payments which can give the investors the cash flow needed.
Which security should you choose?
There is a principle in investment that says; the higher the risk, the higher the returns.
In comparison, equity security risk is higher than that of debt security hence the return of equity security is also higher than debt security.
Although debt security will guarantee you a regular stream of income from interest payment its returns are far less than that of equity security (if they are all performing well.).
To see more benefits from your investment, focus on the equity market in 2022.
“ In the world of Investment and stock trading, it’s imperative you seek for the right information regarding when and how to trade”.
As a new investor, use free trial apps to start learning on how to trade be it stocks or forex. Moreover, it is advisable to start as early as possible as there is no perfect time to enter into the stock market.
It’s worth to know that, sufficient research on the stock in question always influences better decisions regarding investments, be it buying or selling.
It’s also advisable to have a diversified portfolio of investment as this greatly reduces risk.
“Do not invest based on emotions or greed. Always have a budget; do not over invest”.
I published a report investing in Ghana 2021 and if you paid attention to it, you should be smiling reading this. The year 2021 has been amazing for investors.
If you invested in Fanmilk, you would have made 270.37% returns on your investment. Guiness Ghana Breweries Limited made 100% and Enterprise Group made 99.29%. These stocks were the best performing for the year ended 2021.
Investing in Ghana 2022.
Globally, we are experiencing a new wave of innovation and technology. Do not neglect to take chances to look for opportunities in industries that are investing so much into technology and digitization.
This is the way to go.
The dollar is expected to hit 7 cedis in 2022, to make the best out or exchange rate, lock your money in dollars, do not save in cedis.
If you are young, do not make a mistake of not learning about blockchain and cryptocurrency. This is the future and only those who are prepared for it will make the most out of it.
Understanding a little about innovation and disruption will help you appreciate the future.
In my quest to know more about the market in 2021, I had discovered that, there are many financial investments that are actually going to yield less than 15%. In this year, look for opportunities that give you an annual return of not less than 17%. Anything you call an investment for 2022 that historically has produced a net return less than 18% will be classified a liability in 2022.
The cost of living and standard of living coupled with the rate at which government is borrowing in our country “Umuofia” is not getting any better. In order to be able to meet tax obligations in the future, invest as much now if you can.