How stock markets benefit both the economy and the investors

Well-functioning stock markets enable economic growth and development by facilitating the mobilisation of financial resources and by bringing together those who need capital to innovate and grow, with those who have resources to invest. They do this within an environment that is regulated, secure and transparent Exchanges also seek to promote good corporate governance amongst their listed issuers, encouraging transparency, accountability and respect for the rights of shareholders and key stakeholders. However, despite playing a crucial role, the link between exchanges and economic development is not widely-understood or appreciated.

Without stock markets, businesses would largely resort to borrowing huge loans from banks or individuals with well-oiled pockets which must be repaid with interest. Fortunately, businesses in both the developed and developing world can issue shares to the public, raising vast amounts of cash that doesn’t come along with a repayment burden (public companies are under no obligation to pay dividends, especially when they incur losses). When businesses have access to such capital, they can easily expand their operations and create more job opportunities. From a national perspective, this will lower unemployment levels, and enable a government to earn move revenue from business taxes.

Stock markets provide a trading platform for governments too. Sometimes a local, state or national government may need more money to develop a community housing estate, build a water treatment plant or initiate any other public projects. Instead of increasing taxes to raise the required revenue, it can issue bonds through the stock market. When investors buy these bonds, the government is able to raise the money it needs to launch various projects that can ease the cost of living or even create jobs for locals. In the long run, this improves the economy. Investments, whether in the financial markets or product markets (agriculture, real estate, manufacturing etc.), are a key driver for economic trade, growth and prosperity. As governments focus on creating policies like lowering interest rates that promote a culture of investment, stock markets are gaining prominence as a top destination for investors. Increasingly, more people are looking to invest in companies with growth potential. You don’t have to look further than Warren Buffet, one of the richest men of our times, to know that stocks create billionaires. For investors, stock markets are huge auction houses. Every day, investors are buying and selling their shares. This makes securities a liquid investment. When investors want to exit an investment, it is quick and easy to find a buyer. Other assets are much more difficult to sell. If you invest in an investment property, it could take time to find a buyer and get your money out. With securities, investors can find a buyer the very day. C-TRADE comes handy for investors who wish to exit as they are given the option of exiting whenever they want to.

Given that the price of securities fluctuates up and down depending on the performance of the companies as well as other developments in the economy there is a real opportunity for investors to make a profit through buying and selling securities in the secondary market. C-TRADE further enables investors to keep in touch with their investments remotely so they can make quick decisions in certain market conditions which needs to be acted on urgently. The general principle is very simple; one should buy a security when the price is low and sell the security when the price is high.

Outside capital growth, investors can also receive income from their investment in the form of a dividend. While not all securities offer dividends, there are those that do deliver periodical payments to investors. These payments arrive even if the stock has lost value and represent income on top of any profits that come from eventually selling the stock. Investors can hold on to their shares whilst benefiting from dividends.

To start investing on the ZSE and FINSEC listed counters on the go, simply download the C-TRADE mobile app or dial *727# across all mobile networks. Alternatively visit ctrade.co.zw to register. For more information visit ctrade.co.zw or call the C-TRADE helpdesk on the following toll-free numbers:

Econet subscribers— 08080277

Netone subscribers— 08010077

Live chat on web portal Email C-TRADE on ctrade@escrowgroup.org

WhatsApp 0737594405