Investment options available on Zimbabwe’s capital market
Given the current global economic climate, investing has become more about letting your money grow steadily over the long-term, rather than hoping for the market to work in your favour with huge upswings. Investment products work differently when it comes to managing risk and planning for the long term. Securities are popular investment vehicles and can be used in a variety of ways depending on one’s risk profile and investment horizon.
Investors can invest in debt instruments. These represent indebtedness of one party (issuer of the instrument) to another party (lender or investor). In essence, the borrower (issuer) borrows capital from lenders issuing a promissory note promising to pay interest, called the coupon, on a predetermined basis. The issuer returns the principal amount, also called the face or par value, to the investor on the maturity date. Alternatively, the principal amount can be repaid in agreed instalments over a period of time. Thus, debt instruments are effectively promissory notes issued to investors, who are in effect creditors of the firm, for a fixed period of time within which they earn a return and after which they are redeemed (repaid) or converted to some other asset as may have been agreed at inception.
Investors have the option to invest in shares, often referred to as “equity”. Shares represent part ownership in the business. In some companies the shareholders themselves may sit on the board of directors. By speaking out, and asserting their right to be kept informed on appropriate developments, shareholders are able to influence direction and policy of the company. Equities come with certain rights including the voting rights to which the investors are entitled.
Unit trust is also another available option for investors. A unit trust is a fund where your money is pooled together with other investors to invest in a portfolio of securities and managed by a fund manager based on the fund’s investment objective. When you buy a unit trust, you are investing in a diversified basket or portfolio of securities managed by professional fund managers that have carefully screened and put on their shelf for you to invest in, instead of choosing the assets one by one yourself.
The main advantages of investment into a Unit Trust fund is the reduction in investment risk by way of diversification as well as having approved professional investment managers manage the funds. Unit trust investments generally tend to invest in a range of individual securities. However, if the securities are all in a similar type of asset class or market sector then there is a systematic risk that all the shares could be affected by adverse market changes. To avoid this systematic risk, investment managers may diversify into non-correlated asset classes. For example, investors might hold their assets in equal parts comprising of equities and bonds. Unit Trusts allow investors to invest in a diversified range of assets with less starting capital. As their money will be pooled with that of other investors in the same unit trust. Investors can afford to have a more diversified portfolio than they would if they had to buy them directly. Investors get access to more options in sectors and investments that are not easily accessible as to them as individuals.
The choice of which investment option best suits a particular company depends on each individual’s circumstances and other factors to consider include their risk appetite. Expect investment should be sort before an individual invests on various investment options available on the stock market.
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