Many people who have cash have always been skeptical about investing in shares and their point was in the recent past buttressed by the collapse of the global financial markets that led to major loses on equities.
However, recently, a Chief Executive Officer of brokerage Stockbrokers Botswana, Geoffrey Bakwena, brought hope back in the markets when he told young people in Mmopane that there are two sides to the coin when investing in shares.
Bakwena, who previously worked at Botswana Stock Exchange (BSE) said ‘many people do not consider an investment in shares as an option for their long-term investment plans’ although shares have proven to be a very sound and dependable asset to hold over the long term.
“We recommend that you always invest in shares for the long term as the price may fluctuate in the short term but over the long term it should be a solid investment,” advised Bakwena.
He told the Junior Chamber International Botswana Investment Forum, under the topic ‘Investing in Shares and Securities and Pitfalls’, that the advantages of investing in shares are that investors earn dividends generally twice per annum.
Equally, some commercial banks regard shares as a form of security/collateral for loans while shares are also a form of storing wealth and saving.
Although shares can give value for money at times, the disadvantages are that the value of the shares may drop due to economic downturn, company specific factors, industrial action or simply when there are more sellers than there are buyers.
The other disadvantage is that if a person sells shares when the price is lower than that at which they bought them, they might make a loss.
“Note, however, that the investor might have earned numerous dividends before selling,” advised Bakwena.
“If the investor is not in a hurry to sell, they may wait for the shares to gain value before selling and thus realising a profit.”
Bakwena also advised the young people that shares are an investment and offer you another way of saving – like money in the bank, owning cattle, and property adding that over time, shares have outperformed inflation.
He added that the success of the shares depends on the economic performance of the listed company and the country as a whole.
Bakwena also advised that when you own a share you legally own a portion of that company and have certain rights and not privileges.
The shareholder has the right to receive dividends declared by the company, right to elect directors of the company, right to approve certain transactions that the company wishes to undertake through voting at Extra ordinary and General Meetings and right to receive a proportional share of the company’s net assets on liquidation.