Sunday, September 25, 2011

How to start investing (104); Various Types of investments in Ghana; The Money market..

The Ghanaian investment community has been developing every day and it is good to know that, the other side of the investment coin (the money market) is very rewarding as compared to other economies on the African continent or the whole world as a whole.
The money market trading involves trading of low risk securities which are usual short term unlike the capital market. Most people perceive this market as less rewarding since it is a low risk market. But in a developing country like Ghana where Treasury bill rates are above 12% and other low risk rate securities are becoming good investments, what else can you think about than to venture.
Let us now look at the various short term securities in the Ghanaian investment community and how to take advantage of them.
First, is the Treasury bill which is a product of the Bank of Ghana on behalf of the Government of Ghana. It involves lending your money to the Government at a fixed interest rate. This rate is fixed and there is very little or no risk at all when it comes to payment.  The Treasury bill is in form of 91-day bills, 182-day bills or 364-day or 1-year note. Each of these bills has separate fixed rate interests and mature after such days after which the Government will repay the principal plus the interest on it to the investor. Most commercial banks and brokerage houses in the country offer this investment on behalf of the Bank of Ghana. It is safe and short term.
Another investment in Ghana is the Certificate of Deposits (CD). This investment is a financial document showing that a person or organization has a specified sum on deposit at a bank, usually for a set period which comes with an interest rate. Most large companies in Ghana invest in this and very few individuals get the chance to invest in this because in involve very high amounts.
Fixed deposits are another form of investment in Ghana offered by most commercial banks at attractive rates. They are safe and good for low risk takers or investors. Most people also consider savings accounts of the various commercial banks as investment option. In Ghana for instance, banks offer attractive interest rates on the accounts of money savers hence people prefer them to other investments.
Investors must note that these short term securities are good especially for low risk takers but must be understood properly. These are not good for all investment goals especially those targeted at creating wealth. Most of the time people used these investment options to maintain the value of their money over some time.
Keep learning about them and take advantage of them.

Tuesday, September 6, 2011

How to start investing (103); Various Types of investments in Ghana and their risk profiles.

In the last post on this blog, I wrote on setting an investment goal. Thus if the goals is set, then we are now in the best position to look at the various investments opportunities, their risks and whether they are long term or short term.
The Capital market is a long term market and in Ghana, there are a lot of investment opportunities in this market. First is the investment in Stocks. There are shares of companies listed on the Ghana Stock Exchange(GSE) ranging from the financial industry that includes banks like Standard Chartered Bank (SCB), HFC bank, UT Bank, SG-SSB, Ecobank Ghana limited (EBG), CAL bank , through the manufacturing , mining, agriculture industries to the food/ beverages industries. There are about thirty six (36) companies currently listed on the GSE with various prices from as low as 0.05p per share to as high as GHC 55 (about $ 38) per share.

There are two indexes for the exchange to help investors know the performance of the market and they are the GSE Composite Index (GSE-CI) which includes all stocks on the GSE and the GSE Financial Stock Index (GSE FSI) which include only the financial stocks and currently have a year to date rate of 13% and 6% respectively.
Investors should note that, investing in stocks is a risky but rewarding business hence not advisable until one is properly abreast with the mechanisms involved. Moreover, there are over fifteen (15) brokerage firms that could assist you in making the right investments when it comes to stocks.
Other investment opportunities in the capital market of Ghana include investing in Bonds and Mutual funds. Bonds are debt instruments issued for a period of more than one year with the purpose of raising capital by borrowing. The Government of Ghana has issued some many bonds in the past and is still issuing from time to time. There are 2-years, 3-years and 5 years government bonds available for investors with very good coupon rates.  There are corporate bonds like the dollar bond from HFC bank.
Mutual fund as defined by is an investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds in Ghana are managed by most brokerage houses like Databank Financial services, SDC financial services; EDC brokerages firm and so forth. Some mutual funds in Ghana are as follows; IFUND (EDC brokerage ltd.), SAS fortune fund (SAS brokerage), Mfund, Ark fund, Balanced Fund and EPACK (Databank brokerage ltd). Also we have HFC equity fund, HFC unit trust, Stanbic Investment fund, Campus mutual fund, First fund (First bank) and a lot more with various bid and sale prices. These funds have different time horizons and risks profile hence investors with less knowledge about the financial market should seek advice before investing.
Knowing your personal risk tolerance is the key to good investing. Investors assess themselves and know their ability to take risks. Some investments are high risk investment and this means that, the probability of you, the investor losing your principal (initial amount deposited in the investment) is high; also the probability of you making very high gains is high. You would have a high risk tolerance if you have the ability or heart to stand the pressure of losing some or even the entire principal. On the other side, not having the courage to lose a cent is a sign of having low risk tolerance.
My advice is for you is to follow this blog in order to learn more about the financial market and investing as a whole. In the next post, we would look at the other side of the financial market in Ghana which is the money market (short term) investment options.

Keep learning and investing.

Thursday, September 1, 2011

How to start investing (102); Setting the Investment Goal.

The journey to success in investment continues as we look at the basics to investing.
Every good investment should have a goal or an objective. Setting an investment goal is important and must be taken seriously by every aspiring investor. Do not look at a friend’s success in the stock market and just rush to invest. There should be a reason to invest. This objective would help select the best investment to undertake with respect to your risk profile and time horizon.

Setting investment goals like, “I want to invest in order to be very rich” is not realistic and too vague. Investment goals must be realistic and very specific.

You can set a target amount to hit by a particular time. This would advise your choice of investment. People set investment goals to pay school fees, pay bills, service debts, build businesses and so forth.
Setting a good investment goal does not guarantee success of investment but it gives purpose and direction to the investment. Success of the investment would depend on the investment itself and market activities. Getting your funds into the right investment at the right time would make you a successful investor. Do not be afraid of losing your money, just get the basics right.

To start investing, an individual must select an investment to suit the purpose and risk profile. Each investment has an amount of risk, meanwhile some investment risks are so insignificant, and hence such investments are called risk-free investments.
In the next post, we would continue with the investment series and learn about the various investment options in Ghana.
Follow the next post, “How to start investing 103: Various Types of Investments, in Ghana and the risks.”


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