Investment Institutions

An asset that is purchased with the hope that it will generate income or appreciate in the future . In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth.

Where or how can I invest?

Bonds

Grouped under the general category called fixed-income securities, the term bond is commonly used to refer to any securities that are founded on debt. When you purchase a bond, you are lending out your money to a company or government. In return, they agree to give you interest on your money and eventually pay you back the amount you lent out.

The main attraction of bonds is their relative safety. If you are buying bonds from a stable government, your investment is virtually guaranteed or risk-free. The safety and stability, however, come at a cost. Because there is little risk, there is little potential return. As a result, the rate of return on bonds is generally lower than other securities.

Stocks

When you purchase stocks, or equities you become a part owner of the business. This entitles you to vote at the shareholders' meeting and allows you to receive any profits that the company allocates to its owners. These profits are referred to as dividends.

What are dividends?

A sum of money paid annually by a company to its shareholders out of its profits or reserves.

Where can I buy shares?

Shares can be bought through a broker. You can find them at the following companies

• Motswedi Securities
• Imara Capital Securities
• Stockbrokers Botswana
• African Alliance Botswana Securities
   

These are all under Botswana Stock Exchange.

Why do companies sell shares?

Companies issue shares for the purpose of raising money they require for growth.

What determines price of shares?

The price of shares can change many times in one day! however an increase in a company’s profit or new venture can increase the demand of the shares thus increase the share price. The opposite could result in an inverse result.

Always Remember

• Stocks fluctuate in value on a daily basis.
• When you buy stock, you aren't guaranteed anything
• IPO is always the cheapest price
• Participate in the annual general meeting of the company
• You may sell and buy anytime
• Many advise that its best to ‘’buy low and sell high”
   

Caution

Make sure you understand the following before you sign;

• Nature, Aim & Benefits of the product
• Risks of the product
• Details about the fund manager
• Fees and charges to be borne by you
• Warnings, exclusions and disclaimers
   

Collective Investments Units or Mutual Funds

A mutual fund is a collection of stocks and bonds. When you buy a mutual fund, you are pooling your money with a number of other investors, which enables you (as part of a group) to pay a professional manager to select specific securities for you.

Mutual funds are all set up with a specific strategy in mind, and their distinct focus can be nearly anything: large stocks, small stocks, bonds from governments, bonds from companies, stocks and bonds, stocks in certain industries, stocks in certain countries, etc.

The primary advantage of a mutual fund is that you can invest your money without the time or the experience that are often needed to choose a sound investment.

Advantages

• Affordable and easy
• Spreads risk
• Good returns
   

Disadvantages

• The money is taxed
• The market can be volatile