Money market and investment analysts have advised potential investors to look at the capital market as an avenue for raising cheaper capital and an investment avenue to grow their investments.
The analysts said this on Tuesday during a webinar organised by Malawi Stock Exchange (MSE) to raise awareness on the role of the stock market and the benefits of investing in shares and bonds.
Stockbrokers Malawi Limited chief executive officer Noel Kadzakumanja said investing on the 16-counter MSE presents numerous advantages to investors as it offers access to large pool of capital and in an efficient way.
He said: “Investing on the stock brings benefits such as capital gains when you invest in shares and dividend income from shares or fixed interest income from bonds.
“The debt instruments on the stock market also provide an efficient way to raise capital due to the low cost of raising capital achieved through public listing.”
Kadzakumanja advised investors to avoid putting all funds in one company and only buy shares when the price is low and sell when the price rises. He said investors should also know when to exit from a company.
On his part, Alliance Stockbrokers Limited operations manager Thokozani Saulosi said investors need to have a purpose for investment and understand the business of the company before investing.
He said: “When you buy a stock, you become a partial owner of a business, but if you do not understand the business, you are setting yourself up for failure.
“There is, therefore, need to understand how the business makes money. This will include knowing the products, competitors and the business’ competitive advantage over the competitors, risks involved with the business and long-term strategies.”
Saulosi said one of the biggest mistakes new investors make is “blindly buying stocks” because they know the name of the company or because someone told them to.
“When considering buying a stock, it is important to educate yourself about that stock, the market itself and the overall economy before pulling the trigger on the purchase,” he said.
On his part, Continental Capital Limited dealer Tafadzwa Mwawa said potential investors should always seek professional advice before investing.
“It is always important to engage professional advice from stockbrokers who buy and sell listed securities on MSE but also provide guidance on investment decisions based on client financial goals,” he said.
MSE operations manager Kelline Kanyangala said they hosted the webinar to fulfill its role of financial literacy as few people understand what happens on the stock market.
MSE opened in 1996 with National Insurance Company (Nico) now Nico Holdings plc as its first listing.