A stock market is a formalised platform which serves two purposes:
(a) Helps companies (issuers) to raise fresh capital (normally at cheaper rates) by offering shares/ stocks to individuals and other entities (investors) who wish to purchase those shares as an investment.
(b) Offers a market place where such shares can be bought and sold (traded) in a regulated and transparent manner.
- They are assets that make you a part owner of the company. A share represents a financial claim to a fraction of the company’s profits (and losses) in proportion to the number of shares held in that company.
- In addition a shareholder has the right to vote in the control of the company in proportion to the number of shares held. In this regard they shift from the role of a consumer to that of an owner.
Anybody. Forget the misconception that shares are for the rich only. If you have spare funds you can invest in shares. For instance, instead of buying more livestock, expensive clothes or other consumables, one can use that money to buy shares in the stock market instead. If you have any amount of cash that you do not immediately need to spend ; if there are any items (luxury) that you do not really need to buy ; or if you can raise funds by other means (e.g. selling another investment), then you can invest those funds in shares. What must be understood is that like anything else, different people will have different capacities to invest – some people will be able to afford buying more shares than others.
One can invest any amount they can afford, subject to a minimum of 100 shares in any company.
- Commission charged will be on a negotiated basis, but subject to a minimum of 0.60% and maximum of 1.85% of the value of the transaction for equities ,minimum of 0.20% and maximum of 0.50% for Exchange Traded Funds Transactions.
- Handling fees are P15 and P10 per buy and sell transactions respectively.
- Brokers will also be required to levy and collect on behalf of the BSE, the following additional fees from clients:
– BSE transaction fee calculated at 0.15% on trades up to P5 million, and 0.12% on trades above P5 million.
– CSD transaction fee calculated at 0.1% of the trade value
– VAT on charges at 10%
You as a member of the public cannot directly buy/sell shares at the stock exchange. You have to go through an agent, who is registered as a member of the Botswana Stock Exchange, to do that on your behalf. This registered agent is known as a stockbroker. A stockbroker can either be a company like Motswedi Securities, or an individual working for such a stock-broking company.
Owning/ buying shares represents an investment and should be viewed as such. When one buys shares they forgo current consumption to buy into future earnings potential of the company, in the hope that :
- The shares will be worth more in the future, should need arise to sell them at later stage (capital appreciation) and that -They will also pay some income at periodic times during the period in which they are held (dividends)
- Other benefits are:
Shares can also be sold at anytime to raise cash.
Dividends are an investor’s share of the company’s profits for a particular reporting period, and are based on the profitability of the company. Dividends paid out to shareholders depend on the number of shares held. Dividends are generally paid twice a year (although other companies pay four times in a year). It should also be noted that it is normal business practice for a company to decide NOT to pay a dividend for a particular reporting period, for example:
- If the company made a loss for that period
- If it intends to plough the funds back into the business for future growth in the business.
This refers to the upward movement of the share price over time, and is one of the major reasons people invest in the stock market.
Like any other investment, there are risks associated with buying shares. For example the value of the shares can fall after buying them. However it is important to understand what could have caused the share price to fall, before engaging in ‘panic selling’ which might cause the share price to fall even further, resulting in further losses.
Share prices reflect investors’ expectations of how well the company will do in future. If the expectation is positive, then more and more people will want to buy that company’s stock, resulting in increased demand for it. This increased demand will trigger an increase in the share price. The opposite is true if the expectation is negative.
Other factors that can influence share prices include:
- How well the company is managed and directed
- Business climate, particularly in the sector in which the company operates
- General economic conditions in the country, e.g. rate of inflation, level of interest rates etc
- Economic conditions in other competing markets
- From a broker who is only a phone call away (Motswedi Securities can be contacted at 3188627).
- In the local media including newspapers, television and radio
As already indicated, individuals cannot directly buy/sell shares at the BSE. They have to go through a registered member of the Botswana Stock Exchange (stock broker) such as Motswedi Securities, who will then act on their behalf.
A dealer working for such stock broking company would then execute the transaction on behalf of the client, and on the agreed terms.
You can buy shares once you have defined the time frame within which to hold the investment ; when you know what you want that investment to give you ( i.e. dividend v/s. capital growth); and when you have determined how much you can afford to set aside as an investment. You can then contact your broker who will then help you to identify shares that would best suit your investment needs.
On the other hand one can consider selling when:
- The company invested in continues to perform badly over a period of time, with the share price continuing to fall.
- The share price has appreciated so significantly that the investor may want to “lock in the profits” and re-direct the funds to other investments.
- The investor needs to raise funds for other personal requirements.
Not necessarily. That may be the beginning of a sustained period of the market strengthening, and any premature selling may deny investors potentially higher returns. It is always advisable to talk to your broker and get expert advice before taking any decision to sell under such circumstances.
It is advisable to keep track of the company’s performance, both as a business and in terms of its share price. Make it a habit to know what is happening at the company by reading every story that is written in the press about it. Business news on print, radio and television can be a great source of valuable information in this regard.
Because different companies have different levels of profitability, different products/services they offer, are of different sizes,and are even managed differently. These are some of the factors that determine the differences in share prices of different companies. Just like with cattle, a Tswana breed is priced differently from a Simmental or Sereline etc.
This refers to the process when a company offers its shares in the stock market for the first time to investors in an effort to raise cheaper capital. It is also called a listing.
This refers to the process by which government relinquishes ownership (or part-thereof) of its assets (companies) to private hands. One way of achieving this is by selling off such government assets by way of shares in the stock market. An example would be if government sold shares in one of its companies (parastatal) to the public through a listing on the Stock Exchange.
You can rest in peace! The shares can be transferred to the rightful beneficiary (ies), provided all necessary documentation is produced.
There are two bodies that ensure that your rights are protected:
(a) The Botswana Stock Exchange (BSE) has rules and regulations by which all its members (i.e. stock brokers) must abide. Stiff sanctions and penalties can be imposed on any member who behaves in any irresponsible or unprofessional manner, thus putting the interests of the investor at risk. The BSE also has rules and regulations by which listed companies must also abide at all times.
(b) Over and above the BSE, there is another regulatory body called the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) which has its own Act by which it regulates stockbrokers, together with other institutions that act on behalf of third parties on financial matters. This body also has legislative powers to take severe actions against any transgressors in the market.
Bid (buy) – best price in the market at which investors are willing to pay for the stock.
Offer (sell) – best price in the market at which the shares are being offered for sale.
Last (sale) the last price at which shares were actually traded.
Your stockbroker can also help you understand the remaining columns of the BSE chart.