Introduction
Ever considered buying shares? Saving and investments have become crucial in these uncertain financial times. It is all part of the journey to financial freedom. Unfortunately, stashing all your money under the mattress will not work because there is simply not return on investment.
The money is just sitting there and due to inflation; your money is actually losing value. As your money needs to be investment wisely in different ways. You could open an investment account with a bank, buy some real estate, invest in a unit trust or you could buy shares. We are going to do a deep dive on the latter.
What are Shares?
Shares or stocks are equity, or plainly, an ownership interest in a company – a listed company on the Namibia Stock Exchange (the “NSX”). An ownership interest in a company means you become a shareholder and are entitled to that company’s profit/losses. This means if you buy shares in a company and it performs well, you will most probably receive a share in the profits once the dividends are declared. Dividends are usually declared at least once in each financial year notwithstanding if the company made losses. Once bought shares can be kept indefinitely, or sold, usually at a higher price than they were bought for.
Why invest in shares?
Buying shares on the stock exchange may be a way to diversify one’s portfolio. After all, the old adage still holds true – do not put your eggs in one basket. The NSX is a risk and reward platform. How much you earn (profits) depends on the level of risk you take. So instead of putting all your saving in a bank, you can invest it in several stocks in different listed companies. The better the companies you invested in perform the more profits you would make depending on how much your initial investment is.
How to buy and sell shares.
To buy or sell shares on the NSX, the fist step is to choose a registered stockbroker. This is an agent who acts on your behalf, as the investor. Only registered stockbrokers, who are recognised and regulated by the NSX, can be appointed as agents who can be authorised to execute, buy or sell instructions on an investor’s account.
They have a fiduciary responsibility to their clients which implies management and safekeeping. You can give the broker permission to deal on your account (this is known as a managed portfolio), you will need to sign a mandate confirming that he can deal on your behalf on your account. Without this mandate the broker can only deal with your prior approval for each transaction. They can also give advice which stock to buy or sell.
As of to date, Namibia has four (4) registered stockbrokers:
- Cirrus Securities (Pty) Ltd,
- IJG Securities (Pty) Ltd,
- PSG Wealth Management (Pty) Ltd, and
- Simonis Storm Securities (Pty) Ltd.
Their details can be found here. These brokers will be entitled to a brokerage fee due to them on account of them trading on your behalf. This will be discussed prior to the broker taking on the mandate.
Conclusion
When it comes to savings and investments, diversification is key. One way to do this is buying shares on the NSX. This ensures that you can benefit when companies are performing well but also ensures that your money is not sitting idle. Buying shares involves risks. This is why it is a requiremesnt by the NSX that individuals can only buy and sell shares using registered stockbrokers. They ensure that they assess the risk and perform due diligence on behalf of the client.
