The Zimbabwe Stock Exchange has many proponents and we would certainly like to add our voice to the chorus. As things stand it represents one of the best investment opportunities in the nation. There are many reasons why this is the case. Zimbabweans have experienced catastrophic losses of value as the economy has gone through what it’s gone through. Here is a look at some of the reasons why investing in the ZSE makes sense paying special mind to our specific Zimbabwean circumstances.
Ease of entry
Given the low incomes in the country, the ease of entry into the ZSE is a good starting point. With present platforms available shares can be acquired for as little as ZWL$100 plus costs which we will talk about a little later in the article. While those with high incomes have their pick of investment opportunities lower-income earners do not have such luxury. So a strong investing alternative that has a low critical mass for entry is welcome. With individual share prices ranging between ZWL$01159 and ZWL$800 ( the majority of good companies ranging between ZWL$5 and ZWL$50), there’s a good for investing even to those with small amounts. Individually the minimum you can buy is 100 shares so we can place that minimum at ZWL$500 (plus costs) though investment clubs as per Ctrade allow pooling of funds to meet that minimum.
Every Zimbabwean should rightly be concerned about inflation. While we are currently experiencing a slowdown in inflation it is still present. Furthermore, inflation has wreaked havoc on Zimbabweans in the past. The ZSE provides an excellent inflation hedge. Whether you measure inflation on a Consumer Price Index (CPI, which measures the cost of a basket of goods), Purchasing Power Parity (PPP, which measures the buying power of a currency) or another basis such as the Poverty datum line (PDL which looks at the real cost of living) the ZSE is outperforming all measures. As an index, the ZSE is up 61.51% year to date at the time of writing, compared to CPI inflation of 11.5% according to ZimStat and an implied PPP inflation rate of 3.6% the ZSE is holding up pretty well.
We’ve already looked at the prices of ZSE shares but let’s also give credit to the cost element. When transacting on the ZSE the fees involved are ridiculously low. Not to encourage the ZSE to consider charging more but what this means for the average investor is that more of their money goes straight into purchasing the assets they so desire. The fees on a purchase transaction are 1.66% in total. Yes, total. That means for the purchase of ZWL$3500 worth of shares the fees will be ZWL$16.60. On the disposal of shares fees are 2.34% and that includes Capital gains Tax where applicable.
Self manage or pay an advisor
The other great thing about investing in the ZSE is that there is absolutely no experience or knowledge required, sort of. A lot of people will glorify self-managing but you also have the option of using asset managers or stockbrokers and advisors to manage your money. And this is great. While advisors and managers do come at a cost it may well be worth it to you, because you are too busy making the money to invest in the first place, to pay someone to manage it for you. One thing I will say is if you are going to pay someone to manage your money then please make sure you understand why they are advising what they are advising. And if you’re really looking to have some do both and see who performs better you or the advisor.
Speaking of Asset managers and advisors you can also look into hybrid products. You see buying shares directly is great and it will work for many but not all. You can look into hybrid products such as unit trusts and Exchange Traded Funds (ETFs) which allow you to access the benefits of investing in ZSE companies without the hassle. Unit trusts and ETFs similarly pool funds to invest in shares (or other assets) and break down this ownership into very small units. We currently have only one ETF, the Old Mutual Top ten ZSE ETF and a single unit of this is priced at ZWL$1.77 at the time of writing. Unit trusts were outperformed by the ZSE in 2020 but the managers of these funds have found their feet in 2021 and many are currently outperforming the ZSE as a whole.
These are some reasons to invest in ZSE shares but these are the most prominent and important given our circumstances. Financial fortunes are changed by small consistent action and the ZSE allows many to embark on this journey.