The Zimbabwe Stock Exchange has been a hot topic this year and not always for the right reasons. The exchange rallied to post inflation-beating returns year to date. The exchange was also suspended for a little over a month on allegations of some companies shares being linked to the parallel market exchange rate growth. This was later reversed with a few counters being halted on the exchange. So understandably a lot of people are looking to get in on the Zimbabwe Stock exchange but may not know where to start. These are great tips for beginners or those who want to sharpen their strategy.
You have to be in it to win it
Of the 53 companies trading on the ZSE, only 11 have failed to bring inflation-beating returns so far in 2020. If you further factor in that 2 of those 11 have not moved all year the maths is straightforward; you were better of having your money in almost any share on the ZSE than having it in cash. Yes, even US dollar cash. The stock exchange is providing great opportunities for both the short and long term for those who want to invest their money. Even if you picked at random (which you shouldn’t) your chances of picking a loser are 9 in 51 (excluding the two non-movers) or 17%. Not bad.
Buy good businesses
The idea is to buy good businesses. One of the questions people ask is which shares can I buy. While people can give you tips on great companies which have performed very well the best advice is to buy companies you know and understand. Yes, this means reading and researching. There are many things to look for in companies you know but consider what people use. Companies like Delta with their beverage dominance, Econet who many of likely paid to get online to view this content and OK Zimbabwe with shops across the nation scream good business here!
4 Green Houses, 1 Red hotel
Many people want to start small, as you should. This allows you to understand the exchange without taking major risks. The problem here is the aforementioned companies do not come cheap. So starting small with these companies is difficult but not impossible. The board game monopoly has a simple principle for winning which can be applied here: four green houses, 1 red hotel. The idea is your goal is to put 4 green houses on your property and as soon as possible trade the 4 green houses for 1 red hotel because this means more cash flow to you. In our case, you want the big companies which pay big dividends but they may not be affordable right away. There are still great small companies and you can buy these in the meantime and let your money grow in them. You gradually buy more and more small companies (green houses) until you have enough of them to sell and buy those big companies (red hotels).
Bulls make money, bears make money, pigs get slaughtered.
This is a popular quote that is riddled with stock market lingo but let’s break it down and make sense of it. Bulls are what shares are called when in a growth phase when the price is increasing. Sometimes referred to as a bull run or bullish period because bulls attack by charging their target, going forward. Bears are what you call shares that are decreasing in value because bears generally fight while retreating, they do not charge. Pigs simply refer to greedy people. So if we put that all together you can make money when the share or market rises, you can make money when it falls but if you are greedy you will not fair well. When share values are rising you can sell what you have or buy into something that is on the up. When values are decreasing there’s an opportunity to buy good companies at cheaper than normal.
If you don’t know where you’re going how will you know when you get there?
Without a goal, you are pretty much shooting in the dark. While less so on the ZSE because of the currency involved shares tend to go up and down in value regularly. If you do not have a solid plan or goals you may be lead to panic in all this. Many people are invested in the long term, others for the short term. You need to figure out your goals and work out a plan that feeds them.
After the closure, the ZSE lost a lot of value but it seems a turnaround may finally be here. If you’re wondering how to get involved you should try C-trade.