rmation that investors have to know before they decide to buy shares.
Publicly owned companies are required by law to make public their financial results, while shareholders are entitled to copy of the companys results. The starting point for gathering information would be these financial results as it is from such information that one may get a representation of the companys financial and liquidity status. The results would assist the investor, with the aid of a qualified professional, determine or spot for any sign impending challenges be it internal or external.
Secondly, information which is often made public by specialized financial services, companies such stock broking, companies, unit trusts and independent financial experts would help the investor. Since this does not originate from the company there are real chances that the information would not be biased, therefore making this reasonably essential in helping an investor come up with a well-informed decision. Thirdly, approaching appropriate experts for qualified advice, for a fee.
However when it comes to investing the decision will lie solely on the investor. There are two options. The first one is to invest through a unit trust or mutual fund by purchasing units, which would represent a basket of shares of companies on the stock exchange. This option has the advantage of giving the task of choosing the shares to buy to the fund manager, who guarantees a certain return. This option, though favorable to the investor, does not give him control of his funds [with some units trusts you would be required to invest for a certain period before you can liquidate your position].
Therefore, the second option gives the investor greater flexibility and control while the risk is somewhat increased. The decision therefore would depend on the investors desires, the size of the investment and their risk tolerance level. The decision that will be made will have an impact on the return that will be earned. For large-scale investors and wealthy individuals the second option is favorable to them and accordingly many of them invest directly while smaller investors find the first option more suitable.
One golden rule of investing in shares is to diversify your investment or avoid placing all your eggs in one basket. A well-diversified portfolio of shares achieves two main objectives for the investor. It reduces the overall risk, and the rate of return is relatively high. Therefore it is important that investors know just how diversified their portfolio is, whether or not they manage the portfolio themselves. Even in the context of the stocks on the Zimbabwe Stock Exchange, where all share prices seem to go up, it is essential that a portfolio of such stocks be balanced between fast-increasing prices and those with a steady rate of appreciation.
Temra would be happy to answer your investment queries. Email: tem2ra@yahoo.com
Post published in: Economy