One of the greatest lesson history offers is that, in every crisis, there is an opportunity to be sought. Any crisis, be it a financial, health or economic crisis, brings about innovation and collaboration as individuals work together to seek solutions. In fact, Covid-19 serves a good epitome of this as individuals and corporate are constantly seeking new ways of doing business.
The uncertainty created by Covid-19 however, including the loss of life, has led stock markets across the globe to hit record-lows if not to a standstill (stock market halt). This, however, translates into an opportunity for investors and speculators to buy stocks, specifically shares, at lower prices. Of note though, is that cheap is not always good. Nonetheless, investing in shares is a good way to build wealth and realise higher returns.
It is sufficient to note that investing involves some level of risk, either low, moderate, or high risks. Thus, unlike saving money in the bank, there is no guarantee that investing money in the stock market would yield any positive gains. Therefore, it is important for one to practice emotional intelligence when venturing into the stock market.
Some of the factors to consider when buying company shares include: the company’s debt trajectory, revenue projection, going concern, management or leadership, turnaround strategy, annual financial statements and return on invested capital. Likewise, there are a number of external factors that affect a company’s share price including malicious news, interest rates, economic downfalls, and natural disasters e.g. Covid-19.
There are also questions that one needs to answer before buying a company’s share: which type of products or services is the holding company or its subsidiaries providing? Are they in demand today? Will they still be in demand ten years from now?
It should be clear however, that ownership does not imply control. When an individual buys shares in a listed company, they own a fraction of the company’s value. Therefore, this does not mean they control or can influence the day to day operations of the company. Depending on the type of shares, a shareholder may have voting rights.
Also, one needs to be clear about their intentions, whether they want to be an investor or speculator. An investor in this regard, is someone who buys shares with the intent to invest in a company for the long run. A speculator on the other hand, is an individual who buys and sell shares daily for short run gains without proper analysis of the company’s financial wellness.
There are several platforms/brokers one can use to buy and sell shares on the the Johannesburg Stock Exchange (JSE) such Easy Equities, among others. Some company shares are below R1 while others range between R1 and R3000. It all depends on affordability and risk appetite. To begin buying shares through Easy Equities, one needs to register an account on their website and have their account Fica’d. There are many other platforms/brokers, Easy Equities is only chosen on the basis of familiarity.
Special thanks to Cassius Munyai and Tony Matlasedi for their contributions.
*Disclaimer: this article does not constitute financial advice. It is only a personal opinion.
