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Generally, every activity that is done today but which yields profit at a later date can be described as an investment. Investment involves postponing your consumption today in order to put your savings to work. Investment can also be described as the bridge between having savings/surplus cash and reaping returns. In other words, investment has the potential to move the savings/surplus funds of one person/entity to another who needs or requires those funds.

The best time to start investing is NOW. Generally, the younger you are, the longer the time you have to invest.

An investor is anyone who decides to put part of his/her funds in an investment for future benefit. For example, Mr. Mensah who has decided to use 10% his monthly salary to buy shares can be described as an investor. An investor has some characteristics including an investment objective, a time horizon for his investment, an expectation of return and money to invest.

Investment is a necessary condition for creating wealth. Investment helps in realizing one's dream's such as buying a car, house, or paying for your child's education at a future date. Investment puts your savings to work to earn returns. It is impossible to create wealth without investing. Investing gives you the key to secure the future. Investing can let you have a comfortable retirement. Investment is a time-honoured practice for increasing your wealth.

Any individual who is 18 years or above can invest on the Ghana Stock Exchange. Such an individual must understand that investment on the Ghana Stock Exchange is long-term and that there are risks involved, especially during the short-term. Another qualification is to have an investment objective and a period of time in which you intend to retrieve one's investment. Another requirement is the funds itself for the investment. Parents can invest in trust for their children. Institutions can also invest their pension and provident funds on the Ghana Stock Exchange so long as the regulations governing those funds permit such investments.

A number of factors should be considered by an investor before selecting any security on the Ghana Stock Exchange. Sound investment is typically based on research. When an investor decides to invest in shares on the Ghana Stock Exchange, he must consider the past performance of companies, prevailing conditions in the sector in which the companies operate as well as the future outlook in terms of profit growth and dividend payment. An investor can obtain such research information either by contacting a stockbroker for advice and/or reading research reports produced by the stockbrokerage companies.

Share prices are fundamentally determined by supply and demand. In stock market terminology, demand refers to bids and supply refers to offers. All other things remaining the same, the price of a share will go up if bids for the share exceed offers. Similarly, a share's price is most likely to fall if offers exceed bids for it. Bids and offers normally change in response to changing expectations of the investing public. Other factors behind demand and supply that affect share prices are interest rates, expectations of the market, the economy, performance of the listed company, major news from the listed company and investor psychology.

Investment time horizon refers to the period of time an investor is prepared to wait for his investment to mature. The investment time horizon is determined by the investor. For instance, Madam Adzo may have ¢10million today to invest and would want it back in four months while Mr. Kwame who has the same amount to invest may need the money back in 5years. In this case Madam Adzo has a short-term investment horizon while Mr. Kwame has a long-term investment horizon. Investments products typically have different maturities from short term to long term so knowing your investment time horizon will help you to select the right investment.

The amount of money you need to invest on the Ghana Stock Exchange depends on the prices of shares you select. Shares are usually traded in batches or round lots of 100. Where the price of a particular stock is high , an investor can contact a broker to buy fewer than 100 shares or what is commonly referred to as odd lots.

Generally, interest rates and share price move in opposite directions. A fall in interest rates on money market instruments like treasury, fixed deposits and call accounts make them less attractive in terms of the returns they yield. Investors typically react to such a fall by transferring their investments into the stock market. This can lead to an increase in demand for shares, which may trigger price increases. In the case of a rise in interest rates, the opposite occurs, all things being equal. Increases in lending rates can also have an indirect influence on share prices. Where the cost of loan capital of listed companies go up with a rise in lending rates and this could dampen net profits and hence share prices.

When an economy is prospering and doing well, the general level of income rises. This leads to an improvement in the disposable incomes of individuals. Demand for shares derives partly from the level of disposable income. All things being equal, the higher the ability of investors to buy shares, the higher the demand for shares and with it, the tendency for share prices to move up. The opposite is also true. When an economy is sluggish, the level of income and hence disposable income is affected negatively. Such a situation may lead investors to cut back their investments in shares. The resulting slump in demand for shares could lead to a fall in share prices.

Expectations of the market have an impact on prices. Expectation of the market refers to what the investing public envisages the future performance of the stock market and listed companies to be. Specifically, the investing public will be interested in earnings growth and payment of dividend by the listed companies. Investors will typically buy shares of those companies that are expected to record strong growth rates in their earning and pay good dividends. The reason is that most investors are looking for profitable companies to invest in. This makes expectations about earnings growth and dividend payment key drivers of a company's share price.

An investment is not supposed to be done passively. It is important for an investor to actively follow or monitor his investment. Monitoring your investment involves keeping your eye on the developments within the company you invested in, the stock market and the economy as a whole. It is a “hands on” affair. Investors on the Ghana Stock Exchange, can monitor their investments by keeping active communication lines with their broker, by reading the business pages of the newspapers, listening or watching business news on local FM stations and on the TV.

Indices are widely used to track the direction of various stock markets. While the average indices are calculated, all investors can benefit from the information given by these indices. Indices such as the GSE All-Share Index, Dow Jones, Nikkei and FTSE are examples of stock market indices used in other markets. In very simple terms, stock market indices track changes in the market value of the stock exchange and thus show the performance of the stock market. The Ghana Stock Exchange publishes two indices, namely the GSE Composite Index (GSE-CI) and the GSE Financial Stocks Index (GSE-FSI).

There are some investors who buy when prices are generally going up and others who sell when prices are sliding. In most of these cases, the buying or selling behaviour of the investor is not influenced by fundamental operational performance. This behaviour sometimes described as "herd behaviour" is rooted in the psychology that if everybody is buying thus pushing the price up, there must be a good underlying reason and vice versa. This behaviour is a reflection of the survival instinct and the sheer number of investors who are influenced by it tilts the supply-demand equation in the market and hence prices. It is important to understand whether shares price are moving as a result of fundamentals or investors psychology (herd effect).

Listed companies are expected to inform the general public about any significant development in their operations as well as their quarterly financial results. Listed companies therefore make announcements such as changes in their board of directors, key staff appointments and resignations, merger and acquisition moves, expansions of branch network/production floor, etc. The Ghana Stock Exchange also requires all listed companies to report their financial result quaterly. These company announcements either increase or reduce demand for shares.

The business world is dynamic as there is always one change or the other taking place. For instance, there could be a change in the environment of a company in which you hold shares. The change could affect the fortunes of the company either positively or negatively. If you are monitoring your investment, you will be in a better position to either take advantage of the opportunity or cut your losses. You can know the right time to shift your investment from one listed company to another or when to buy/sell an investment only when you monitor your investment.

Whenever you buy shares on the Ghana Stock Exchange, you are supposed to receive notification. The broker who executed your request is required to give you a contract note covering the transaction. Three days after the date of the transaction, your broker must settle the trade -  receive cash if it was a sale or have your securities account credited with the number of shares purchaased. Therefore it is necessary that as an investor on the Ghana Stock Exchange, you open a securities account with the GSE Securities through your broker.

Certain regulatory measures are in place to protect individuals who invest in securities on the Ghana Stock Exchange. The brokers who serve as intermediaries between investors and the Ghana Stock Exchange are required by the Ghana Stock Exchange to comply with membership regulations. The listed companies on the Ghana Stock Exchange are expected to observe certain rules including disclosure of result and any other information that are significant and price-sensitive. The Securities Industry Law regulates the Ghana's capital market itself as well as all Dealers in the securities industry. Under this law, a Securities & Exchange Commission (SEC) has been established to ensure that all players in the industry comply with the standards established for operating in the industry. Investors must keep themselves informed and contact the Securities & Exchange Commission if they have any serious complaint.

OTC stands for "over the counter" and it represents a category of market for trading in securities which are not listed on the Exchange. Unlike the Ghana Stock Exchange, which had a particular trading floor where securities are traded, the OTC market is not located at any particular place.

A stockbroker is a professional who helps investors to either buy or sell securities (shares and bonds). The stockbroker therefore acts as the middleman or intermediary between investors who wish to buy shares/bonds and those investors who wish to sell securities. The stockbroker therefore eliminates the need for investors to search for trading partners. The stockbroker also gives advice to investors about which securities to buy and sell. Stockbrokers play a vital role in our market because all investment on the Ghana Stock Exchange can only be done through a stockbroker. To qualify as a broker, a person must among other things complete the Securities Courses offered by the Ghana Stock Exchange, pass the relevant examinations in them, be in the employment of a brokerage company for at least six months and be licensed also by the Securities & Exchange Commission.

A prospective investor on the Ghana Stock Exchange must open a securities account with a brokerage house prior to trading in securities. The process of opening an account is very simple and starts by making contact with a broker of your choice. The investor then completes an account opening form giving personal particulars, a passport picture and an identification  (Voter card, Driving licence, Passport, National ID)  and contact address etc.

Only Authorised Dealing Officers (brokers) can trade on the Ghana Stock Exchange. An Authorised Dealing Officer is a broker who has been licensed by the Ghana Stock Exchange to be a trader in securities. Trading on the Ghana Stock Exchange takes place every working day of the week from 10.00am to about 3.00pm. Trading is open to the general public.

Companies that have applied to the Ghana Stock Exchange and have been approved for their shares to be traded on the GSE are referred to as Listed companies. These companies have complied with certain requirements of the Ghana Stock Exchange. All listed companies are public companies and they are all required to publicly disclose their results and other pertinent information affecting their operations.

There are currently thirty five (35) companies listed on the Ghana Stock Exchange representing some of the leading sectors in the Ghanaian economy. These sectors include financial, manufacturing, mining, trading, brewery and pharmacauticals.

There are several benefits to be derived from investing. The obvious benefit is the profits that accrue on an investment. For instance, when you invest in shares listed on the Ghana Stock Exchange, you can earn dividends and/or capital gains. Dividends are the portion of a company's profits that are distributed to all shareholders during a particular financial year after they have been recommended by the directors and approved by shareholders. Capital gains refer to the difference in the price at which an investor buys shares and the price at which he sells them.

Another benefit of investing is that you protect your savings from the effects of inflation which can erode the value of your savings if not invested properly. Generally speaking, ¢10million in 2004 will buy less goods in 2009 than would have been possible in 2004.

Investing also helps you to prepare for projects in the future as well as retirement. Though you may not have the resources today to pursue your dream items such as acquiring immovable/movable assets (land, building, car etc.), regular investment can prepare you to realize these dreams in the future. Do not forget that a farmer can rather choose to consume his seed today or invest it in the soil to reap a harvest tomorrow. Choose to invest today for a better tomorrow.


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