East African Business Week (Kampala)
Emin Pasha
11 January 2009
opinion
I am looking forward to a very exciting year for the Stock Exchanges in our region. The markets are sure to witness several initial public offers, cross-listings, rights issues, share splits and dividends over the coming 12 months. The investment business loves a fresh start.
To symbolize this, a bell is rung at the beginning of each trading session. Even with the onset of electronic trading in many markets there is still something special about that bell. You can feel the energy of the traders at the very moment the ringing fills your ears, the rising of their voices with the possibilities of price movement and bid/offer conflicts, fortunes made or lost, empires built or overthrown, all in that room, all on that day.
And then it starts over again the next trading session.
Company reporting also contributes to this "fresh start" mentality.
All listed companies produce annual reports which neatly package the activities and financial results from an entire year into a thin, magazine size format.
The results are often released to the media and regulators long before investors get their hands on a printed annual report. Frequently, annual reports come out 3 months after the close of the year. By the time many investors read, analyze, and digest these reports the markets have already moved on. The company is already recording data for their next annual report. Another fresh start.
Now we come to investors. There is merit in having a forward looking mind-set but in order to develop an effective investment strategy, investors must know where they stand at the beginning of a New Year.
How will you know? The best brokers send their clients annual statements of account with the details of how many shares you own and the value of your portfolio (your entire share holdings) as of the end of the year. In this case, brokers will calculate the portfolio according to closing share prices as of 31st December, 2008.
If your broker doesn't provide you with this kind of statement and if you have the details of the shares you own, you can calculate your own portfolio value.
However, a client statement is a basic service that all brokers should provide; instead of taking the time to do these calculations you may want to pick up the phone and consider moving your account to another broker.
Why is it so important to know where your portfolio stands? Because it is a large factor in determining your investment strategy over the next 12 months. Let me explain why: your portfolio will either be Down, Up, or Even.
Many of us experienced losses in 2008 and our portfolios are starting off the year as "Down". My advice is to hold on to shares that have lost value since buying rather than locking in paper losses.
At the same time remember that when markets are down, bargains are out there. Investing in a down market gives you an opportunity to gain as the market recovers. This is exactly what we have seen in the U.S. markets which are up 23% since mid-December.
Next, investors whose portfolios gained value last year are in the enviable position of being "Up". The challenge for these investors is to not overreach but still take advantage of under priced shares. Also, if your portfolio is on the upside you are playing with the Market's money in some respects. A little risk taking is worthwhile and can be very rewarding.
Finally, the "Even" portfolio is also a pretty good place to be, considering the havoc markets have played on share prices since October last year. Investors with "Even" portfolios truly have a fresh start.
Call your broker and ask for your account statement. Use that as a roadmap for setting an investment strategy in 2009. It's always a good time for a fresh start!
The writer is a stockbroker in EA.
Be the first to Write a Comment!
Copyright © 2009 East African Business Week. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
