Always think long term in any equity investment

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Business

Always think long term in any equity investment


Financial stock market graph illustration. PHOTO | BOWL

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Summary

  • Despite the efforts of the Capital Markets Authority and other stakeholders to educate the general public on the importance of investing in stocks, public participation is still very low.
  • Stock market investing is for everyone and if done right it offers the highest returns over the long term.
  • As a general rule, when investing in the stock market, always keep the long term in mind and avoid being driven by emotions.

Sammy, one of the frequent readers of this column, asked me if it was a wise decision to invest in MTN Uganda’s ongoing Initial Public Offering (IPO).

MTN Uganda is a subsidiary of MTN Group Limited, a South African multinational mobile telecommunications company, operating in many African and Asian countries with headquarters in Johannesburg.

MTN Uganda opened its IPO of 20 percent of its shares on October 11 and the offering will close on November 22. Kenyans are eligible to participate alongside other citizens of East African countries. The shares are regulated by the Capital Markets Authority of Uganda (CMA) and listed on the Uganda Securities Exchange (USE).

Sterling Capital Limited’s regional coordinator and investment manager Benson Kasyoka Kivai pointed out that MTN Uganda is the main mobile operator in Uganda, controlling 59.1% of the telecommunications market.

Sterling Capital has partnered with Equity Brokers, Uganda to facilitate the purchase of MTN Uganda IPO.

MTN Uganda has seen its subscriber base grow at a compound annual growth rate (CAGR) of 25.7% over the past three years, from 11.3 million in 2018 to 14.2 million in 2020 and this growth is expected to continue given Uganda’s low mobile phone rate. penetration rate of only 61.1 percent, which is lower than other African peers.

The low mobile penetration rate, high population growth rates and a gross domestic product (GDP) growth rate of +/- 5% in the medium term provide a very favorable environment for the growth of the mobile telecommunications industry. and good returns on investment for investors.

There are also huge growth opportunities in the data and fintech services segments.

Uganda’s internet penetration rate increased significantly between 2016 and 2020, from 15.8% to 26.1%.

Generally, the stock market is one of the least understood areas of investment, it is hated and loved by different categories of people in equal measure.

Despite the efforts of the Capital Markets Authority and other stakeholders to educate the general public on the importance of investing in stocks, public participation is still very low. The majority of potential investors see the stock market as a risky business or one with dismal returns, especially if you don’t have a lot of money.

This is far from being the truth. Stock market investing is for everyone and if done right it offers the highest returns over the long term. It even outperforms the real estate investment which is the favorite of many people. However, in the short term it is a very risky business and you can easily lose money.

A good example is the Safaricom IPO in 2008, where many people lost money just like others made their fortunes.

Telecom’s performance had disappointed many investors in the first three years after listing, with the worst to come when it hit a low of 2.50 shillings, half the offer price in 2011.

Many investors lost confidence and sold their stocks taking huge losses. But it turned out that the stock appreciated over the following years and generously rewarded patient investors.

As a general rule, when investing in the stock market, always keep the long term in mind and avoid being driven by emotions.

Mr. Kiunga is the author of The Art of Entrepreneurship: Strategies for Success in a Competitive Market


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