Even though the MTN IPO only raised 35% of its target, the interest Ghanaians expressed in the stock is something I cannot recall having previously seen for another IPO. Everywhere I turned it seemed like people wanted to know if buying the stock was a good investment or not and how much they could expect to earn from investing in it.
This comes on the back of the phenomenal performance of the Ghana Stock Exchange (GSE) in 2017. Stocks returned 53% last year and despite a far less exciting performance this year, people’s appetites are stoked and they want to include some exposure to stocks in their portfolio.
So how does one start investing on the GSE? You can go to any licensed brokerage (full list here) and open a trading account. You would also be required to open an account with the Central Securities Depository (CSD). You can then make the request for your broker to buy whatever stocks you wish to purchase.
However, this process is not without challenges. For one thing you pay commissions on your transactions. Another issue is that the low liquidity on the stock exchange means that there could be a difference between the listed price and the price at which you can actually buy the stocks. It also means that selling the stock could take some time and it may be at a price much lower than the listed price.
There are simpler ways of including stocks in your portfolio and if you are in formal employment, you probably have exposure in simpler ways. First of all, your pension contribution to SSNIT is partly invested in stocks listed on the GSE. SSNIT is the largest investor in the GSE with GH¢2.7 billion invested in 22 stocks as at June 2018. Also, the tier 2 component (5% of your salary contributed to SSNIT) is handed over to a private pension fund manager which also invests in stocks on the GSE. If you take the third tier option of contributing a bit of your salary to a provident fund, then that presents another exposure to stocks.
But the easiest way for anyone to invest in the GSE no matter their employment status is to buy equity-focused mutual funds or unit trusts. I wrote all about mutual funds in Ghana so I will not repeat that in this post but I find them to be the easiest way to invest in stocks on the GSE. They reduce the headache of liquidity and commissions as these are absorbed by the fund. Also, they are able to get better deals on stocks than an individual investor would. Finally, the fact that dividends are automatically re-invested increases your return.
Even though one would pay management fees (not more than 2.5%) I believe the ability to actually realize your gains through withdrawals is worth it. So if you want to start investing in the GSE, read this guide about mutual funds and get started.