By Mbonisi Siziba
It all started in high school ( Solusi Adventist High School ) when the upper six class was called up to the Solusi University for an Elevate program by Econet Wireless. I made my entrepreneurial presentation on a chicken project to help assist the less privileged to pay school fees. Although the project never took off, that day I walked away with $100 for doing that presentation. Wondering what I would do with the $100 I began asking around for any business projects I can start, it’s that time that the Elevate manager ( Mr Muchena ) suggested investing in the Zimbabwe Stock Exchange. I didn’t bother researching about what it was all about, I just pooled in my $100 and bought shares of Zimpapers which were worth 2cents each share. Buying those shares without knowing what I’m doing was the best mistake I have ever made in my life. Yes, the best mistake of my life! Of course, later on, I began researching and reading the stocks and sold all the Zimpapers shares. From my learning about the stock exchange, this is what I discovered, and I would like to confess that buying stocks on Zimbabwe Stock Exchange is like buying a ticket for a seat in the Titanic ( these investing rules were inspired by the observations I made on how Warren Buffet buys and handles stock shares ):
- Invest in a quality business, not stock symbols you see on ZBCnews: don’t go for the highest or lowest stock share price for your own certain reasons. Observe the company’s 10year track, basically know the history of the company. Average the trend movement on how many percents it has risen over the 10year track.
- Don’t invest for 10minutes if you’re not prepared to invest for 10years: when I get my money I pool it in the stock exchange which has my mother and sister always asking why don’t they see the money that the stock exchange is making for me, the reason is simply because I’m only interested about profits when becoming 30years of age, as for now we just hold. Be willing to hold one position for 10years.
- Calculate how well management is using the money they have: a company’s success is determined by how management uses its equity and the capital we invest in them. The return on capital ( ROC ) and the return on equity ( ROE ) must be high. Putting it all simple ROE and ROC are defined as earnings of a company divided by equity and capital.
- Stay away from ” glitter ” stocks: all speculators are attracted to glitter stocks. Just because you saw Econet Wireless advertising on ZBC the whole day doesn’t mean it’s the best stock to buy. We want to buy those that sell more products and services than the market themselves. It’s like a boy about to ask out a girl, you shouldn’t pick the one that is popular and everyone is interested in. You can’t buy popular and do well.
- Remove the weeds and water the flowers: don’t ever think you can make money buying and selling stock. Only sell when you see that you can do better at another stock, after all, you should buy stocks with the goal of having shares in a certain company not gambling with the stock shares.
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These are the 5 rules I would advise to a starter in the stock exchange. In the next article, we’ll look at ‘ Know what a fat pitch is and what to do with it ‘.
Just for interest’s sake, this what my portfolio looks like, so every time I get the little or much money I get this is where it all goes:
This means that for example for every $100 I get and decide to invest in the stock exchange, $13 goes to buying stock shares for InnScor.