Investors advised to diversify equity holdings

Amid renewed investor participation in the equities market, the Portfolio Manager at EcoCapital Investment Management Limited, Elliot Amponsah, has advised investors to diversify their investments in the stock market to mitigate risks.

According to him, equities come with a higher level of risk than other asset classes – making it appropriate for investors to purchase shares from different companies listed on the Ghana Stock Exchange (GSE) instead of putting all their proverbial eggs in one basket.

He emphasised the importance of diversification, especially given the current investor concerns over the risk profile of investment options in the country.

“If you are investing in the stock exchange, do not put it all in one basket. Do not invest in one company’s shares; rather, spread your money to at least eight different stocks on the market. With this, when one drops such that you are making losses, the other ones will cushion you in your portfolio,” he said while educating his audience on the structure, operation and opportunities on the stock market via a zoom meeting.

Currently, the GSE is the only stock exchange available in the country allowing entrepreneurs and governments to raise long-term capital. EcoCapital’s Portfolio Manager noted that the stock exchange is open to everyone, but he advised elderly persons and other investors who are risk-averse to invest only a percentage of their money in buying shares due to their low ability to bear risk.

He further emphasised the need for actively monitoring the market daily to know the performance of each listed company, especially companies where the investor has their shares.

“If you want to invest in the stock market, you have to be vigilant by watching what happens on the stock market,” he noted. He advised people who do not have time for monitoring the market to consider investment companies which will do so on their behalf.

Mr. Amponsah also outlined some factors which affect stock prices: including company performance, news events; and economic conditions such as interest rates, inflation and gross domestic product growth.

He explained that there are two major ways of making money in the stock market: capital gain – buying low and selling high; as well as dividends paid to investors by companies in the market.

The investment manager further stated that while the stock market can be a complex and intimidating place, understanding the fundamentals is essential for making sound investment decisions.

His comments come amid a resurgence in the equities market as investors seek opportunities away from the flat debt market.

The GSE Composite Index (GSE-CI) increased by 14.01 percent in March compared to the previous month, resulting in a year-to-date gain of 12.33 percent. The rise in share prices was fuelled by investors diversifying their holdings and dividend announcements from some listed companies.

The volumes and values traded were significantly up, with a 2,730 percent and 588 percent increase respectively from the previous month, mainly due to block trades in MTN Ghana shares. The top-5 gainers for the month were Total (39.82 percent), MTN (35.87 percent), Unilever (33.78 percent) and Benso Oil (20.93 percent).

In contrast, the GSE Financial Stock Index experienced a year-to-date loss of 11.98 percent, as investors anticipated reduced profitability in 2022 for financial stocks.

The volume and value traded were 173,658,609 and GH¢167.9million respectively, which is down by 19.22 percent and 29.17 percent compared to the same period in 2022. The cumulative volume of 181,344,788 valued at GH¢199million represents a decrease of 35.39 percent and 34.06 percent compared to the same period last year.