A Guide to Designing an Investment Policy in Personal Wealth Management
It is imperative that an investor has a sound, realistic investment policy as a starting step for a successful investment journey. In simple terms your investment policy sets out the guidelines for you in the investment process. It guides you in asset selection, capital allocation, the level of risk tolerance you have, when to take profits and your investment philosophy. ...more
The National Social Security Schemes and the role played by actuaries in the financial management of such schemes....more
One of the most important challenges currently facing actuaries in advising life offices is that too little liquidity can seriously harm the life office. In this week’s article we will look at liquidity risk in life insurance. ...more
It Pays to use Fundamental Analysis
At times the market calls into question virtually every portion of your stock portfolio. You wonder, did I make the right decisions when I bought these stocks? To answer yourself in any rational fashion, you need to be able to judge whether circumstances, not just psychology, have changed for your holdings. ...more
Financial health of the corporation - A closer look at liquidity risk
The previous article gave insight into the factors critical in assessing the financial health of the corporation. One of the factors mentioned is liquidity risk and its role in determining failure or success. There is a saying which states that “the customer is king”. ...more
DO NOT OVERLOOK INFLATION WHEN INVESTING
At retirement we face two big financial hazards. One is living too long and using up all our savings. The other is inflation. A penny saved is a penny earned, right? Not necessarily. Thanks to inflation, over time that penny could be worth less than when it was first dropped into the piggy bank. That's why if you're investing — especially for major goals years away, such as retirement you can't afford to ignore the corrosive effect rising prices can have on the value of your assets. Inflation has been a very consistent fact of life in our economy. That is why it has been labeled the country’s numero uno enemy.
FINANCIAL HEALTH OF THE CORPORATION – MISSING VALUE IN SHARE VALUATIONS
The previous articles discussed the essence of share valuations and its impact on share purchases and disposal decisions. The interesting fact however, is that even though an investor should normally buy or sell shares on the basis of the share value, there is evidence of investors acting in a way that does not reflect this perception. Some investors simply follow the crowd. This means that the investors do not necessarily seek to make decisions on their own, they watch the direction in which other investors are moving and follow....more
TAKE YOUR BUSINESS TO THE CASINO! PART 1
Traditional thinking by economists proposes that there are three main factors of production namely: land, labour and capital. According to Alfred Marshal, “national income is the aggregate net product of and the sole source of payment for all the agents of production”. The payment to labour for example is wages and economists propose various ways in which the price of labour should be set. For example, set wages on the basis of marginal productivity such that the factor of production – labour is rewarded in proportion to the value which it is adding to the production process. ...more
TAKE YOUR BUSINESS TO THE CASINO! PART II
The origin of the idea of a capital market in the form of a stock exchange was highlighted in the first part of this article. The question of risk was raised and this week we seek to discuss the nature of risk faced by the entrepreneur who decides to list their business on a public market. ...more
You can survive a volatile stock market
More people are choosing to invest in the stock market. But with news of macroeconomic instability brewing locally, some people may begin to worry about the security of their investments. I believe there's no reason to panic. The stock market goes through a natural course of ups and downs that balances out in the long-term. During any downturn, investors should keep their eyes on the long-term rewards of their investments. There will always be risks to investing. But people have to remember that stocks have performed well in the past and are currently on the roll.
ASSET ALLOCATION AND SELECTION DECISION IN WEALTH MANAGEMENT
Asset allocation decision refers to the degree of spread of your investment across various asset classes and within these asset classes. The first step is to define your asset classes which are typically stocks (equities), bonds, money market, real estate and pure money market. The more sophisticated investor may include other alternative classes such as actively traded options and futures, currency, precious minerals (such as gold). ...more
IS MARKET TIMING RELEVANT?
Equity players have witnessed a big jump in prices over the past two weeks. Both the heavy cap and light cap investors were rewarded by the re-rating of the bourse. However the market has taken a setback, which other quarters think is just temporal. ...more
WHAT THEN? WHEN THE MEDIUM OF EXCHANGE LEAKS VALUE…
The previous article discussed the birth of money and the subject of inflation in simplified terms. It was noted that the concept of money was borne out of the need to facilitate trade between producers of various goods and services. That money is a medium of exchange. Money is a proxy for value and for money to be acceptable to all traders, it must have certain qualities. When money loses some or all of its key qualities, it becomes questionable as a medium of exchange....more
THE CASE FOR A DERIVATIVE MARKET IN ZIMBABWE
This week I have decided to present a case for the need of a derivative market as an integral part of the capital market in Zimbabwe. Zimbabwe’s financial sector has registered phenomenal growth when tracked back to the pre-liberalisation period. However the current macro economic problems have set back financial sector growth and sophistication due to a series of financial services company closures and a general lack of confidence in the banking system...more
MANAGED OR FLOAT EXCHANGE RATE—WHICH ONE IS THE BEST SUITED FOR OUR ECONOMY?
There was excitement in the market when the central bank dropped the Auction System and introduced the Tradable Foreign Currency Balances System (TFCRS) in the Third Quarter Monetary Policy Statement. This will see exporters retaining 70% of export proceeds in their foreign currency accounts (FCA). ...more
THE CASE FOR A DERIVATIVE MARKET IN ZIMBABWE (PART II)
Last week I highlighted the role of regulatory institutions in the facilitation and sustenance of a vibrant derivative market in Zimbabwe. Key issues indicated included the need for stringent regulation, the setting up of relevant statutory or regulatory instruments, fostering of general macro economic stability.
WHAT DETERMINES GOOD FINANCIAL HEALTH?
The state of different companies and organizations is normally depended on the organisation’s financial status. The balance sheet is a statement which shows the state of affairs as at a given point in time. The profit and loss account is a description of the financial performance of a company over a given period of time. ...more