Demystifying the stock market
Isaac Pinielo | Friday March 20, 2015 14:32
BusinessWeek: Please give a brief profile about yourself?
Segonetso: I am a Motswana male born in the late 1980s in Lobatse, but I was brought up in a farm south of Kanye village. In pursuit of better education, I then moved into Gaborone to pursue senior secondary education.
Upon completion of my BGCSE, I went to Asia where I obtained my first degree in Financial Engineering (Financial Engineering is the application of mathematical solutions to some problems in finance).
I then went to Europe where I studied Master of Science in Finance. During my first degree, I obtained a Certificate in Investment Management (IMC) offered by CFA Society of the UK, formerly UK Society for Investment Professionals.
I am currently enrolled for CFA Program at Level 1.
I am a banker by profession, I work full time in treasury for one of the leading banks. I am a small time investor in the stock market with keen interest in different investments.
BusinessWeek: When did you write this book and when was it released?
Segonetso: I wrote this book in April 2014 whilst overseas in Europe and it was released on March 11, 2015. I plan to launch it officially within the next two months.
BusinessWeek: What prompted you to write such a book?
Segonetso: Apart from my interest in writing, I wrote this book after getting numerous questions from friends, colleagues, family and relatives about investing in shares, bonds and other instruments just by virtue of being a finance and investment graduate. As a result, I challenged myself to create a reservoir of information where everyone can dip their hands, a source of material that I can confidently recommend to other people. After studying the local market and the material in circulation with regards to investing in the stock market, I realised that there is no single source that provides information on the steps that you need to take or follow when you want to invest in the stock market, particularly simple guidance for potential investors.
Additionally, I was driven by the fact that for so many years, African writers focused on literary work with very little attempt to write about real world challenges such as economic issues.
BusinessWeek: Do you think most Batswana understand what investing entails?
Segonetso: Most Batswana simply do not understand about investing. They know it’s out there but they do not understand the functionalities of it. However, Botswana Stock Exchange annual report shows that investor contribution to turnover by citizen investors have grown rapidly over the years, suggesting that more Batswana are gradually appreciating the world of investing in the stock market. Many Batswana are hyped about BTCL IPO, but they don’t know BTCL’s business model, growth prospects in the market in which it operates, its value.
BusinessWeek: What should be done to make people understand the importance of investment?
Segonetso: This can be achieved through an upscale in public education programs that encompasses various methods such as books, SMS technology, edutainment videos, stock market simulation games both online and offline at school and general public level, road shows, interactive software programs, testimonials and one-on-one presentations. It goes without saying that for this to be a success, investing in the stock market has to be demystified.
BusinessWeek: At what age should one start investing?
Segonetso: A person should start thinking about investing at a very young age depending on the influence from their parents. They (parents) should anchor the whole process until an age when their children can take control of their own investments. This is not out of the ordinary because Warren Buffet, the world-renowned American investor bought his first stock at the age of 11.
BusinessWeek: What is your general comment about investing in Botswana?
Segonetso: Investing in Botswana stock market is very limiting in terms of investment strategies that investors can exercise. Since the market is clouded by illiquidity and very low daily trading volumes, there is no price discovery that can allow investors to buy and sell stocks frequently in the local bourse, hence investors find themselves limited to the ‘buy and hold’ strategy which explicitly leads to longer holding periods in anticipation of share price appreciation.
In addition, order-driven trading through stockbrokers as opposed to directly trading own stock portfolio online makes investing in Botswana stock market a less desirable experience. Despite these bottlenecks, our capital market has grown and developed tremendously over the years as evidenced by the introduction of new products, IPOs, new listings, high turnover levels and total market capitalisation.
BusinessWeek: Should issues of investment be included in school curriculum?
Segonetso: Concept and theory of investments is not included in school curriculum, a phenomenon that is not surprising given the fact that most writers are not interested in non-fiction work. This book will fill a gap should the Ministry of Education and Skills Development take interest in the subject.
BusinessWeek: What are the types of investment that you think can be suitable for the ordinary Motswana?
Segonetso: Investing takes a holistic approach in assessing the potential investor’s risk appetite, disposable income, age, investment horizon and many other inputs that would help to identify a suitable investment instrument. Generally, if an individual is less risk averse, they can invest in shares and exchange traded funds, but if they were risk averse, government securities or bonds would be suitable because these instruments are considered to be less risky compared to equities.
BusinessWeek: How did you go about writing this book?
Segonetso: When I wrote this book, I aimed to use relatively simple language that can be understood by everyone. I limited the length of the sections by being specific and selective in terms of what I deemed to be relevant. I wanted the length of the book to be short so that it can be read by anyone without any intimidation of length and thickness. I made the decision in cognisance of the fact that Batswana are not natural readers;a thick book would have scared them away.