Investors in the capital markets should diversify their investment portfolios across different asset classes to mitigate risks, a stockbroking firm has said.
Zimbabwe has been grappling with a myriad of challenges including high inflation, shortages of foreign currency, high cost of doing business and the adverse impact of Covid-19 pandemic which disrupted business operations.
“The portfolio should be future oriented, long term and selected instruments should be poised for a positive return through both capital gains and dividends, thus meeting the investor’s objective,” FBC Securities said in its latest report.
FBC Securities said it would be prudent to consider about 40% of the portfolio for active trading which allows the investor to realise some profits in the event of short-term swings in sentiments in the market, in particular on non-core holdings.
The FBC Securities’ report said the stock market, which has naturally been a barometer of how an economy is performing, provides a store of value in an inflationary environment.
Stocks, it said, give holders a claim to the underlying real assets of a company.
Another advantage of investing on the stock market, the report said, was that globalisation and a relentless pursuit to succeed has led other companies to expand their geographical reach to beyond borders such that the effects of an economic meltdown in one area does not hamper the company in its entirety.
Some local companies such as Fidelity, Nicoz Diamond, ZB, and FBC among other companies have opened units outside the country’s borders to hedge the local operations against economic meltdown.
The low yields in other investment classes such as the money market make the potential returns on the equities market attractive and uncertainty on the country’s currency as the RTGs balances and the cash gap widens makes the stock market a safer mode of investment, the report said.
Investors such as insurers and pension funds have been left with little investment options. They either have to content with the meagre money market rates averaging 15% or choose the flexible and inflationary hedging properties of the equities market.
The latter has become the natural choice, combined with other forms of real assets.
FBC Securities has recommended top 10 counters investors can invest in during April.
These are the country’s biggest brewer Delta Corporation, cash-rich Innscor Africa Limited, Econet Wireless Zimbabwe, Ok Zimbabwe, Meikles, Cassava, National Foods, Padenga, Simbisa and Zimre Holdings Limited.