Are stocks a good investment option?

 AS more people seek ways to grow their money beyond traditional savings accounts and property investments, a grow¬ing question is making the rounds: Are stocks a good investment option in the kingdom?

In a country where financial lit¬eracy and formal investment vehi¬cles are still in the early stages of expansion, understanding the risks and opportunities associated with stocks is crucial.

WHAT ARE STOCKS AND WHY SHOULD YOU CARE?

Simply put, a stock represents a share in the ownership of a compa¬ny and constitutes a claim on part of the company’s assets and earnings. Investors buy stocks with the hope that the value of the company will grow, increasing the value of their shares.

“Investing in stocks can be a pow¬erful way to build long-term wealth,” said Lindiwe Dlamini, a Financial Advisor. “But it must be done with awareness of the risks involved, es¬pecially in markets that are not as developed or liquid as those in ma¬jor economies.”

THE PROS

 Potential for high returns: Over time, stocks have historically of¬fered higher returns compared to savings accounts and even gov¬ernment bonds. This makes them appealing for long-term investors looking to beat inflation.

Partial ownership and divi¬dends: Some stocks offer dividends, which are payments made to share¬holders from a company’s profits. This can provide an income stream on top of capital gains.

Portfolio diversification: Stocks can add variety to your investment portfolio. According to the Cen¬tral Bank of Eswatini’s Financial Stability Report (2024), diversi¬fication helps reduce overall risk, especially in uncertain economic conditions.

Access to regional and global markets: With access to stockbro¬kers and platforms that connect to South African and global exchang¬es, local investors can now explore broader markets.

THE CONS 

Market instability: The value of stocks can go up and down quickly. A bad earnings report or economic downturn can cause sharp declines.

Limited local market options: Eswatini’s own stock market, the Eswatini Stock Exchange (ESE), is relatively small and illiquid. “This limits the choices available to in-vestors and can make it harder to sell shares when you need to,” men¬tioned Sibusiso Nhlabatsi a Market Analyst.

Requires knowledge and moni¬toring: Unlike a fixed deposit where you ‘set and forget’, stock invest¬ment needs attention. Prices are in¬fluenced by company performance, economic trends and even politics.

Costs and fees: Buying and sell¬ing stocks typically involves broker fees and sometimes annual account maintenance charges. These can eat into your profits, especially if you are trading frequently or investing small amounts.

WHAT ARE YOUR OPTIONS? 

Despite its small size, our country does offer several avenues for those interested in stock investment:

Eswatini Stock Exchange (ESE): Established in 1990, the ESE current¬ly lists a small number of companies including Swaziland Empowerment Limited (SEL), Nedbank (Eswatini) and many others. While the list is limited, it allows emaSwati to invest directly in companies operating in the country.

Cross-Border Investments (South Africa): Due to Eswatini’s econom¬ic ties with neighbouring South Af¬rica, many emaSwati invest in the Johannesburg Stock Exchange (JSE) through licensed brokers. According to Thembeka Motsa, a broker: “We have seen increasing interest from younger professionals looking to in¬vest in tech stocks and ETFs listed in South Africa.”

Unit trusts and mutual funds: For those who want exposure to the stock market without picking individual stocks, unit trusts are a good option. Local asset managers offer funds that invest in a mix of equities and bonds, both locally and regional.

Online trading platforms: While still limited in Eswatini, some plat¬forms allow access to international markets like the NYSE and NASDAQ. However, the Financial Services Regulatory Authority (FSRA) warns that investors must ensure they use regulated and reputable platforms to avoid scams.

Stock investing is not a guaranteed path to riches, but with careful plan¬ning, it can be a strong component of your financial strategy. 

As Dudu Simelane, an Investment Educator passionate about Financial Literacy highlighted that they encour¬aged people to invest in knowledge before they invest in stocks. Under¬stand what you are buying and why. She added that anyone interested in stocks should start small, diversify and avoid putting all their money into one company or sector.

SHOULD YOU INVEST?

If you are financially stable, have an emergency fund in place and are willing to learn, then investing in stocks locally or through regional markets can be a smart move. Just do not expect overnight success. 

Eswatini may not have the largest or most liquid market, but its growing fi¬nancial sector and regional connectivity offer meaningful opportunities for those who are ready to take the leap.