Introduction
Many beginner investors may turn to stocks in emerging markets as a means of growing their wealth over time. However, investing in destinations such as Ivory Coast will bear certain risks, so that it is important for beginner investors to understand how to proceed in the most profitable means.
Ivory Coast provides several compelling incentives to invest.
Moody’s Investors Services commented in October 2017 that Ivory Coast’s long-term foreign currency rating with its stable outlook “is primarily supported by the economy’s growing diversification and high growth prospects, which are underpinned by structural reforms and public investment in infrastructure.”
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The Ivory Coast will continue to see strong economic growth in the coming quarters, driven by private consumption, the construction, transport and mining sectors.
Ivory Coast’s favourable business environment is encouraging, with opportunities emerging in the mining sector. In the coming years, fixed capital formation will be an increasingly important component of the economy and the main driver of growth.
Ivory Coast boasts high levels of openness to international trade and liberal foreign investment regime, low tax burdens, and membership of the Union Economique et Monetaire Ouest Africain (UEMOA) – which provides benefits in terms of foreign currency transactions and access to a regional bourse.
The Ivory Coast economy has several important growth sectors that make shares trading a viable option in this region, if you know how to approach these new emerging sectors.
What are the best investment options for beginners?
Growth stocks
Growth stocks have earnings growing at a faster rate than the market average. They rarely pay dividends and investors buy them in the hope of capital appreciation. A start-up technology company is likely to be a growth stock.
Growth stocks are often relatively correctly valued or sometimes even overvalued, because of their significantly high growth rate.
Hence, they are higher priced in the market. The act of investing in growth stocks is known as growth investing, i.e., investing in stocks that experience continued growth.
Growth stocks come with higher metric ratios, like P/E ratio, P/B ratio, and earnings per share (EPS). Growth stocks carry relatively lesser risk because their growth rate is high and increasing.
They are relatively less sensitive to adverse economic conditions than the overall market. Hence, growth stocks are relatively less risky investments.
Growth stocks are usually up-and-coming companies. Such companies usually introduce something new and innovative to the market and are growing increasingly, owing to their unique selling proposition (USP) and competitive advantage.
Growth stocks usually pay very little or no dividends at all. It is because such companies usually follow a reinvestment protocol wherein they reinvest all their retained earnings back into the company.
Income stocks
Income stocks pay dividends consistently. Investors buy them for the income they generate. An established utility company is likely to be an income stock.
Income Stocks, also known as dividend stocks, are the equity stocks that provide consistent and regular income in the form of a dividend to its buyers.
The most common features of such stocks are low volatility, regular dividend payout from the last 10 to 15 years, and regular increase in dividend payout and show a pattern of increasing profit growth.
Although there may be a consistent increase in the dividend payout of such stocks there is a limited scope in terms of future growth of the capital invested.
There is a regular dividend payment in case of income stocks. A dividend is either paid on a monthly or quarterly basis.
Added to this, these stocks involve lesser risk as the companies issuing such stocks are well established and are not much affected during bear markets. These are the first choice for investors who want a stable return and less risk.
Value stocks
Value stocks have a low price-to-earnings (PE) ratio, meaning they are cheaper to buy than stocks with a higher PE.
Value stocks may be growth or income stocks, and their low PE ratio may reflect the fact that they have fallen out of favour with investors for some reason. People buy value stocks in the hope that the market has overreacted and that the stock’s price will rebound.
Value stocks come with lower metric ratios because they are undervalued. Value stocks are expected to gain value eventually when the market corrects their prices.
In the unlikely event that the stock doesn’t appreciate in value as was expected, investors can lose their money. Hence, value stocks are relatively riskier investments.
Value stocks are usually large, well-established companies that are undervalued for a variety of reasons, such as negative PR, a bad earnings season, and so on, but eventually gain back value in the long term.
Value stocks usually pay dividends well and don’t reinvest the entirety of their retained earnings back into the company.
Blue-chip stocks
Blue-chip stocks are shares in large, well-known companies with a solid history of growth. They generally pay dividends.
Blue-chip stocks are typically viewed as low risk because they tend to post steady earnings and, more often than not, pay out dividends to investors. A blue-chip stock tends to be trusted by investors, partly because it will have a large market capitalisation.
They are the opposite of penny stocks, which tend to have a lower, less stable price and do not pay dividends as regularly.
Blue-chip stocks are not immune to crashes or bankruptcy, but such occurrences tend to make the headlines. As these stocks are primarily owned by the investing public, if there is some bad news in the market, it could cause substantial damage to the share price.
Blue-chip stocks are good for investors who want to see steady gains to their portfolio, but for speculators, they don’t tend to have the short-term movement needed for many trading strategies.
Short-term traders are unlikely to see drastic day-to-day movements in the price of a blue-chip stock because of its relatively stable market capitalisation.
Bonds
Bonds are considered much more stable than stocks, but their returns tend to be on a much smaller scale.
A bond is essentially money you are loaning to a company or the government. With a bond, you assume the role of the bank and the lender must pay you back the money with interest — this is where you make your returns.
When you buy a bond, you are lending to the issuer, which may be a government, municipality, or corporation. In return, the issuer promises to pay you a specified rate of interest during the life of the bond and to repay the principal, also known as face value or par value of the bond, when it “matures,” or comes due after a set period of time.
Bonds can provide a means of preserving capital and earning a predictable return. Bond investments provide steady streams of income from interest payments prior to maturity.
The interest from municipal bonds generally is exempt from federal income tax and also may be exempt from state and local taxes for residents in the states where the bond is issued.
Exchange Traded Funds (ETFs)
ETFs operate in many of the same ways as index funds: They typically track a market index and take a passive approach to investing. They also tend to have lower fees than mutual funds. Just like an index fund, you can buy an ETF that tracks a market index like the S&P 500.
The main difference between ETFs and index funds is that rather than carrying a minimum investment, ETFs are traded throughout the day and investors buy them for a share price, which like a stock price, can fluctuate. That share price is essentially the ETF’s investment minimum.
Index Funds
Because index funds take a passive approach to investing by tracking a market index rather than using professional portfolio management, they tend to carry lower expense ratios — a fee charged based on the amount you have invested — than mutual funds.
But like mutual funds, investors in index funds are buying a chunk of the market in one transaction.
Before you begin investing, conduct a financial audit
First, you should have a strategy and be confident in your ability to manage your financial situation before investing your money in the stock market. You can achieve this by doing the following:
- Realize your financial goals and why you want to invest. Determine by when you want to achieve these financial goals and how much will it cost versus the size of the return on investment.
- Understand your cash flow and whether you have any financial restrictions. You must ensure that you have a definite idea of incoming/outgoing cash, disposable income, and so on. Consistency is key when trying to grow your wealth long-term.
- Always keep an emergency fund so that you have a safety net to fall back onto in cases such as sudden unemployment, funding an unforeseen expense, and so on.
Conduct comprehensive fundamental analysis
Fundamental analysis refers to analysis based on economic data or reports.
Along with major economic reports such as the Producer Price Index (PPI) and Gross Domestic Product (GDP), fundamental stock investors evaluate stocks based on the information contained in a company’s financial statements and earnings reports.
Investors also examine various financial ratios, such as the debt/equity ratio or price/earnings ratio, to evaluate a company and its stock price.
Adequately weigh your risk against your opportunity
Because of the correlation between risk and potential return, investors need to carefully consider their risk tolerance when selecting investments.
An investor who is looking to generate a second income through investing, or amass a large enough fortune to retire on, will make much different investment choices than an investor who is merely seeking to earn a little interest to help offset inflation and protect his or her purchasing power.
Identify your investment profile
The first step to successful investing is figuring out your goals and risk tolerance – either on your own or with the help of a financial professional.
There is no guarantee that you’ll make money from your investments. But if you get the facts about saving and investing and follow through with an intelligent plan, you should be able to gain financial security over the years and enjoy the benefits of managing your money.
Ensure that you have enough portfolio diversity
By including asset categories with investment returns that move up and down under different market conditions within a portfolio, an investor can help protect against significant losses
Market conditions that cause one asset category to do well often cause another asset category to have average or poor returns. By investing in more than one asset category, you’ll reduce the risk that you’ll lose money and your portfolio’s overall investment returns will have a smoother ride.
If one asset category’s investment return falls, you’ll be in a position to counteract your losses in that asset category with better investment returns in another asset category.
In addition, asset allocation is important because it has major impact on whether you will meet your financial goal. If you don’t include enough risk in your portfolio, your investments may not earn a large enough return to meet your goal.
FAQ
Can beginners start investing in shares?
Yes, beginners can start investing in the stock market or stock exchanges through brokers or other financial institutions.
What is the best strategy that will ensure profits?
There is no single investment strategy that will guarantee profits. Different strategies work for different investors. To find the right strategy, investors must have an investment goal, horizon, and an idea of how the stock market operates.
Can I invest in shares in Ivory Coast?
Yes, investors can buy shares directly on the official Ivory Coast stock exchange.
Can I invest in shares directly from the stock market?
Yes, some publically-traded companies offer the option for a direct stock purchase plan. However, typically, most investors purchase shares through a broker.
Is it expensive to invest in shares?
No, the barrier of entry is extremely low, and some brokers and applications offer extremely cheap shares at very low additional costs.
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