THE FOLLOWING STEPS WILL GUIDE A POTENTIAL INVESTOR ON HOW TO INVEST THROUGH THE MAlAWI STOCK EXCHANGE
STEP ONE FIND /CHOOSE A STOCKBROKER
A stockbroker is the investor's link with the stock exchange. A stockbroker is a licensed firm which buys and sells shares and securities on behalf of investors for a brokerage fee or commission.
Stockbroking is a personal service, so before you begin, talk to other brokers to find out what services they offer. Your choice of broker will depend on what type of service you require.
A stockbroker can be contacted whether through his registered agent, a letter, telephone, fax or through direct personal contact.
STEP TWO MAKING THE INVESTMENT DECISION
Potential investor should decide whether he is interested in regular income or long-term capital appreciation. This decision will assist your stockbroker in recommending whether your decision to buy shares and stocks is suitable for your needs.
Remember, the actual day-to-day behaviour of share prices, however, is governed by the law supply and demand. Once the stock market is fully developed there will be many different securities to choose from, and every buyer has his own or her own reason for preferring one share to another.
STEP THREE BUYING AND SELLING SHARES (PLACING AN ORDER)
HOW TO BUY SHARES
After you have decided which shares to buy, guided by your stockbroker, decide the price you are ready to pay for each share and the number of shares your money can buy. Remember to put enough money away for important family or personal expenditure e.g. such as school fees, insurance. Share purchases should be viewed as long term saving and investment.
When you give an instruction to your broker to buy shares be sure to tell them whether you want to buy "at" a specific price, within a range of prices or "at best" -the term used for an instruction to buy shares at the best available price. You may want to give your stockbroker a time limit. In terms of Malawi law both the buyer and seller of shares must sign a share transfer form so it is important to sign a transfer form and send it to the stockboker. Alternatively, you may authorise the stockbroker to sign the transfer form on your behalf.
The members of the Malawi Stock Exchange require that forward payment for shares is made to reduce instances of - default. On the day the order is executed at the Stock Exchange,
the stockbroker sends to the buyer, a Brokers Purchase Contract Note showing the number of shares purchased, the price per share and the commission chargeable in accordance with the Stock Exchange stipulated rates. The final figure will show the actual amount payable to the stockbroker
A BROKERS PURCHASE CONTRACT NOTE is a legal document that acts as proof of share ownership until the share certificate arrives. With advice from your stockbroker, you can sell your shares through the Purchase Contract Note. This document must be kept safely and permanently as it may be needed for tax purposes
Through your stockbroker, the transfer secretary issues a new certificate in your name. This certificate is a legal document confirming title and should be kept safely. However, it is of no value to anyone else and can be replaced if lost (an indemnity form signed in front of a commissioner of oaths is required to achieve this).
HOW TO SELL SHARES
Find the value of shares through a stockbroker, the Malawi Stock Exchange or the business page in the newspapers.
Contact your stockbroker and place an order to sell your shares at the price satisfactory to you. You may wish to sell the shares at a certain price or not lower than a certain price. You may also want to put a time limit by which the shares should be sold. Whatever the case, be sure to give your stockbroker exact instructions.
Remember share prices may go up and down, therefore there is a need to guide your broker on, your most prefered selling price range .
Remember After the order has been executed through the Malawi Stock Exchange, your broker sends you a BROKERS SALES CONTRACT NOTE which shows the net sale proceeds payable to you. It also indicates commission and handling fees chargeable. Your stockbroker will advise you when to collect your cheque but this should be.
Remember share prices may go up and down, therefore there is a need to guide your broker on, your most preferred selling price range.
FOLLOW YOUR INVESTMENT
To make most of your investment, you should monitor the activities at the Malawi Stock Exchange. You should visit the Stock Exchange to understand the trading system, regularly consult your stockbroker, understand the business page and write-ups in the papers and leading financial journals, and follow radio reports on the Malawi stock market.
Attending seminars, conferences and subscribing to Malawi Stock Exchange publications will go along way in enhancing your knowledge.