Investors asked to diversify their portfolios

Charles Benoni Okine writes about calls for the need for investors to desist from concentrating their funds in one portfolio.

The Deputy Managing Director of the Ghana Stock Exchange (GSE), Mr Ekow Afedzi, has called on investors in the country to diversify their portfolios to enable them to reap the full benefits of different equities on the exchange.

“But before you do so, do well to ensure that you seek the right advice from brokers who are more experienced to provide the needed information to enable you to take a judicious decision”, he said.

Mr Afedzi was speaking at a day’s seminar to introduce some select financial journalists from the Institute of Financial and Economic Journalists (IFEJ) to brief them about the listing of an Exchange Trade Fund (ETF) on the local bourse.

The Newgold ETF was introduced to the GSE by Aba Capital, the corporate and investment banking division of Absa Bank Limited and affiliated with Barclays.

 This makes the GSE the fourth African bourse to list the NewGold ETF after South Africa, Botswana and Nigeria.

NewGold (an exchange traded fund sponsored by Absa Capital) offers the opportunity to invest in gold bullion, as it tracks the cedi price of gold.

NewGold issues listed instruments (structured as debentures) backed by physical gold and the value of a NewGold debenture will rise or fall in accordance with the fluctuations in the cedi price of gold bullion.

Each debenture is backed by physical gold approximately equivalent to 1/100 ounces of gold bullion, which is held with a secure depository on behalf of investors.

NewGold charges an annual fee of 0,4 per cent of the value of the gold bullion held in custody in order to meet its operating expenses.

Generally, however, a unit trust plus a share gives an Exchange traded Fund (ETF).

An exchange traded fund sounds complicated, but in reality it’s a simple product.

Its sole purpose is to track a specific market index, such as the GSE All Share.

In the past, the only way to track the GSE All Share would have been to buy one share in every company making up the All Share index and that is expensive, time-consuming and risky.

With an ETF, one benefits from combining the best features of a unit trust and an individual stock:

Ones money is pooled (like a unit trust) so that it goes further; One is buying a portfolio of securities, which lowers the risk; and one chooses the index, sector or commodity one want to track, or a range of ETFs over several markets.

Exchange traded funds are ideal building blocks in creating the investment portfolio that suits your own needs and investment goals

ETFs are securities traded on exchanges like shares but track the combined value of a portfolio or basket of underlying assets such as commodities and bonds.

ETFs affords investors the opportunity to own creation units that entitles them to a commensurate value of the underlying assets  (in this case gold) in quantities that would not have been possible of they were to purchase the actual assets.

Mr Afedzi the GSE is expected to be more liquid with the introduction of the NewGold ETF and expressed the hope that many more people and insitutions will show interest by invresting to guarantee good returns.

Meanhwile, the Ghana Stock Exchange (GSE) on Wednesday began trading of its first ever Exchange Traded Funds (ETF) on the local bourse as part of measures to offer investors diversified portfolios.

Four hundred thousand NewGold shares were listed at an opening bid price of GhC31.40, a ceremony witnessed by top players in the industry.

Speaking on the trading floor of the GSE before the commencement of trading of the NewGold ETF, Mr Kofi Yamoah described the move as a significant achievement for the local bourse because “we are trading an asset which is gold”.

He said every investor can be able to easily track the price of the commodity and know how much he/she is worth as far as the investment is concerned.

Mr Yamoah said the move is also expected to increase the liquidity of the GSE and bring some more excitement and value adding that “it will afford the investors to be able to diversify their investment portfolios on the GSE.

The Head of Investments of Absa Capital, Dr Vladimir Nedeljkovic on his part said “the listing of the NewGold ETF on the GSE helps to further expand the Ghanaian investment market; The capital markets in Africa are still very underdeveloped presenting an opportunity for significant growth in the region”.

“We believe that the ETFs present the gateway to this growth, but further market maturity is required, especially when assessing just how far more extensive global ETF offerings are”, he said.

Mr Nedeljkovic said there can no commodity as safe and risk free as gold and described the new window for investors as opportune for Ghanaian investors.

He said Absa Capital has more than 40 tonnes of bullion in actual gold sitting in London and therefore, there can be no doubt about the credibility of the new investment portfolio.

The Managing Director of Barclays Bank Ghana, Mr Benjamin Dabrah, said the NewGold ETF is the largest traded funds in Africa and being introduced in Ghana is a plus for the country.

He said gold is the safest commodity to trade-in because it has proven to be the most valuable even in turbulent times.

“This new window is good for the pension fund managers in the country and we hope they will explore that to the fullest”, he said and used the occasion to wish the GSE well in its future endeavours and as it trades this new commodity on the local bourse.

Madam Batsile Ngomane, Investments, Absa capital, said there are no limits to what investors can buy and noted that there is no reason for anybody interested to panic.

She said a shareholder can sell his/her shares at any time and there will be a buyer adding that “this is one unique feature of this NewGold ETF”.