A listing on the JSE may be just what your company needs to take it to the next level, whether this entails accessing capital for growth, profile building or realising investment for its shareholders. Whatever the reason, as the economic climate improves, more companies will look seriously at the possibility of listing.
The JSE ended 2012 with eight new listings on its Main Board and four listings on the AltX. The listings trend last year has been appropriate given current market conditions. As has been the goal for some time now, the JSE is looking to attract quality listings — companies that list for the right reasons and which find strategic value in listing their businesses.
While the number of new listings is obviously closely tied to economic conditions, the decision to list should meet the long-term objectives of the firm rather than benefiting from a day’s buoyant conditions.
Markets are both cyclical and changeable and share prices move accordingly. Companies looking to list need to take this into account and have a long-term horizon in mind. The decision to list demands an in-depth understanding of a company’s management, resources, stage of development, long-term future goals and strategy.
When listing’s a bad idea
There are instances where listing is a clear no go. Listing on the JSE is not an escape route for a company in trouble looking to cash out, nor is it an opportunity for a company without clear direction seeking growth.
The JSE therefore remains strict, looking to talk to solid companies with good track records and proven management. As a regulator, the JSE takes investor protection very seriously, and it’s therefore vital that it uses its judgement to prevent inappropriate listings to avoid future problems for both the company concerned and its investors.
On some occasions a company may have both a good track record and prospects but nevertheless be poorly suited to being a listed entity. Highly entrepreneurial firms, for example, may battle with giving up some autonomy or resist having to account for decisions to a larger audience.
The pros and cons of listing must be carefully weighed up. The benefits include gaining access to equity capital rather than debt finance, enhancing a company’s status, and enabling companies to use their shares to fund acquisitions. In addition, companies enjoy greater exposure. Finally, listing could enable a company to attract and maintain good employees and may also enhance dealings with banks, suppliers, distributors and customers.
Taking the first steps
When deciding to list your company you need to consider the following:
- Where is your business plan taking the company?
- What are your likely capital requirements?
- How strong is your competitive position and how can it be maintained and strengthened?
- What is the quality and experience of the management team?
- Are all members of the management team working to the same agenda?
- What outside perspectives, such as non-executive directors, does the board have access to?
- What will attract investors to the company and are you committed to spending time communicating with these shareholders?
The process of preparing for and seeing through a listing is demanding. Inevitably, as this process places additional pressure on the management team involved, if cracks are ever going to appear now will be the time. It is crucial to ensure that the board is unified behind whatever collective decisions have been taken and that all members are able to explain and promote the company’s plans.
It’s therefore not surprising that some companies considering a listing decide against it the first time but return to the idea later when they are better prepared.
The actual listing, however, is only the start of operating in a listed environment. There are a number of considerations to take into account when considering listing on the exchange. These include:
- A reduction of control. The sale of equity would involve ceding a degree of management control to outside shareholders, especially for significant acquisitions.
- Disclosure requirements and ongoing reporting. A much higher degree of reporting and disclosure is required, which may require additional investment in management systems, resources and more rigorous application of compliance controls.
- Loss of privacy. Greater accountability to outside shareholders means that directors and management lose much of the privacy and autonomy they previously enjoyed while running an unlisted company. The company’s heightened profile means any under-performance is scrutinised which may have a direct impact on the share price.
- Costs and fees. The overall costs of listing and maintaining a listing must be considered and understood.
- Management time. The listing process and other duties may require time.
- Additional constraints. Directors’ responsibilities and restrictions are complex. They include a disclosure of total remuneration packages, restrictions on share dealing and the communication of price sensitive information — whether this information is to have a positive or negative impact on the share price.
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Say you have R40 000 to invest. What if your R40 000 could grow to say R200 000 in seven years or so? Read On
The Best Way To Get Your Teenager To Start Investing Right Now
Jeff Rose advises a young fan on where to start his investment journey.
In this video, Entrepreneur Network partner Jeff Rose talks about receiving a letter from a young investor, who is looking for advice on how to begin investing.
Rose talks about the act of actually doing the investing versus worrying about reading books or asking others about the process. Taking action gets the most results, since you are able to make mistakes and start the learning process. Taking action also leads to more experience, which is to say if you begin investing as a teen, you will be much more savvy about investing as a twenty-something.
In answering this young investor’s concern about investment direction – the fan hopes to balance short-term gain and long-term gain, as well as to establish some padding for a future business – Rose turns him in one specific direction: A Roth IRA. When he was younger, Rose didn’t even know what a stock was until far into his college years; during this time, he discovered the Roth IRA and learned of its compounding power, as well as the accessibility of an initial investment.
As another route, Rose also mentions starting a business. This path, Rose explains, will help you achieve the most return on investment.
Click on the video to hear more tips for a younger investor.
This article was originally posted here on Entrepreneur.com.
5 Insider Tips Every Trader Needs to Know
Here are five insider tips that every trader needs to know.
Like in every profession, there are a lot of figures circulating regarding how many forex traders actually make money, and how many traders lose more money than they earn. We are not going to launch into speculations that we can’t prove with accurate statistics. However, there is one thing we can say without citing any official sources: there are more people losing money than those earning.
Why? The answer can be found in the annals of human psychology. Some go into forex expecting to get rich overnight, while others do not (understandably) have the time to dedicate themselves fully to this activity. So what can you do, concretely, to join the group of people earning money? Here are five insider tips that every trader needs to know.
1. Choose a Methodology and Stick With It
Even before executing your first trade, you need to have a rough idea on what you will base your decisions on. In this sense, you must know what intel you will need to make the appropriate decision, like when to enter and exit a trade, which timeframes are the best (more on that later) and so on and so forth.
Some people are partial toward fundamental factors (foreign investments, inflation, unemployment rates, and other economic indicators), coupled with a chart, for executing a trade. Others prefer the raw numbers and stats of technical analysis.
But, whichever methodology you choose, make sure to be consistent and that it is adaptive, as there is no objective way to tell if one is truly better than the other. The most important thing to consider is whether or not your methodology and the strategies built around it are adaptive enough to keep up with the changing dynamics of the forex market.
2. Always Calculate Your Expectancy
Expectancy is a formula that traders use to determine how reliable their trading system is. It involves going back in time to your previous trades (a journal will come in handy here), measuring how many traders were winners versus losers, and then finding out how profitable your winning trades were as opposed to how much money was lost after bad trades. The formula is as follows:
E=[1+(W/L) x P – 1, wherein W is the average winning trade, L represents Average Losing Trade, while P is Percentage Win Ratio.
3. Define Your Trading Goals and Build a Strategy Fitting of Your Personality
Most forex beginners come into the market thinking that they know everything that one could possibly know, without any sort of long term plan or concrete goals. This is the one mistake that eventually leads most traders to quit forex, because the reality of the market – and the trade itself – will hit them straight on sooner rather than later.
Therefore, the first thing you need to do is set a couple of goals. Start small and realistic at first – do not set yourself for winning a ridiculous amount of money in the first months because you will be sorely disappointed.
After setting the goals, you can start looking at various trading strategies and see which ones will help you achieve these goals and, most importantly, whether or not they are a good fit for your personality.
Some helpful questions to ask in this case are in the lines of ‘’Do I feel comfortable holding positions overnight?’’ or ‘’How much risk am I willing to assume for a given trade?’’, ‘’Am I more comfortable following a trend or betting against it?’’, ‘’Will I trade to gain some additional income, or full time?’’. Another equally viable method which will help you asses your strengths and weaknesses is doing a personal SWOT analysis.
4. Make use of Multi Time Frame Analysis
Regardless of whether you are a swing, day or long term position trader, it is highly recommended you always approach trading in a top-down fashion. This technique involves starting with a higher time frame chart and gradually zooming down to your current trading time frame chart. By doing this, you can get a ‘’big picture’’ view of the price action.
This tip is important because many traders commit the grave error of building their trading decisions around the time frame in which they are currently trading. For instance, when a trader sees a hammer candlestick pattern on a five-hour chart, they push forward with the trade without considering what might happen in the following time frame. What you are doing here is similar to a game of chess – you have to think a few steps ahead and choose your forex trading products and tools wisely in order to land a successful trade.
5. Do Not Use More Indicators Than Necessary
Indicators are simply visual representations of market realities that show things such as price movements, patterns and the like. As useful as they are, after trading for a while, you will soon realise that at some point they become quite counterproductive.
Many traders will tell you that the only indicator that you need is price, and everything else is there just to make one understand how the market got to that point. And since succeeding in the forex market is mostly about getting in on a trend before anyone else spots it, you can probably guess why over-crowding your monitor with indicators is not such a good idea.
Whatever some might tell you, forex is not a walk in the park. Like everything in life, it takes hard work and dedication to reach the point where you can state without doubt that you have achieved excellence. However, even the most dedicated and hard-working traders need a push in the right direction in the form of some lesser known insider tips that only traders will know. Hopefully, the tips in this article will provide you with the insight necessary to take your trading efforts to the next level.
Time For An Alternative Investment Approach
The age of high-risk, high-reward thinking may be all but done, for now.
For years the investment formula applied by investors has been to craft a diversified portfolio of assets weighted more towards equities. It made sense to build a foundation on safe, low-risk, low-return capital preservation investments and, depending on your age, allocate a relatively larger portion of your investable income into higher risk, higher return equities.
But is this justified in the local context? While global equity markets have enjoyed a decade-long bull run following the 2008-2009 financial crisis, consistently delivering 10% to 15% annual returns, the JSE has been a perennial under-performer over the last four to five years.
Despite this fact, significant investor capital has continued to flow into local equities, either directly into stocks or via unit trusts, ETFs and endowments. And now amid more volatile global economic conditions, where global indexes have come off record highs in early 2018, local equities are still projected to underperform in the medium-term as the market correction that many predicted gathers momentum.
This shift is symptomatic of the volatility that currently characterises global markets as Brexit plays out, trade wars intensify, and widespread socio-political instability creates systemic economic risks. Yet, investors are still being advised to put their money into higher-risk vehicles.
Further compounding the issue is the fact that the country’s exchanges are dominated by a few large entities, which are all negatively impacted by the country’s dire economic situation. This means local investors must also contend with concentrated risk.
Despite these threats, many financial advisors have stuck to the traditional investment playbook by telling clients to “stay calm and remain invested in equities.” But given the prevailing market conditions, investors can realise better returns from investment opportunities that break from this conventional approach.
Returns from various fixed-rate investments, for example, have and continue to outperform equity investments, and do so without the associated risks.
While reducing risk is not necessarily a key concern for naturally risk-included entrepreneurs, when it comes to investing our hard-earned money we have the power to manage that risk. So, forget the old, pervasive attitude of “no risk, no reward.” It’s dated and, quite frankly, unwarranted.
The new reality is that fixed-term, low-risk investments have become among the best-performing asset classes — a fact that is tearing at the foundations of conventional investment advice. Entrenched beliefs must therefore be challenged, especially when investments that offer security can match or outperform high-risk options such as equities.
So, what are our options, given that fixed-rate investment options currently abound? Well, before diving into a vanilla offering from a bank, consider what your capital is secured against.
Banks generate their returns by lending out pooled deposits in the form of loans and credit. Some of this lending is secured, much of it is not. This can introduce risk into your investment, because the ability of debtors to repay debt is often compromised in a struggling economy, and bad debts will impact the returns that a bank can offer depositors.
Forward-looking secured investments, on the other hand, offer a set rate for five years and are secured against a variety of assets, like Fedgroup’s Secured Investment in participation bonds, which removes significant risk from the equation. These types of collective investment schemes are also regulated to protect investors.
While it may not be prudent to completely disinvest from the local stock market, there is a case to be made to be more circumspect with future investments, matured investments, or that portion of your portfolio that is earmarked for reallocation. With this money, an investment that delivers both capital security and a high, fixed rate of return might well prove more attractive than the traditional wisdom of local equities.
The guaranteed, low-risk returns currently offered by fixed-rate investments have transformed these products from fringe options into mainstream investment vehicles that can no longer be ignored. With the chance to outperform the average equity investor, isn’t it time to rethink your conventional investment approach and consider the lucrative and, more importantly in such volatile times, secure opportunities offered by these alternative investment options?
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