ONE concept that Piggy has been promoting is for investors and traders to be kept updated on market developments through online communities or social trading groups.
These are informal WhatsApp-based groups consisting of individuals who share ideas and news flow about a common interest, which in this case is trading and investing on Zimbabwe capital markets.
Piggy also supports news platforms that give insights that are useful for traders and investors in terms of crafting appropriate strategies. News Trading is a technique or method that is used to trade currencies, shares, indices and other instruments on the financial markets. It is essentially an attempt to profit from price movements emanating from immediate market reactions to major news and economic data announcements.
Generally, economic as well political news reports often spur strong short-term movements in the markets, which may create trading opportunities. For example, announcements about interest rates, unemployment or the central bank’s policy shifts can affect exchange rates and share prices. Similarly, news relating to corporate profits or a change in management can affect the share price.
Piggy notes that news channels also offer breaking news that can help you judge whether your stock purchase is a winner or a loser.
News trading has largely been applied in foreign exchange trading given that exchange rates of currency pairs fluctuate based on many criteria which includes fundamental announcements from that country.
However, it is very relevant in other markets such as the share and commodities markets. The idea is that traders should be well informed through news-wires on all major economic events that affect investment markets. Access to financial news channels such as Bloomberg, CNBC and BBC News is of paramount importance.
In the case of Zimbabwe capital markets, certain information and news sources could be critical in terms of implementing news trading strategies. Some of the important market moving news include political events, election results, country ratings, interest rates, gross domestic product, employment numbers, trade balance, inflation and company financial results.
The role of social media platforms
Social media platforms also remain an important source of news despite the risks of “fake news”. Twitter, a website and mobile platform where individuals post a 140-character thought, or “tweet”, represents one of the newer social media resources that enables one to keep abreast of critical news.
Twitter is currently revolutionising agriculture markets in the USA. Commodities brokers and traders are paying close attention to tweets as they can now gather real-time updates on planting intentions and yields and tracking a multitude of trends such as weather and flu outbreaks.
Twitter also allows traders to follow news outlets and research groups, giving them tips and recommendations that can influence their trading decisions. In more than one instance, some market-moving data or news has appeared on Twitter feeds before it was published on the actual websites.
See beyond negative news
Piggy has been noticing some negative reports on the outlook of the Zimbabwean economy in 2021. Economists have cited a plethora of headwinds such as (i) Covid-19, (ii) worsening foreign
currency shortages and (iii) inflationary pressures. This also triggers fears amongst investors especially when one considers the impact of currency depreciation and potential loss of value.
Piggy maintains that buying stocks in 2021 is still a good idea. While stocks are considered risky assets, there are several reasons why you should build positions in 2021.
According to researchers, stocks have beaten every other type of investment over any 10-year period during the last 75 years.
This implies that there is need to take a long-term view. Piggy also recommends individuals and household to diversify future income streams by buying shares of companies that are well managed, cash-generative and exhibit strong growth prospects.
According to research conducted by Jeremy Siegel, best-selling author of Stocks for the Long Run (McGraw-Hill, 2002), stocks are riskier than fixed-income assets, but in the long run, they tend to outperform every other investment.
According to many experts, stocks have returned an average of 11% annually for the last 75 years, handily beating inflation as well as bonds, money market accounts, and savings accounts. In addition, it is cheaper to buy stocks over the long term, especially if you buy and hold.
Of course, stock market investing has its own risks. When you invest or trade in the market, there is a chance that you could lose some or all of your money. The goal for many investors and traders, therefore, is learning how to recognize and minimise risk.
Keep in mind, however, that you cannot eliminate risk, but you can learn to manage it. The entire stock market could go down in price because of outside events like war, recession or even terrorism. Second, even if the stock market as a whole goes up, there are several reasons why your stock could go down.
That said, if you do not invest in the market, there is the risk that you will miss out on some very profitable buying opportunities. Therefore, whether you invest in the market or not, there will still be risks.
Matsika is the head of research at Morgan & Co and founder of piggybankadvisor.com. — firstname.lastname@example.org / email@example.com or mobile: +263 783 584 745.