Written by Lewis Humphries, freelance journalist
Like most developing countries across the globe, a lot of countries in Africa are presenting a raft of exciting investment opportunities across a range of markets.
To this end, new research from PwC projects that the value of traditional assets under management in 12 African markets peaked at around $1.098 trillion in 2020, up from a total of just $293 billion in 2008.
But what are the most common investment vehicles in the region, and how can you get started in your target market?
A Look at Africa’s Most Popular Markets
The year 2020 bought a number of seismic challenges, particularly from the perspective of the coronavirus pandemic.
However, people were able to leverage increased Internet penetration rates to capitalise while being compelled to spend more time at home, as many turned to the $6.6-trillion a day forex market to create a passive income stream.
In fact, some regulated brokers in the region saw growth in excess of 100% through 2020, with brokers such as Tickmill alone reporting a 27.43% hike in demand during this period. Of course, this trend was also driven by increased market accessibility and the provision of a forex account that offers a welcome bonus of $30 or more to new clients, but there’s no doubt that this has quickly emerged as one of the region’s most popular asset classes.
Stocks also offer a viable opportunity for African investors, as do exchange-traded funds (ETFs) and mutual funds.
These options benefit from built-in diversification, while they cost far less than manually building a portfolio of individual stocks. The most popular South African ETF is the iShares MSCI South Africa ETF (EZA), which represents a pure-play way of investing in the region.
Interestingly, residents of South Africa may also want to consider investing in cryptocurrency. Here, regulators are embracing cryptocurrency trade and forging progessive investment laws, increasing accessibility and causing experts to predict an increase in activity nationwide.
The landscape differs somewhat elsewhere on the continent, but investors in SA may well want to consider the volatile but increasingly liquid crypto market.
Our Brief Guide to Getting Started
Regardless of which asset classes and markets you target, you’ll have to adhere to a few basic rules when investing your hard-earned cash. These include:
- Analyse and Learn: Every successful investment journey is based on a foundation of relevant knowledge, which can be garnered from webinars, online courses and good old-fashioned books (there’s a particularly diverse selection of forex literature out there). This can help to create a keen sense of determinism and enable you to manage your expectations, in line with your newly-found understanding and appreciation of your own financial situation.
- Establish Your Risk Profile: We’d also recommend understanding the precise amount of risk that you’re comfortable with as a trader, as there’s a seismic difference between secure dividend investments and volatile derivatives such as forex. So, it’s important you establish your risk pattern and a precise amount of capital that you can afford to lose each month, so that you can avoid recording large and unsustainable losses.
- Diversify Your Interests: While it’s important to start small and scale your efforts in line with experience and profitability, you should definitely focus on the diversification of your portfolio as a long-term goal. So, while you may start out by trading just one or two major currencies, over time you can branch out into minor and exotic currencies before considering cryptocurrencies, stocks and fixed-income products like bonds.