A share price is more than just a number. It’s a snapshot of a company’s health and the market’s expectations. Like slices of a cake, shares represent ownership in a business. Prices rise and fall based on investor confidence, company leadership, and economic forces at home and abroad. Understanding these shifts is key to navigating the market wisely.
1. What is a share price?
A share price is the cost of one piece of a company.
A company is like a big cake, and it is cut into many small slices called shares. If you want to own a piece of that company, you buy a slice. The price of that slice is called the share price. If a cake costs P100, and it is cut into 10 equal slices, that means each slice costs P10 (share price).
2. What makes share prices go up or down?
Share prices change based on what people think will happen to a company in the future.
If people believe the company will do well, maybe make more money, or grow bigger, then more people want to buy its shares. When many people want to buy, the share price goes up.
But if people think the company might struggle or lose money, fewer people want to buy, and the share price goes down.
Other things that can change share prices:
- How the company is run: If the company has good leaders who make smart decisions, people trust it more, and the share price can go up.
- The business environment: If things are going well in the type of business the company is in (like mining, farming, or banking), that can help share prices go up. But if that sector is struggling, prices can fall.
- The country’s economy: If the economy is doing well, for example, prices are stable and interest rates are low, businesses usually do better, and that can push share prices up.
- Other countries’ economies: If investors see better opportunities in other countries, they might move their money there, which can make local share prices go down.
3. Why are share prices different?
Share prices are different because companies are not all the same.
- Some companies make more money, some are bigger, some sell different products or services, and some are managed better than others. These differences affect how much people are willing to pay for their shares.
- It’s just like with cattle: a Tswana cow is priced differently from a Simmental or Sereline because they are different in size, meat quality, and strength. The same idea applies to companies and their share prices.
4. Can you explain the BSE chart?
The BSE chart shows what’s happening with shares on the stock exchange, like a scoreboard for buying and selling.
Here are some of the key words you’ll see:
- Bid (Buy): This is the highest price someone is willing to pay to buy a share. Think of it as the buyer’s best offer.
- Offer (Sell): This is the lowest price someone is willing to accept to sell their share. Think of it as the seller’s asking price.
- Last (Sale): This shows the most recent price which a share was actually bought and sold.
- Where can I get information on share prices?
- Brokers
- Media
- Botswana Stock Exchange
6. When is the best time to buy or sell shares?
The best time to buy shares is when you’ve thought about a few things:
a) How long do you want to keep the shares, short term or long term?
b) What do you want from them: do you want to earn money regularly (dividends), or do you want to wait and sell them later at a higher price (capital growth)?
c) How much money can you afford to invest without needing it soon?
Once you’ve decided these things, you can talk to a stockbroker. They will help you find the right shares based on your goals.
You might think about selling your shares when:
- The company has been doing badly for a long time, and the share price keeps falling (consider that you might be locking in a loss). This might be a sign to move your money elsewhere.
- The share price has gone up a lot, and you want to take your profit before it goes down. You can then use that money to invest in something else.
- You need money for something important, like school fees, a project, or an emergency, so you decide to sell your shares to get cash.
7. Do I always have to sell my shares when the price goes up?
No, not always.
- Just because the share price has gone up doesn’t mean you must sell. The price might keep going up, and if you sell too early, you could miss out on even bigger profits.
- That’s why it’s smart to talk to your stockbroker before deciding. They can help you understand if it’s the right time to sell or if it’s better to hold on a bit longer.
- What should I do after buying shares?
After buying shares, it’s important to keep an eye on the company.
You should:
- Check how the company is doing: is it making profits? Is it growing?
- Watch the share price: is it going up or down?
- Follow the news: read stories in the newspaper or listen to business news on the radio or TV to see what’s happening with the company.
This helps you decide whether to keep your shares, buy more, or sell.
9. How are my interests protected as a small investor?
Two important organisations help protect your rights when you invest:
a) Botswana Stock Exchange (BSE): The BSE has rules that all stockbrokers and companies must follow. If someone breaks these rules or acts unfairly, the BSE can punish them to keep investors safe.
b) Non-Bank Financial Institutions Regulatory Authority (NBFIRA): NBFIRA is another organisation that watches over stockbrokers and other financial companies. They also have strong powers to stop anyone who breaks the law or treats investors badly.
Together, these two make sure the market is fair and that small investors like you are protected.
10. What happens to my shares if I die?
If you die, your shares can be passed on to the people you choose (called beneficiaries).
To do this, the right paperwork needs to be filled out and submitted so the shares can be legally transferred to them.
- Can I transfer my shares to someone else after buying them?
Yes, you can.
To do this, you contact the transfer secretary for the company. They handle moving the shares from you (the current owner) to the new owner.
If you’re not sure who the transfer secretary is, your stockbroker can help you find out.
- Can I buy shares for someone else?
Yes, you can.
All you need are the full names and current address of the person you’re buying the shares for, plus the money to pay for the shares.
*Source of information: Motswedi Securities
