1. Treasury bills & fixed deposits
Treasury bill is one of the basic investment products in Ghana. The Bank of Ghana, via the various financial institutions, issues Treasury bills and bonds to the public. The common types of Treasury bills and bonds to choose from are the 91-day Treasury bill, 182-day Treasury bill, 1-year Treasury note, 2-year bond, 3-year bond and the 5-year bond. The Treasury bills can be easily redeemed at any time, even when not fully matured. The bonds, on the other hand, cannot be easily redeemed at a premature stage. For instance, if you invest in a 3-year bond but wish to redeem your money before the three-year maturity period, let’s say just five months from the investment start date, then there must be another investor ready to buy that 3-year bond before you can have your invested money released to you. Such buyers are mostly difficult to come by, especially when the interest rates are low.
The interest rates for Treasury bills come in two kinds- the normal rate and the discount rate. With the discount rate, the interest is calculated and given to you in advance, even before your invested money matures. This rate is however slightly lower than the normal interest rate. For example, the normal interest rate for the 91-day Treasury bill (23rd-27th May, 2016) was 22.8071% while the discount rate for the same period was 21.5768%. Interest rates on bonds are normally paid semi-annually throughout the duration of the particular bond (For current rates on Treasury bills, click here).
Consider fixed deposits as a parallel version of Treasury bill which is directly provided by the financial services, rather than providing it on behalf of the central bank. The interest rates of fixed deposits are generally lower than that of their Treasury bill counterparts although few banks offer more.
2. Mutual funds
A mutual fund is a form of collective investment whereby money is pooled from different individuals and invested in preferred investment instruments. Mutual funds are mainly managed by licensed brokers and financial services. Basically, these brokers receive different sums of money from various individual or institutional investors. Based on each investor’s contribution, the investor is allotted some shares or units in proportion to the total pooled fund. The total collected fund is subsequently invested in monetary instruments or businesses in accordance with the investment strategy of the mutual fund. A key benefit of mutual funds is the relatively higher returns. Generally, some investment opportunities associated with higher returns require some minimum bid. For instance, the Ghana government announced to auction a 3-year GH¢500 million bond on 26th May 2016, with a minimum bid of GH¢50,000. With this minimum bid, it appears that only the rich can afford to invest. However, by pooling fund collectively, mutual fund managers have the advantage to meet such minimum required capital. Mutual fund managers therefore invest on behalf of the various individuals who cannot afford this minimum bid. Depending on market conditions, the higher investment returns associated with mutual funds cannot be always guaranteed. The disadvantage aspect of Mutual funds is the commissions charged. Commissions and other management fees range from 1 to 3% of the invested capital. There are different forms of mutual fund. These are basically ‘money market’, ‘equity’ and ‘balanced’ mutual funds.
Managers of ‘money market’ mutual funds invest wholly in low-risk instruments such as Treasury bill, notes, bonds and fixed deposits. Managers of ‘equity’ mutual funds invest a high proportion of the fund (usually 80%) in equities or stocks and the rest in low-risk instruments. Managers of ‘balanced’ mutual funds invest approximately 50% of the fund in equities and the other half in low-risk money instruments. Below is a list of the common mutual funds (and their respective managers or brokers) available in Ghana:
Databank financial services
Databank manages five main mutual funds namely Epack, Mfund, B fund, Arkfund and Edifund. The Epack is a long-term equity fund (established in 1996), the Mfund is a money market fund while the Bfund (as the B signals) is a balanced fund. Major portion (80%) of Epack fund is invested in about nine African stock markets, including the Ghana Stock Exchange. The Arkfund was established in 2009, purposely for investors who have ethical concerns about their investments. It is a form of balanced mutual fund that is entirely invested in socially responsible companies as well as companies that do not cause damage to the environment. Edifund is meant for people who plan to finance their educational needs. It is of two kinds- Tier 1 and Tier 2, for short-term and long-term needs respectively. Visit Databank’s website at http://databankgroup.com/
Firstbanc financial services
Firstbanc manages two main funds- First fund and Heritage fund. The First fund is a money market fund while the Heritage fund is an equity fund for long-term growth. Their ‘First fund’ has consistently won best ‘performing money market fund’ by Premiere Investment Club of ACCA, from 2010 to 2014. Visit Firstbanc’s website at http://firstbancgroup.com/demo2/
HFC investment services
HFC manages four different investment products namely HFC unit trust, HFC equity trust, HFC REIT and HFC F-plan. The HFC unit trust is a money market fund that invests in short-term money market securities. The HFC equity fund, as the name implies, invests in equities on the Ghana Stock Exchange for long term investors. HFC REIT is a mutual fund that invests about 75% of its portfolio directly in the real estate industry. HFC F-plan (F=future) is an equity fund that invests not only in equities of the Ghana Stock Exchange, but also in stocks of other African markets. Visit their site at http://hfcinvestments.com/
Ecobank Development Cooperation (EDC)
EDC, a subsidiary of Ecobank, manages EDC balanced fund. Visit their site at https://www.ecobank.com/edc
Gold Coast Fund Management
Gold Coast Fund Management (GCFM), a subsidiary of Group Nduom, has operated for over two decades now. GCFM has won various awards which include Best Fund Manager (Ghana Investments Awards) for 2012 and 2013 as well as Best Investment advisor for 2014. Funds managed by GCFM are Gold fund unit trust and Gold money market fund. The Gold fund unit trust is an equity fund which allocates about 75% of its investment portfolio in Ghanaian stocks and 25% in fixed income securities. On the other hand, the Gold money market fund invests in low-risk instruments such as corporate bonds, fixed deposits and Treasury bills. Visit their site at http://www.goldcoastfundmanagement.com/
Other mutual funds
Besides the mutual funds listed above, there are others which include NTHC- Horizon fund, SAS Fortune fund and SDC- Campus mutual fund.
Ghana has a single stock market- the Ghana Stock Exchange (GSE). Trading on the GSE takes place from 10:00 am to 3:00 pm every working day. You can buy stocks from the stock market through accredited stock brokers such as Databank, FirstBanC, CAL brokers, NTHC, EDC, etc. To purchase a stock on the stock market, one needs to open a GSD (Ghana Securities Depository) account via any of the accredited stock brokers, make some deposit and fill the appropriate transaction form. The stock broker then buys the stock on your behalf and credits it to your GSD account. So far, CAL brokers is the sole brokerage company in Ghana that provides its customers an online trading platform (via their i-broker terminal) to trade directly with the Ghana Stock Exchange in real time. Databank is another broker that similarly plans to launch their Omni Trader (an online stock trading platform) in the immediate future.