Get to know your mutual funds: SAS Fortune fund

SAS fortune fund

Our first post on the ‘Get to know your mutual funds’ series started with Epack investment fund, where we highlighted aspects such as the nature, investment strategy and performance of the fund. To continue the series, let’s have a look at SAS Fortune fund. Continue reading “Get to know your mutual funds: SAS Fortune fund”

4 DUMB financial decisions I had made in the past

dumb financial decisions

Just about three months ago, I wrote on four smart financial decisions I had made in the past. As humans, we also make mistakes in some aspects of our lives, which include finances too. In the previous post, I mentioned how useful it was to learn from other people’s mistakes. You may therefore find it worthwhile to go through the following financial mistakes I made in the past, especially if you’re of the younger generation.

  1. Closing my first mutual fund account within just 2 months of opening

dumb financial decision_nokia 2300
Over-excitement propelled me to sell my first fancy phone to fund my first investment account

In reference to the previous post about SMART financial decisions, I made it known that I opened my first investment account in my early twenties, after attending an investment seminar. In fact, over-excitement from the seminar propelled me to sell my then multi-coloured phone to fund the investment account. This was a Nokia (2300) brand phone which I had used for just five months. Due to the strong passion to begin investing, I ignored the fact that I bought the phone for far more than the price I resold it. Imagine buying a phone at GH¢150 (then ¢1,500,000) and then selling it just after five months of usage, for GH¢60 (then ¢600,000). That was exactly what I did. As you can see, this was surely not financially prudent. What made it worse was that the investment account could not last as it should have been. Selling my first fancy phone to fund my first investment account appeared to be easy. However, coping with the ‘phoneless’ life afterwards could not stand the test of time. I couldn’t even wait for three months- I promptly went back to the financial institution for the account’s closure.

Even though it was a good initiative on my side to open an investment account at an early stage, it was also dumb to close the said account just after two months of opening. By now, you may be aware of the cost implications of closing an investment account prematurely. First, the investment fund (an equity mutual fund) had made losses during the two-month period I stayed invested. Hence, the GH¢60 invested had significantly reduced in value to my disappointment. In addition, I was charged 3% of the remaining amount as early withdrawal fee (which I was not made aware of during the account opening). As if what I went through was not enough, I further topped up the retrieved money with additional fund sourced from my SSNIT (students’) loan instalment to purchase another fancy phone. This was Nokia 6610i, bought for GH¢200 (then ¢2,000,000). Imagine what GH¢200 could do if invested in 2006. Certainly, this was a clear example of opportunity cost [the profit I could have gained from investing the GH¢200 but gave up and rather chose to spend the GH¢200 on a luxury phone].

  1. Not diversifying my investment portfolio sufficiently

dumb financial decisions _diversificationBack in the olden days, I would be staying glued to the television set on Saturday evenings awaiting the NLA (National Lottery Authority) lottery draw on GTV. Just like other kids at the time, the only means to be part of the lottery game was to randomly pick 5 out of the 90 numbers to be drawn and watch if any of them would stand a chance of being drawn. Imagine staking 5 out of 90 lotto numbers. The chances of winning are definitely less as compared to staking many numbers such as 10, 20, or even 30 out of the 90 lotto numbers. Realising how difficult it was to get any of my selected numbers being drawn, I henceforth decided to go beyond five numbers. I quite remember writing down at least 10 different numbers just to increase my chances of ‘wining’ and indeed, I did ‘win’ on many occasions 🙂

I’m sure by now you’re wondering what lotto numbers has got to do with investment diversification. Now, let’s take a look at the Ghana Stock Exchange. Imagine owning stocks in just a couple of the 40 listed companies and regularly sitting close to your computer screen to monitor stock prices on the market. You would realise that your chances of having your stocks being among the gaining list are very less. The situation is different when you own stocks of several listed companies instead of few ones. That is the relationship I’m trying to draw between the lotto numbers and investment (stocks) diversification. During my early stage of investing, my investment picks were confined to few products, in particular stocks. Similar to the lottery story above, I would be staying close to the television watching the GSE updates section of business news. Unfortunately, the few companies from which I owned some stocks were outside the winning team most of the time. Besides that, my portfolio was easily subjected to avoidable shocks and turbulence effects of the stock market in times of bad economy.

See also: My bad experience with a long-term bond: The lessons learnt

  1. Not taking advantage of market falls

dumb financial decisions _market fallsAlthough history shows that stock markets always come out of crisis, we try to shy away from bad markets, either consciously or unconsciously. A number of seasoned investors advise us to take advantage of falling markets. One such key person is Warren Buffet who is noted for the statement that “the key to successful investing is to buy low, [and] sell high”. Nonetheless, the fear to lose one’s investment forces us to do otherwise. This was a similar situation I found myself in- I ignored the opportunities in fallen markets. In fact, I had witnessed the stock market fall a number of times but failed to take advantage of that.

As explained earlier, the lack of diversification exposed my investment portfolio to turbulence effects of the stock market in bad times. This effect could have been minimised or neutralised if I had purchased more of the fallen-priced stocks at the time. One means to mask stocks’ losses is to buy more of the fallen-priced stocks. In doing so, you aim to neutralise the negative effects (losses) posed on the currently owned stocks.


  1. Selling stocks at the wrong time

The lack of proper investment diversification resulted in the sale of stocks during needy circumstances. Surely, selling stocks without making any gain is not worth it. The worse part is that fees and commissions would be paid irrespective of the negative returns. Buying or selling stocks on the GSE attracts a commission of up to 2.5% of the traded amount (This, I never knew at the time though). Thus, within a short period of holding the stocks, a total commission of 5% (for both buying and selling) was paid to the stockbrokers. Even though I sold them to make ends meet, the timing was not right to make some gains. This could have been avoided if I had properly diversified my investment (by including other investment categories such as short-term products). At least, I could have waited for a while so as to make some capital gains.

   Lessons that could be learnt

Failure, they say, becomes a progress when we learn from it. Although I failed to maintain my first investment account, at least, the passion seemed to be still latent. This passion resurrected a few years later when I opened another account which is still active to date. Like the saying goes, ‘don’t let your fall turn to be your downfall’. Furthermore, limit your expenses on luxuries.

Again, don’t be a victim of poor investment diversification. With a well-diversified portfolio, you stand a greater chance of winning many times. Proper diversification is essential for the resistance of shocks on investment portfolio.

Finally, take advantage of market falls. Purchase more of good companies’ stocks when prices go down. In that way, you minimise the negative effects (losses) on currently owned stocks.

Percentage rates of investments: Interpreting them correctly

percentage rates of investments

Percentage rates appear to be popular in many financial publications. We see them in different forms- either positive or negative. As investors, some common areas we find percentage rates interesting are documents that deal with investment returns or profits. Many investors, as well as prospective ones, look out for rates quoted by financial institutions to make informed decisions. Unfortunately, most prospective investors get confused in the interpretation of these rates. Besides the misinterpretation of percentage rates, others naively compare rates associated with different investment categories. Their naivety reflects in the manner they query or make statements such as:

  1. “Which mutual funds have the highest interest rates?”
  2. “Which stocks have high interest rates?”
  3. “The interest rate of Mfund [money market fund] is higher than that of Epack [equity fund]”

One consequence of misinterpreting percentage rates is the disappointment that follows when lower-than-expected returns are made on an investment. During a chat with John (a follower of Sikasεm) a few days ago, I was not surprised when he expressed the frustration he had recently been through. He revealed:

“I nearly cried when 700 cedis in an account yielded only 4.57cedis.”- John Mensah

I understand many more people have had such an experience before. Yes! It is a very painful experience to go through. However, to avoid or reduce the impact of similar painful experiences, it would be worthy to study a few of the percentage rates we usually come across in investment products.


Annual interest rate

The most common investment products that make use of annual interest rates are Treasury bills and fixed deposits. The interest rates quoted on the various Treasury bills and fixed deposits are annually-based. That is, the return or profit earned on these investment products, when utilising the quoted interest rates, is for a period of one year (12 months). However, T-bill investments do not always mature in 12 months. For instance, the 91-day and 182-day T-bills mature after three months and six months respectively. Hence, the calculated interests need to be prorated (distributed) for the actual maturity periods. That is three months and six months for the 91-day and 182-day T-bills respectively.

To be clearer on this, let’s go through the sample calculation below.

     How to calculate Treasury bill interest

Let’s assume that you invest GH¢1000 at the current 91-day T-bill rate of 13.4700%,

Now, since the quoted interest rate (13.4700%) is an annual (12-month) rate, the total interest on the GH¢1000, after 12-months, would have been (1000×0.1347) = GH¢134.7


However, 91-day T-bill investment matures after three months. Hence the above total interest needs to be prorated for a three-month investment period.

Thus, the real interest to be earned on the GH¢1000 would be (1000×0.1347)/4 = GH¢33.675

Note that 3 months × 4 = 1 year. That is why you see the total (annual) interest being divided by 4

In a similar manner, the annual interest would have been divided by 2 if it were to be 182-day (6 months) T-bill investment.


Another means to estimate your T-bill or fixed deposit interest is to first distribute the calculated annual interest per each month and further multiply the monthly interest by the actual number of months the money stayed invested.  Using the same example above, the interest earned per month would be (1000×0.1347)/12 = GH¢11.225 Remember that there are 12 months per annum (year).

Now, since the money is being invested for 3 months (91-day T-bill), we multiply the monthly interest figure by 3. That is, (GH¢11.225×3) = GH¢33.675


Annual yield

Annual yield is the annual rate of return on an investment, taking into consideration the compounding effect of any intermediary interest earned. Annual yield is most often reported as the investment return on money market funds (a pool of fund invested in fixed income products). Managers of money market funds, while estimating the annual yield, assume that the funds would remain intact in the account for one year (365 days). For instance, the estimated annual yield of HFC Unit Trust on 10th May 2017 was reported as 20.31%. What this means is that assuming the funds in HFC Unit Trust remain intact from 10th May 2017 to 10th May 2018 (one year), the estimated rate of return would be 20.31%. That is, the value of the mutual fund would appreciate by 20.31%. However, since investors continue to deposit and withdraw from mutual funds, the funds are therefore not expected to remain intact throughout the full year. Thus, fund managers keep revising their annual yield on a daily basis to reflect the changes. For this reason, it may be difficult to precisely calculate the return on a mutual fund (money market) investment over a period.

Due to the effect of compounding, investment returns associated with money market funds may not be evenly distributed over the investment duration. Let’s assume that you had invested GH¢1000 in Databank’s Mfund on 12th May 2017. Annual yield of Mfund on 12th May 2017 was 19.88%. Thus, the estimated return (profit) on the GH¢1000 after one year would be (GH¢1000×0.1988) = GH¢198.8 However, the GH¢198.8 takes into account the compounding effects of intermediary profits that are reinvested by the fund managers. As such, it cannot be equally distributed by each of the 12 months. This implies that if the GH¢1000 stays invested for just six months instead of the 12 months, you cannot expect to earn half of the annual profit.

Once again, let’s go through another example using real historical data.


Table: Historical investment value of an Mfund account

Date Mfund value, GH¢ Monthly return, GH¢
30/09/2016 879.41 —–
31/10/2016 894.71 15.3
30/11/2016 912.03 17.32
31/12/2016 928.61 16.58
31/01/2017 945.83 17.22
28/02/2017 958.98 13.15
31/03/2017 971.49 12.51
30/04/2017 988.82 17.33


The table above shows the value of an Mfund investment account (a money market fund) over a seven-month period. Based on the investment values, the monthly returns are also calculated by subtracting preceding values from current ones.

Even though the fund manager (Databank) had estimated an annual yield of about 23% at the time, the returns (as seen in the table) were not equally distributed over the period- They differed from one month to another. For instance, November return of GH¢17.32 had increased from the October return of GH¢15.3. On the other hand, the return in January (GH¢17.22) had dropped to GH¢13.15 in February. Factors that account for non-equal distribution of Mfund returns include, but not limited to, compounding effect of intermediary profits as well as changes in interest rates of fixed income products during the investment period.


Year to date return (YTD)

Whenever we mention year to date, we refer to the period between the start of a calendar year and the present date of the same year. The beginning of the calendar year often has 1st January as the baseline. Year to date return therefore refers to the return or profit made so far, from 1st January to the present day of the calendar year. For instance, a year to date investment return of 10%, as of 30th April 2017, implies that from 1st January to 30th April 2017, a return of 10% had been made on the investment.

Year to date returns are usually reported on equity-related investment products such as the Ghana Stock Exchange (GSE), Epack investment fund, SAS fortune fund and HFC Equity Trust. Similar to the annual yield explained earlier, year to date returns can drop or increase from time to time within a calendar year. Again, year to date returns do not accumulate in a linear functional manner. In other words, they do not distribute proportionally along the calendar year. The mere fact that a year to date return after the first four months (30th April) was 10% does not necessarily mean that the return at the end of the year (31st December) would be 30%. This is due to price fluctuations on the equity markets. On every business day, equity fund managers recalculate their year to date returns based on the present prices of stocks.

It is also important to note that published YTD returns mostly affect existing shareholders than prospective ones. Now let’s have a look at the scenario below:

percentage rates of investments_scenario

From the scenario above, it is clear that the investor lacked understanding of YTD returns. This is a common mistake many prospective investors make when investing in equity funds. As I mentioned before, YTD returns mostly affect existing shareholders. Thus, the 45% the prospective investor noticed in September 2016 was a profit that had been ‘earned’ already by the existing shareholders of the equity fund. To accurately estimate his return, he needed to do that in reference to September 2016 since that was when he made the deposit. According to the scenario, the fund had lost 5% (45% to 40%) from September to December. Hence, the investor had actually lost part of his deposit.

In a similar situation, an existing shareholder who topped up his account in September 2016 would not enjoy profit on the additional deposit that was made in September. Nevertheless, he would enjoy the 40% return on his previous investment (prior to the deposit in September) if that investment had stayed in the equity fund from January to December 2016.


Comparing percentage rates

It is important not to compare percentage rates of different categorical investments. For example, the annual yield of HFC unit trust (a money market fund) as of 10th May 2017 was 20.31%. On the same day, the year to date return on HFC equity trust (an equity mutual fund) was 9.68%. It would be a big mistake to compare these two percentage rates and assume that HFC unit trust performs better than HFC equity trust. This is because the 9.68% return on HFC equity trust is only for the period of 1st January 2017 to 10th May 2017 while the 20.31% on HFC unit trust is a 12-month estimated rate.

On another note, it may not be appropriate to compare the year to date (YTD) returns of two different equity funds in the early part of a year. As stated earlier, YTD returns do not distribute proportionally along the calendar year. For instance, the YTD returns of SAS fortune fund and Epack investment fund, as of 11th May 2017, were 14.51% and 5.4% respectively. While the rate for SAS fortune fund is higher than that of Epack, it may be premature to conclude that SAS fortune fund performs better than Epack investment fund. This is because the YTD return of SAS fortune fund may drop while that of Epack can rise steeply before the year ends. Thus, a more appropriate comparison could be done at the end of the calendar year.

Stock analysts predict buoyant performance on GSE

stock analysts predict performance on gse

Stock analysts are confident trading activities will bounce back in the second quarter following a pickup in trading activities on the local bourse. The 2017 first quarter performance indicate that the stock market gained about 10 percent growth compared to the negative 4.26 percent recorded in the same period last year.

While investors of GCB Bank gained 1 cedi 64 pesewas to record the highest gains in the first quarter of this year, investors of CAL Bank were the highest losers as their stocks dropped almost 35 percent in the first quarter of this year.

With about 46 percent increase in price, GCB Bank topped the gainers for the first quarter. It was closely followed by Benso Oil Palm Plantation and StanChart which recorded 39.42 and 26.85 percent respectively.

Also, the share prices of Ecobank Ghana, Total Petroleum and Unilever Ghana Limited increased by 14.06, 11.11 and 5.76 percent respectively. With the exception of Unilever Ghana Limited, all the gainers for this year’s first quarter ended 2016 with losses on their share prices.

Also, of the top five gainers, only Benso Oil Palm and Unilever Ghana Limited recorded some gains in the same period last year.

An Associate Equity Trader at UMB Stockbrokers, Kofi Busia Kyei, explains to Citi Business News the reasons accounting for the performances of the listed companies that gained in the first quarter of 2017.

Investors were taking positions quickly ahead of the expectations of the new regime. They were expecting interest rates and inflation to drop…GCB has been resilient over the years, it gained about 22.1 percent in profits…generally, the bank has been a very good company,” he said.

But investors of CAL Bank recorded the highest loss on their share prices. The banking stock declined as much as 34.67 percent. It was preceded by Tullow Oil and Produce Buying Company with -22.60 and -16.67 percent respectively. Also, Guinness Ghana Limited, SIC Insurance and Enterprise Group recorded losses of 7.98, 1.52 and 0.42 percent respectively.

Kofi Busia Kyei further explains reasons accounting for their poor performances:

Basically CAL Bank’s profits were down over the period, down by over one hundred percent comparing 2016 and 2015…their cash also went down by 80 percent; investors also look out for these indicators before making decisions.

Meanwhile, the share prices of the remaining stocks such as HFC Bank, Ecobank Transnational Incorporated, Goil, ADB, UT Bank, Ayrton and Access Bank, remained unchanged.

The stock analysts are highly optimistic of the second quarter of 2017. They cite the new pro-business policies by the government and recent trends in interest rates as basis for their claim.

Also, the Managing Director of the Ghana Stock Exchange, Kofi Yamoah, tells Citi Business News he is hopeful the market will pick up despite a bullish performance in 2015 and 2016.



Performance of stocks on the Ghana Stock Exchange

performance of stocks

Investing in stocks is proven to be one of the most lucrative means of building wealth. Stocks may be either listed or unlisted. Unlisted stocks (also known as over-the-counter stocks) are stocks that are not traded on a stock exchange but directly between two parties in a non-standardised form. Listed stocks, on the other hand, are stocks traded on a regulated market or exchange such as the Ghana Stock Exchange. There are currently about 40 listed stocks on the Ghana Stock Exchange. These are made up of various industrial sectors such as banking, insurance, manufacturing, mining, and petroleum. Usually, the performance of stocks on the Ghana Stock Exchange is captured by the ‘GSE all-share index’. The GSE all-share index, which can further be represented in a percentage format  (GSE return), reflects the overall performance of all listed stocks on the exchange. Refer to this link for all historical GSE returns (from inception to date).

Besides the GSE all-share index, the performance of stocks can also be measured for each individual stock. The most common means of doing this is by computing the return on the stock based on its share price appreciation (or depreciation) over a period. For instance, if a stock starts trading at the beginning of the year at GH¢2 and closes at the end of the same year at GH¢3, the said stock would be making an annual return of 50%. That is [(3-2)/2] ×100.

In the table below, you will find the historical returns of the various stocks listed on the Ghana Stock Exchange. These figures, covering the past six years, are calculated based on their opening and closing prices for each of the years under study. The average returns for the latest five-year period (2012-2016) are also computed.

See also: Performance comparison of mutual funds in Ghana

Performance of stocks: Historical returns of stocks listed on GSE
2011 2012 2013 2014 2015 2016 Latest 5-year average
1 AngloGold Ashanti Depository shares AADS -16.7 4 0 1.9 -1.9 0 0.8
2 Access Bank Ghana ACCESS N/A N/A N/A N/A N/A N/A N/A
3 African Champion Industries Limited ACI 0 -12.5 -14.3 -66.7 0 -50 -28.7
4 Agricultural Development Bank ADB N/A N/A N/A N/A N/A N/A N/A
5 AngloGold Ashanti Limited AGA 0 8.8 0 0 0 0 1.76
6 Aluworks Limited ALW 8.3 -61.5 0 -60 600 0 95.7
7 Ayrton Drugs Manufacturing Co. Ltd. AYRTN 6.3 5.9 0 5.9 0 -25 -2.6
8 Benso Oil Palm Plantation Limited BOPP 46.7 27.3 129.3 27.7 -38.8 -17.1 25.7
9 CAL Bank Limited CAL -9.4 35.7 162.2 4.1 2 -25.7 34.9
10 Clydestone (Ghana) Limited CLYD -42.9 0 0 -25 0 0 -5
11 Camelot Ghana Limited CMLT -25 16.7 14.3 -25 0 0 1.2
12 Cocoa Processing Company Limited CPC 0 0 0 0 0 0 0
13 Ecobank Ghana Limited EGH (Formally EBG) 6.3 -6.3 87 35.5 -7.6 -8.6 20
14 Enterprise Group Limited EGL -24 26.3 291.7 -6.9 37.1 0 69.6
15 Ecobank Transnational Incorporated ETI -21.4 20 58.3 47.4 -3.6 -63 11.8
16 Fan Milk Limited FML -3.3 50.4 86.5 -20.7 40 51.7 41.6
17 GCB Bank Limited GCB -31.5 13.5 131 13.4 -34.9 -6.1 23.4
18 Guinness Ghana Breweries Limited GGBL -1.9 71.2 136.6 -48.4 -37.8 -18.1 20.7
19 NewGold Issuer Limited GLD N/A N/A -18.8 37 8.9 -0.5 N/A
20 Ghana Oil Company Limited GOIL 10.3 93.8 43.5 19.1 33.3 -21.4 33.7
21 Golden Star Resources Limited GSR -47.1 0 0 -14.9 -15 -2 -6.4
22 Golden Web Limited GWEB -20 0 0 -25 -66.7 0 -18.3
23 HFC Bank (Ghana) Limited HFC 2.3 0 113.3 68.4 -43.8 -15.6 24.5
24 Mega African Capital Limited MAC N/A N/A N/A N/A 33.3 0 N/A
25 Mechanical Lloyd Company Limited MLC 10 36.4 153.3 -26.3 -32.1 -21.1 22.0
26 Produce Buying Company Limited PBC 92.3 -28 -5.6 -29.4 -16.7 -40 -23.9
27 Pioneer Kitchenware Limited PKL -14.3 0 0 0 -16.7 0 -3.3
28 PZ Cussons Ghana Limited PZC N/A -25 338.9 -62 13.3 -35.3 46.0
29 Standard Chartered Bank (GH) Ltd. SCB 0.7 -74.7 29.9 36.2 -19.9 -25.2 -10.7
30 Standard Chartered Bank (GH) Ltd. (Prefrence shares) SCB PREF 0 0 0 5.8 29.1 5.6 8.1
31 Societe Generale Ghana Limited SOGEGH (Formally SG-SSB) -28.1 2.1 56.3 33.3 -20 -22.5 9.8
32 SIC Insurance Company Limited SIC -7 -15 14.7 -5.1 -62.2 -14.3 -16.4
33 Starwin Products Limited SPL -40 66.7 -20 -50 100 -25 14.3
34 Sam Woode Limited SWL 0 0 50 33.3 0 0 16.7
35 Trust Bank (Gambia) Limited TBL -69.9 0 -12.5 -31.4 54.2 -29.7 -3.9
36 Tullow Oil Plc TLW N/A 22.7 -8.1 0 -6 -18.3 -1.9
37 Total Petroleum Ghana Limited TOTAL 98.3 18.5 N/A 20.6 -16.4 -61.2 N/A
38 Transol Solutions Ghana Limited TRANSOL -28.6 -20 -25 0 0 0 -9
39 Unilever Ghana Limited UNIL 16.7 28.3 114.9 -41.6 -20.6 0.1 16.2
40 UT Bank Ghana Limited UTB 14.3 18.8 18.4 -44.4 -60 -70 -27.4

*N/A: Not available, mainly because the company was not listed on the stock market by then

Performance of stocks: Brief observations

According to the data above, the performance of stocks for most listed companies has not been encouraging over the six-year period. For instance, African Champion Industries Limited (ACI), Clydestone Ghana Limited (CLYD), Golden Star Resources Limited (GSR), Golden Web Limited (GWEB), and Transol Solutions Ghana Limited (TRANSOL) never recorded a single positive return throughout the period. Moreover, their latest 5-year average returns were -28.7%, -5%, -6.4%, -18.3% and –9% respectively.

Another key observation from the data has to do with stock volatility. Even though some stocks depict impressive average returns for the latest five-year period, the trend of their annual returns appears to be erratic. A typical example is Aluworks Limited. According to the data, Aluworks’ 5-year average return (95.7%) was contributed by the sole remarkable return (600%) it recorded in 2015. PZ Cussons similarly posted a 5-year average return of 46% which was mainly due to the 338.9% it recorded in 2013.

On the other hand, some listed companies have been consistent in good shape over the six-year period. A few of these stocks, according to the data, include Benso Oil Palm Plantation Limited (BOPP), Ghana Oil Company Limited (GOIL) and Fan Milk Limited (FML). BOPP recorded negative returns for two years (2015 & 2016) and positive returns for the rest of the four years. It further posted a 5-year average return of 25.7%. Similarly, Fan Milk Ltd recorded negative returns in 2011 and 2014, positive returns for the rest of the four years and a splendid 5-year average return of 41.6%. GOIL recorded only one negative return in 2016, with a 5-year average return of 33.7%.

In terms of industrial sectors, the banking and finance stocks seem to perform better than stocks of other sectors. A few studies show that the well-being of an organisation’s industrial sector may impact the performance of its stock. It is due to this reason why investors are advised to invest in industries they are familiar with. Thus, it may be beneficial to look further and compare the performance of stocks according to their industrial sectors. Refer to this link for the historical returns of stocks categorised by their various industrial sectors.

It is essential to note that stocks’ returns based on their price appreciation alone may not constitute their total performance. This is because other factors such as dividend payments and any bonus shares issued by the companies can also be considered. In spite of this, stocks’ returns play key role in terms of their performance rating. At least, we know that the rate of dividend payments by most companies is fairly low as compared to returns on stocks.

Furthermore, one must be cautious when utilising historical results for any financial decision. Although many financial analysts depend much on historical performance of stocks, a few veteran investors caution on such practices. For instance, Warren Buffet once argued that:

If past history was all there was to the game, the richest people would be librarians.”

In a nutshell, even though historical results may not guarantee the future performance of stocks, they may still aid investors to have a clear picture of what is happening on the stock market.

Could February be good month to buy stocks on GSE?

February _ex-dividend date

Very recently, I posted about dividend payments of some selected companies on the Ghana Stock Exchange. One thing peculiar about dividend declaration is ‘ex-dividend date’. Whenever board of directors declares dividends, they also announce an ex-dividend date in order to determine rightful owners of dividends for stocks purchased afterwards. To qualify for a declared dividend, investors must buy stocks, at least, one business day before the ex-dividend date. For example, when SOGEGH (Societe Generale Ghana Ltd.) declared dividends last year, it further announced ‘23rd March, 2016’ as the ex-dividend date. What this implies is that any investor who purchased SOGEGH shares before 23rd March, 2016 was entitled to the declared dividend. On the other hand, any seller of SOGEGH shares traded after the said date was entitled to the declared dividend.

Now, before you ask the question ‘what has ex-dividend date got to do with buying stocks in February?’ consider visualising the purchase of a cow that is due to deliver a calf. All things being equal, you (as the buyer of the cow) stand to benefit from the additional calf in the immediate term.

Back to the dividend subject, February is known to be the month when many traded companies begin to declare their final dividends for the preceding financial year. Even though some institutions publish their dividends later in the year, many declarations often start in the latter days of February through the months of March and April. Examples of trading companies that had previously declared their dividends in the said period can be found below:

  1. CAL Bank Ltd.
  • Dividend for the 2009 financial year was published on 2nd March 2010
  • Dividend for the 2010 financial year was published on 28th February 2011
  • Dividend for the 2013 financial year was published on 21st February 2014
  • Dividend for the 2015 financial year was published on 29th February 2016
  • Dividend for the 2009 financial year was published on 23rd February 2010
  • Dividend for the 2010 financial year was published on 3rd March 2011
  • Dividend for the 2011 financial year was published on 8th March 2012
  • Dividend for the 2013 financial year was published on 5th March 2014
  • Dividend for the 2015 financial year was published on 3rd March 2016
  1. GCB Bank
  • Dividend for the 2012 financial year was published on 30th April 2013
  • Dividend for the 2013 financial year was published on 30th April 2014
  • Dividend for the 2014 financial year was published on 31st March 2015
  • Dividend for the 2015 financial year was published on 19th April 2016
  1. Fan Milk Ltd.
  • Dividend for the 2008 financial year was published on 16th March 2009
  • Dividend for the 2009 financial year was published on 17th March 2010
  • Dividend for the 2010 financial year was published on 6th April 2011
  1. HFC Bank
  • Dividend for the 2008 financial year was published on 26th March 2009
  • Dividend for the 2009 financial year was published on 11th March 2010
  • Dividend for the 2014 financial year was published on 31st March 2015

Imagine buying some of these mentioned stocks and getting entitled to their declared dividends (if purchased before the ex-dividend dates). As mentioned earlier, it’s like purchasing a cow that is due to deliver a calf or purchasing a chicken that is due to lay eggs. In this instance, the calf or the eggs correspond to the dividends due to be paid.

february_pregnant stock

Getting paid dividends for stocks held for just a couple of months is a great deal. I mentioned in my previous post that dividend yields of stocks usually range from 4-9%. Let’s assume that you purchase CAL Bank’s stock whose historical dividend yield swings around 8%. If you hold these stocks for 3 months and get paid the dividend, your benefit would outweigh fellow shareholders who might have held their stocks for 1 year (12 months) but getting paid the same dividend yield. In fact, the 8% dividend yield (of stocks held for 3 months) extrapolates to about 32% per annum. [That is, (12/3) × 8 = 32%]

Don’t forget that some well-informed investors hold on to their stocks anytime dividends are declared even if they had earlier intended to sell them. They do so, in particular, if the dividend yields are good. Their motive is to postpone any sale of stocks until the ex-dividend date in order to gain from the dividend payments. Hence, before you wait for listed companies to begin publishing their dividends, why don’t you take advantage of it now? As you know, buying stocks on the GSE may also take processing time.

Dividend payments of selected stocks on the Ghana Stock Exchange

dividend payments

Honestly, there is one particular sentence I always love to come across in the annual reports of listed companies. It goes like:

The directors have recommended a dividend of GH¢… for the year ended…

As some of you may be already aware, a number of listed companies distribute portions of their earned profits to their shareholders on a regular basis. This payment, referred to as dividend, is one of the benefits of investing in stocks. Although dividend payments are often made in cash, they may also be distributed in the form of bonus shares (free additional shares to existing shareholders) or a combination of both. For instance, a company may issue bonus shares in the ratio of 1 share per 10 existing shares held by its shareholders.

Many listed companies pay dividends to their shareholders once annually. A few of them however pay dividends twice per annum, which are made up of interim and final dividends. TOTAL Petroleum, Tullow Oil and Mechanical Lloyd are examples of the few ones that usually pay dividends twice in a year. It should however be noted that even though some companies pay dividends twice in a year, the sum of their two dividend figures might not match the single dividends paid by other companies.

While some institutions prefer to issue cheques as payment medium of their dividends, others deposit them directly into shareholders’ bank accounts. CAL bank, UT bank and Tullow Oil are typical examples of companies that deposit dividends directly into their shareholders’ bank accounts.

It may also not be appropriate to compare the dividend figures of two different stocks, particularly if they are of different industrial sectors. A more appropriate way to determine which stocks pay more as dividend could be the use of dividend yields. Dividend yield is the dividend expressed as a percentage of the stock price. This normally ranges from 4% to 9% depending on the company’s dividend policy and other factors such as a sharp decline in stock prices.

Simply, Dividend yield = Dividend per share/price per share.

Although dividend payments remain one of the factors looked for by some investors during stocks purchase, they should not necessarily be the yardstick to determine whether a stock is good or bad. This is because even though a company may make massive profits, it may choose to invest most of the profits in expansion projects instead of giving them to its shareholders as dividends. Nonetheless, dividends can still serve a useful purpose for investors who seek regular income.

Infact, dividend payments as well as an increase in dividend payment rates cannot be guaranteed. For example, Enterprise Group Limited, which is known for consistently paying dividends to its shareholders, skipped issuing dividend for its 2011 financial year. Likewise, GGBL (Guinness Ghana Breweries Limited) paid no dividend to its shareholders from 2010 to 2012. Moreover, Camelot Ghana Limited paid a constant dividend of GH¢ 0.005 for four consecutive financial years (2008 to 2011) without increasing the rate.

On the other hand, Goil (Ghana Oil Company Limited), which listed on the GSE in November 2007, has consistently paid dividends to its shareholders in an increasing rate to date.

Without bombarding you with further dividend theory, let me tabulate below, the dividend payments of 10 selected stocks for the past decade.

See also: A snapshot of Ghana Stock Exchange performance in 2016

1. Dividend payments of CAL Bank Limited (CAL)

Financial Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Dividend, GH¢ 0.0075 0.0075 0.0075 0.0105 0.0145 0.012 0.013 0.026 0.035 0.053 0.081 0.1

2. Dividend payments of Guinness Ghana Breweries Limited (GGBL)

Financial Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Dividend, GH¢ 0.03 0.0361 0.0418 0.0429 0.0485 0.04 Nil Nil Nil 0.01729 Nil Nil

3. Dividend payments of Ghana Commercial Bank (GCB)

Financial Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Dividend, GH¢ 0.0375 0.04 0.055 0.055 0.060 0.06 0.07 0.14 0.18 0.25 0.32 0.33

4. Dividend payments of Ecobank Ghana Limited (EGH)

Financial Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Dividend, GH¢ 0.067 0.24 0.16 0.18 0.2 0.24 0.29 0.43 0.78 0.84

5. Dividend payments of Societe Generale Ghana Limited (SOGEGH)

Financial Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Dividend, GH¢ 0.045 0.045 0.03 Issued bonus shares 0.04 0.035 0.04 0.04 0.06 Issued bonus shares 0.076

6. Dividend payments of Enterprise Group Limited (EGL)

Financial Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Dividend, GH¢ 0.005 0.005 0.008 0.009 0.01 Nil 0.032 0.045 0.215 0.05

7. Dividend payments of Fan Milk Limited (FML)

Financial Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Dividend, GH¢ 0.03 0.04 0.046 0.0575 0.075 0.1 0.02 0.04 0.06 0.09 0.09 0.1035

8. Dividend payments of HFC Bank (Ghana) Limited (HFC)

Financial Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Dividend, GH¢ 0.0045 0.0055 0.01 0.01 0.015 0.016 0.022 0.028 0.035 0.06 Nil

9. Dividend payments of Ghana Oil Company Limited (GOIL)

Financial Year 2008 2009 2010 2011 2012 2013 2014 2015
Dividend, GH¢ 0.0085 0.0104 0.012 0.014 0.015 0.016 0.02 0.025

10. Dividend payments of Camelot Ghana Limited (CML)

Financial Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Dividend, GH¢ 0.003 0.004 0.004 0.004 0.0045 0.005 0.005 0.005 0.005 0.006 0.006 0.0075 0.0075

Is there any hope for the equity market in 2017?

equity market

As the 2016 year brings down the curtain, many are those yearning for a turning point in the Ghanaian equity market. The Ghana Stock Exchange, which plays a leading role in the Ghanaian equity market, is projected to close the year 2016 with a negative return. The Exchange similarly posted -11.77% in 2015, compounding investors’ disappointment.

No matter these negative yields, the equity market has been known for its ability to recover from negative trends to positive results in the past years. This could, at least, give some hope to the investing public. So the questions we ask are:


Must investors anticipate better results in the coming year?”

Should we embrace ourselves for a positive outcome in the equity market for the year 2017?”

Answers to the above questions may depend on some signals. A few signals depicting the probability of a positive yield in 2017 are:

  1. Continuous drop in Treasury bill interest rates

Interest rates of Treasury bill have dropped to their lowest for the year 2016, thus reducing the attractiveness of the fixed income market. As mentioned in a previous post, investors normally shy away from Treasury bill to other investment options anytime Treasury bill rates become unattractive. Since the equity market serves as one of the reliable investment alternatives to Treasury bill, the drop in Treasury bill rates may be a positive signal for the equity market.

  1. Negative yield (return) for two (2) consecutive years

The history of the Ghana Stock Exchange shows that the bourse barely posts a negative return for more than two consecutive years. In fact, the only period the stock market repeatedly recorded negative returns for three consecutive years was between 1990 and 1992 (Note: the Ghana Stock Exchange officially began in 1990. Click here for GSE returns since inception). Since then, there hasn’t been any period with a repeated negative return except 2015/2016. Thus, the probability of the stock market posting negative return for a third consecutive time in 2017 is less, even though possible.

  1. Change in government

Ghana will soon be transitioning from the current government to a new one following the recent election held on 7th December, 2016. A change in government, although arguable, may also reflect on the market through many factors. Some investors and market players perceive various economic indicators to improve following the in-coming government. Such investors mainly respond to media sensations to take investment decisions. This may in turn reflect positively on equity market activities.

  1. Dividends postings by listed firms

Many organisations listed on the Ghana Stock Exchange are expected to publish their dividend pay-outs at the end of the year. If these figures are good, they may drive investors to demand for more stocks on the market. As we know, higher demand may trigger positive returns.

To sum up, 2017 may be a welcoming year for the equity market due to a few signals. First, the continuous drop in Treasury bill rates may lead more investors to the equity market as an alternate option. Second, based on historical data, there is a less probability that the stock market would post a negative return for the third consecutive year. Third, the response of investors to media sensations owing to a change in government could reflect positively on equity market activities. Finally, the publication of profits and dividends by listed companies may trigger more stock demand which may result in positive return on the market.



Performance comparison of mutual funds in Ghana

mutual funds performance

Why mutual funds?

Many reasons can be assigned to why people choose mutual funds over other investment instruments. First, most mutual funds are affordable in the sense that individual investors can start with fewer amounts. Second, mutual funds are generally managed by licensed professionals, making them one of the ideal choices for individuals with even limited investment knowledge. Investors can therefore sit back, trusting these professionals to deliver good results. In addition, mutual funds are more liquid (can be easily converted into cash) as compared to other investment products such as stocks. Note that it takes a relatively longer time to sell stocks on the Ghana Stock Exchange than to redeem your money from a mutual fund scheme.

Mutual funds selection

The growing interest in mutual funds of late has led to a rise in various fund schemes in the country. Currently, there are over 30 licensed mutual fund schemes in Ghana. While a few of them are as old as Methuselah, others are as new as new-born babies. Each fund has its own investment goal(s) and therefore diversify their assets to suit such goals. The varying forms of mutual funds therefore make it easier for different types of investors to choose their suitable preferences. Choosing or investing in more than one particular fund is also a good decision to reduce the risks posed by a fund’s failure.

Ideally, one needs to consider certain key factors before selecting from the numerous available funds to invest with. These factors include, but not limited to, fees and commissions (which is separately dealt here), track record of the fund managers as well as past performance of the fund.

See also: Performance of stocks on the Ghana Stock Exchange

Past performance of mutual funds

The past performance of a mutual fund can be used to assess how stable (or unstable) the fund has been over that period. This can then be used as guidance, although not always, in depicting how the fund would perform in the future (For current mutual funds’ rates, click here). Most mutual fund managers publish their annual returns to the public which can then be compared with the returns of their peers.

Assessing a fund’s performance in reference to that of its benchmark and peers is very useful. Almost all equity funds (including balanced funds) are benchmarked against the Ghana Stock Exchange returns (All Share Index) Money market funds also benchmark their returns against the average Bank of Ghana Treasury bill rate for the year, usually the 91-day term. In the table below, we compare the performance of past returns Continue reading “Performance comparison of mutual funds in Ghana”

Profits of SAS fortune fund drop in 2015

SAS fortune fund

The bearish economic outlook for 2015 had significant impact on performances of various sectors of the economy for the year.

Figures released by the managers of the fund showed that the fund decreased by GH¢ 0.0036 to close the year at GH¢ 0.5064.

The fund also made a total return of negative 0.71 percent as compared to the GSE Composite Index of negative 11.77 percent.

Despite these performances, managers of the fund maintain that the Strategic African Securities Fortune Fund has been able to maintain a lead role over its benchmark Ghana Stock Exchange Composite Index.

Speaking at the fund’s 11th Annual General Meeting Chairman of the SAS fortune fund Board, Maxwell Logan stated,

“The total net asset value of the SAS fortune fund at the end of 2015 stood at GH¢ 2,971,909 and representing about 5% decrease over the previous year’s total net asset of GH¢3, 129, 788.”

According to Maxwell Logan, the fund was also Continue reading “Profits of SAS fortune fund drop in 2015”