See beyond the negative news


Piggy has been noticing some negative reports on the outlook of the Zimbabwean economy in 2020. Economists have cited a plethora of headwinds such as (i) another looming drought, (ii) worsening foreign currency shortages and (iii) 18-hour rolling power cuts. The Ministry of Finance & Economic Development is forecasting to 3.0% GDP growth in 2020 but this could be difficult to achieve. A major cause of concern are the economic effects of another drought in 2020.

Zimbabwe as a nation has in the past had about one drought in every 10 years and about one mild drought in every 3 years. The country is facing yet another potentially devastating drought that could derail GDP growth projections for 2020. 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 2020 is a good idea

While stocks are considered risky assets, there are a number of reasons why you should build positions in 2020. 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. Here is an infographic from the Joe Money Podcast that depicts the advantages of capital gains and dividend income streams;

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 minimize risk. Keep in mind, however, that you cannot completely 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 a number of 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.

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