Lesson 1: What Is Investing?
Learn how your money can work for your future.
Welcome to Investing
Welcome to your first ZambiaShares investing lesson. If you have never invested before, don't worry. We will start from the very beginning.
Investing simply means putting your money into something with the aim of receiving a financial benefit in the future.
In this course, we will learn about investing using simple examples that are easy to understand in everyday Zambian life.
What Does Investing Mean?
Think about the difference between spending money today and putting money aside for a future purpose.
When you invest, you put money into an asset such as shares, bonds or another investment with the hope that it can provide income or increase in value over time.
Investing means putting money to work today for a possible financial benefit in the future.
The important word is possible. Investment returns are not guaranteed. Your investment can also lose value.
Saving and Investing Are Different
Saving
Money kept aside
Investing
Money put to work
Saving means keeping money aside so that you can use it later. For example, you may save money for school fees, an emergency, a new phone or another short-term need.
Investing is different. You normally invest money with a longer time horizon and accept some risk in exchange for the possibility of earning a return.
Why Do People Invest?
People invest for different reasons. Your reason for investing will depend on your own financial goals.
- To build wealth over a long period
- To prepare for future financial goals
- To potentially earn investment income
- To participate in the growth of businesses
- To prepare for future needs
Think About a Farmer
Imagine a farmer planting maize. The farmer does not plant the seed today and expect a harvest tomorrow.
The crop needs time, care and the right conditions before it can produce a harvest.
Investing can be similar. You put your money into an investment and give it time to potentially grow.
Investing in a Business
Investor
Company
Business
Companies need money to run and grow their businesses. One way a company can raise money is by selling shares.
When you buy shares in a company, you become a shareholder. This means you own a small part of that company.
If the business grows and performs well, shareholders may potentially benefit. But the investment can also lose value.
What Can You Invest In?
Investing is not limited to shares. There are different types of investments available to investors.
Shares
Bonds
Property
Funds
Each type of investment has its own potential benefits, risks and rules.
In the ZambiaShares learning course, our main focus is understanding the stock market and shares.
How Can an Investment Make Money?
With shares, an investor may potentially make money if the value of the shares increases.
Some companies may also pay dividends to shareholders. A dividend is a payment a company may make to its shareholders from available profits or reserves, subject to the company's decisions and applicable rules.
A Simple K1,000 Example
Imagine You Invest K1,000
Suppose you buy shares worth K1,000.
Later, those shares are worth K1,200. The value has increased by K200 before considering fees, taxes or other costs.
But if the shares later become worth K800, the value has fallen by K200.
This is why investing is different from simply keeping money in your pocket. The value of an investment can change.
Investing Has Risk
Risk is one of the most important things a new investor needs to understand.
The value of shares can increase, but it can also decrease. The amount you can lose depends on the investment and the circumstances surrounding it.
This is why you should never invest money without first understanding the risks.
Investing Needs Patience
Many investors think in terms of years rather than days.
A business may need several years to expand, open new branches, increase sales or develop new products.
Because of this, investors should understand their own investment time horizon before putting money into shares.
Do Not Follow Every Stock Tip
You may receive investment tips from friends, social media, WhatsApp groups or people you know.
Be careful. A person may share an opinion without having enough information to support it.
Before investing, learn about the company, understand its business and consider the risks.
Knowledge Comes First
You do not need to rush into the stock market.
First learn how shares work. Then learn how to understand companies, dividends, financial information and investment risk.
The more you understand, the better prepared you can be to make your own investment decisions.
What Should You Remember?
- Investing means putting money to work for the future.
- Saving and investing have different purposes.
- Shares can increase or decrease in value.
- Some companies may pay dividends.
- Investing involves risk.
- Long-term thinking can be important.
- Do not blindly follow stock tips.
- Learn and research before investing.
Lesson Complete!
Well done! You now understand the basic meaning of investing, why people invest and why investment risk matters.
Most importantly, you have learned that investing should start with knowledge and understanding.
Learn first. Understand the risk. Then make informed decisions.
Investing may sound like something only rich people, business owners or financial experts do. But investing is simply the process of putting your money into something with the aim of getting a benefit in the future.
For example, when you buy shares in a company, you are investing in that business. If the company performs well, the value of your shares may increase. Some companies may also pay dividends to their shareholders. However, investing also involves risk, and the value of an investment can go down.
For someone starting their investment journey in Zambia, it is important to understand one thing first: investing is not a quick-money scheme. It is about learning, making informed decisions and giving your investments time.
Think about a farmer planting maize. The farmer does not plant today and expect a harvest tomorrow. The crop needs time, care and the right conditions. Investing can be similar. You put your money to work and give it time to potentially grow.
In this first lesson, you will learn what investing means, why people invest, the difference between saving and investing, how investments can potentially make money, and why risk is an important part of investing.
You will also learn why you should not blindly follow stock tips from friends, social media or WhatsApp groups.
By the end of this lesson, you should have a simple understanding of investing and why learning should come before putting your money into the stock market.