How to Invest in Africa

Investing directly on Africa stock exchanges is not the best choice for the common investor. Few of these exchanges even allow foreign investment and the market volatility is wild enough to worry even the most professional stock pickers. I suggest familiarizing yourself with African companies listed on the New York Stock Exchange(NYSE), the London Stock Exchange(LSE), and the Johannesburg Stock Exchange(JSE) to make your dive into the world of foreign investment a little easier and less worrisome. Here are two companies with proven reputations that have significant operations in many countries of Africa.

Anglo-Gold Ashanti- a gold mining and exploration company based in South Africa. The Company maintains a portfolio of mining operations and projects on four continents, including many countries in Africa I have stated above. Anglo-Gold Ashanti works across the full spectrum of the mining value chain. You can learn more about this established company and its up to date financial information here.

Sasol – an international integrated energy and chemicals company. There are numerous joint venture projects in Mozambique regarding energy and chemical production that will provide sources of energy to many African countries in the coming decades. Here is a link to their website where you can find all up to date financial reports.

If choosing your own stocks is something that still frightens you, there are many mutual funds and exchange traded funds (ETF’s) to choose from that are run by American investment firms with significant exposure to African companies.

A mutual fund is an investment vehicle funded by shareholders that allows you to purchase a collection of stocks, bonds, and other securities. The value of the mutual fund is dependent on the net value of all securities contained in the “portfolio.” It is an easy start for a beginning investor because they require little to no management and they are a cost effective way to invest in numerous securities. An additional advantage of mutual fund is that they are highly liquid, which means your professional managers can adjust certain aspects of the fund in order to achieve a maximum return.

An exchange-traded fund is similar to a mutual fund with the exception of some key differences. Like a mutual fund it tracks a pool of assets such as stocks, bonds, securities and commodities. Where they differ is that ETF’s can be traded on stock exchanges throughout the normal course of a trading day. Their prices fluctuate just like stocks and their closing prices closely resemble the net value of the pool of assets, but may differ due to trader speculation. You might also find listed ETF’s that will have significantly lower fee’s than mutual funds that you might find advantageous.

Here are links to an ETF and Mutual Fund to consider.

Market Vectors Africa Index (AFK)

T. Rowe Price Africa and Middle East (TRAMX)

 

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