Buying Stocks in Jamaica
What are Shares / Stock?
Before someone even thinks of buying stocks in Jamaica (or any country), an understanding of what exactly are stocks/shares and the stock market (eg. the Jamaica Stock exchange) is critical to investing successfully. Owning shares, gives the stockholder a claim on its assets and profit. When a business grows, if all other factors are equal (ceteris paribus) a stockholder can sell the stock for a higher price and receive a profit. However, the converse is also true in that if a business is not doing very well the value of the stock can plummet and cause the shareholder to lose if the shares are sold.
How can money be earned from Stock investing?
Money is earned from stocks in two ways
- Stock Price Appreciation
Stock Price appreciation
Of the two ways to earn money from stocks, earning from this method depends on the operating environment, and this can be very subjective and therefore more volatile because the stock price is primarily based on other investors’ perception of the stock. Regardless, this is the method that is common to all stock on an established stock exchange. Stock appreciation is basically standard economics, when you have a large number of buyers (and few sellers) the stock price goes up and when you have a large number of sellers and few buyers the price goes down (generally). Stock exchanges such as the Jamaica Stock Exchange are different in that sometimes when the general investor sentiment is low (e.g. the recently concluded debt swap; the recent depreciation of the Jamaican currency) stocks that should perform (based on proven profitability in their financial statements) are sold at lower prices as investors seek to ‘flee’ the stock market.
Dividends are generally more stable in that you can normally get an idea of how much money you will be earning periodically as firms normally declare when they are giving out dividend payments to shareholders so a shareholder can analyse a firm’s previous pay-outs to determine what they can expect in the future.
What are the costs for buying stocks in Jamaica?
Buying stocks in Jamaica (and selling) incurs the following costs
- Commission to the Stock Broker: – which is normally about ~2%
- JSE Cess: – 0.20% on the Principal (gross amount to be invested)
- JCSD: – paid based on the size of the transaction
- GCT: – 16.5% paid on all fees
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