How can I buy shares of stock in Zambia? For some companies, shares exist as financial assets that guarantee an even distribution of residual income, if any, in the form of dividends. Shareholders who do not distribute dividends do not participate in profit sharing in this business. Instead, they hope to participate in the growth of stock prices by increasing company profits.

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When incorporating a company, owners can issue common shares or preferred shares to investors. The company does issue shares to investors in return for capital used to develop and manage the company.

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Shares in a private entity or partnership are owned by the founders or shareholders of the company. As small firms expand, shares are usually sold to outside investors in what is known as the primary market.

How can I buy shares of stock in Zambia?

As the company continues to grow bigger, it inevitably seeks much-needed equity by selling its shares to the public in an initial public offering (IPO). After the IPO, the company’s shares will then be an open secret as they will trade publicly and will eventually be listed on the stock exchange that is, the Lusaka Stock Exchange LuSE.

Types of Shares

PREFERENCE SHARES

This type of share gives certain preferential rights in comparison to other types of shares. The main advantages of preferred shareholders include the following:

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They are preferred first when it comes to paying dividends, that is, they are the first beneficiaries in sharing the company’s profit. If the company is closed, preferred shareholders have the first right to payments.

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Three subcategories of the preference shares are:

Cumulative preference shares

Cumulative shareholders are entitled to receive outstanding dividends before dividends are paid to every shareholder. For instance, if preferred share dividends for 2020 and 2021 were not paid due to a market downturn, preferred shareholders are entitled to them before they are given for the current one.

Non-cumulative preference shares

Non-cumulative shareholders cannot claim dividends in arrears. These shareholders only earn dividends if the company makes profits. However, no dividends are paid for previous years as is the case with preference shares.

Convertible Preferred Shares

These shares are convertible as a result, convertible shareholders can convert their preference shares into common shares over a period of time.

Equity Shares

Equity shares are also known as common shares. The majority of shares that the company issues are equity shares. This type of share is actively traded on the secondary market or capital market. These shareholders reserve voting rights during company meetings in Zambia. They are also entitled to dividends which the Board of Directors declares. Nevertheless, dividends on these shares are not fixed and as such, they can vary from year to year depending on the profits made by the company. Equity shareholders are second in line to receive dividends after preferred shareholders.

Differential Voting Rights

These are shares that are as ordinary as equity shares with the only difference being that they come with differential voting rights that equity shares do not have. The shareholders of these shares can have lower or higher voting rights during company meetings.

The reasons why some companies issue type of shares are:

Preventing a hostile takeover of the company

Prevention of bringing on board a passive investor without a vision to spur the company ahead.

DVRs are usually attractive as they compensate investors with higher dividend rates.

On stock exchanges, DVRs are traded just the same as equity shares although mostly, they trade at a discount.

How to buy shares in Zambia

If you have been asking how can I buy shares of stock in Zambia? Check the information below which explains in detail how to buy shares in Zambia and make money from stock trading.

Choose a broker

Brokers are authorized intermediaries for trading financial assets on the Lusaka Stock Exchange. As of May 2020, 6 brokerage firms were accepted for trading on the exchange: Madison Assets Management, Securities Brokers Zambia, Pangea Securities, Autus Securities, Equity Capital Resources, and Finance Securities Zambia.

Open a trading account with one of these brokers

How can I buy shares of stock in Zambia? Only the following information is required: proof of residence, proof of identity, a completed intermediary account opening form, and an indication of the investment amount (1.375% flat fee per transaction). The broker gives you access to its investment platform, which allows you to send buy and sell orders to a centralized system on the Lusaka Securities Exchange.

Select the asset you want to invest in

Investors must decide whether to invest in stocks, government bonds, or corporate bonds.

Submitting a buy order

After you have made a decision regarding what you want to invest in, the next step is submitting a buy order through your broker. Here, it is very much possible to set a limit price or market price for the selected financial asset.

The transaction is complete after the buy and sell prices match

When the auction price of an asset matches the asking price, the transaction is executed. The broker completes the exchange transaction payment on your behalf and submits the transaction amount to the buyer or seller broker. Thereafter, you are officially and legally a shareholder of a company.

The Broker issues the transaction notification and charges their fees

The last part of the deal in share buying is paying the broker their fees. The fixed broker fee is 1.375% of the total asset amount per transaction.

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