Getting Started with Investing in the Guyanese Stock Market

On average, global stock markets return 1.5x – 2x your money every 10 years.

What about investing in Guyana? If you invested in DDL 10 years ago, you would have earned 12x your money, the highest return in the last 10 year stretch. Just $83,000 would have made you 1 million.

If you held Banks DIH shares instead, you’d have nearly 10x your initial investment. If you had $100,000 you’d now have 1 million. Demerara Bank would have given you 8x for a close 3rd while Republic Bank would have given 5x – not too shabby.

Since the discovery of oil, many have believed that Guyana is poised for a meteoric rise due to the influx of investments that are expected.

Before you begin investing however, there are a few key rules you should follow to ensure you are not putting your financial life in jeopardy.

Why Should you Invest?

If you need more convincing before investing, I will be writing another article soon explaining the power of compound interest and how it can potentially make more money for you than you could ever dream of earning in your entire life. I’ll leave a link to it here once it’s completed so stay tuned.

Albert Einstein is reputed to have said, “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”

A quick example:

If you earn a salary of $200,000 GYD per month for the rest of your life starting from 20 years old and retire at 65, you’d have earned $108,000,000 GYD in your life (ignoring taxes and deductions). Sounds amazing! After taxes, this would be around $85,320,000 GYD in your lifetime. Still not bad.

However, if you took just 10% of your salary ($20,000 GYD) every month and put it into a compounding asset that yields 10% annually (an average yield for stock markets), at 65 years of age you’d have an additional $180,309,048 GYD – earning more than you, while you had to do absolutely nothing. That is the power of compounding.

But that’s not all – guess what? Guyana’s stock market has been growing faster than the average market bringing our yearly average returns to more like 20% since its inception in 2003. At this rate, you’d have an astounding $4,776,470,862.

Can’t read that number? That’s 4 billion, 776 million Guyanese dollars! All from a simple contribution of $20,000 GYD per month. So you just went from making a just above average 85 million in your lifetime, to almost 5 billion – making you 56 times wealthier than you would have been by simply working normally. That means that you’d have to work for 2,520 YEARS to make that same amount of money yourself!

Disclaimer: Investing has risks – you are not guaranteed to make money; you might even lose money. Past returns do not guarantee future returns. I am not a financial advisor, this is merely for educational and entertainment purposes. The opinions expressed in this article are my own and should not be taken as facts. Do your own due diligence and never blindly listen to a random guy on the internet. Hi, I’m Timothy – by the way. For full transparency, I own shares in quite a few of the companies in Guyana.

Additional Side Note: Do not expect Guyana’s market to continue to grow at this rate. It may increase or decrease in the future.

Is investing just for the rich and educated people? Absolutely not! Using the assumptions above, $10,000 per month can leave you with 2.3 billion in 45 years. $5,000 per month can give you up to 1 billion for your retirement – and to pass on to future generations.

Ensure you have an emergency fund

Before you do any sort of investing, always make sure you have a backup of “hard cash” to fall back on, in case things go sideways. What happens if you lose your job, lose a limb or get sick? Emergency funds make sure we always have some money to keep us going in case of things not going well.

Try to save up 3-6 months of your current living expenses in cash and never touch it unless absolutely necessary.

Pro Tip: Keep this money in a high-interest bank account so it doesn’t just sit there collecting dust. In Guyana, some bank-like institutions like Hand in Hand Trust and the New Building Society offer between 2-3% interest per year.

Find out about how to craft an emergency fund in this article.

Pay off high interest debt

You never want to invest if you have high interest debt that can be paid off. Why? Paying off debt results in a guaranteed return. A loan of 7% on $100,000 is $7,000 yearly (assuming the balance remains the same). If you pay off that debt, you are guaranteeing a gain of $7,000 for yourself. Unlike this, there are no guarantees in the stock market.

If you have loans with interest rates above 6%, pay them off as soon as possible – especially credit card debt or payday loans.

Lower your Expectations

Seems weird that I’d tell you to lower your expectations just after I told you that you can earn an additional 5 billion dollars in your lifetime. I probably raised your expectations, if anything. However, that 5 billion dollars came after 45 years of you working and contributing $20,000 per month. Did it come after 1 year of being invested? NO. 45 years! If you remove just the last 5 years, bringing your time to 40 years, it drops to 1.9 billion. So in the last 5 years, you would have earned 3.1 billion whereas the 40 years prior total to 1.9 billion. If you take off 10 years instead, it drops to 770 million. This is why you need to start investing as soon as possible. 10 years can cause you to lose out on over 4 billion dollars.

Quite often people think of investing in the stock market as doubling and tripling your money in a week – this is not the case 99.99% of the time you will be investing. Sometimes it does happen, but you should not be counting on this. Do not expect to become rich overnight – this is a long term plan. Extend your time horizon.

You should not be investing if you plan on staying invested for fewer than 10 years. Any less can be considered gambling. Your chances of being a successful investor lowers dramatically as you decrease your time horizon. Ideally you should be planning to stay invested for 20-30 years, giving your money time to grow and compound.

Do not try to time the market. You lose money waiting for the next “best time to invest”. Just put your money in, and let the market do its thing. Never believe that you are smarter than the market.

Do your research

Do not invest blindly into companies just because someone told you it is a good company, or the stock is going to go up. Investing is not gambling – it’s a calculated risk; take your time. Study each company you want to invest in carefully and ensure it’s something you want to stick with for the long term. Ask yourself, would I want to own this business?

Don’t know which companies are available for you to invest in? To see the companies that are available to invest in, click the buttons below. They link to GASCI – Guyana’s Stock Exchange.

Find out about the management of the company. Who are they and what are their policies? What are their long term goals with the company? What does their track record look like? This is called fundamental analysis.

Next, look at the company stock itself. How has it been performing? Look back one year, 5 years, 10 years and 20 years. How has the stock performed? Is it rising consistently? How did it react to the last global recession? This is called technical analysis.

At the time of writing, here are the financials of the companies on the Guyana Stock Exchange

Let’s talk about each column on this table.

On the left, we have the stock. These are usually shortened forms of a company’s name – for instance “DIH” is the ticker for the Banks DIH stock.

Next, we have the last trade price. This is what one share of the company is currently selling for. These are listed in Guyanese Dollars, so if we wanted one share of DIH, we’d have to pay $160 GYD currently.

EPS

EPS is short for Earnings per Share. EPS indicates how much money a company makes for each share of its stock and is a widely used metric for estimating corporate value. A higher EPS indicates greater value because investors will pay more for a company’s shares if they think the company has higher profits relative to its share price. This is calculated using the company’s last earnings figures. If a company earned 100 million dollars in net profit for the last year, and has 10 million shares in circulation, then the EPS is 10. Higher is better.

P/E ratio

P/E ratio is short for Price to Earnings ratio. It is used to tell how relatively expensive a stock is. A high P/E ratio could mean that a company’s stock is overvalued, or else that investors are expecting high growth rates in the future. Lower is better.

Dividend Yield

Dividend Yield is used to give investors an idea of what percentage of their investments will be returned within a year as dividends. A 1% dividend yield will give you approximately $1 back in dividends for every $100 you invest. Higher is usually better – but not too high! Tread carefully if dividends go over 5% – this can potentially be what investors call a “dividend trap”. High dividends can be worrying for a few reasons, including a rapidly declining share price, unsustainable payout ratio by the company and potentially cut dividends in the future.

Don’t know what a dividend is?

A dividend is basically a cash payout to investors for the purpose of cash flow. Think of it as your share of the profit. Not all companies pay dividends, since it is not required; and some may reduce or even cut their dividends entirely if the company is going through a rough time.

Choose a broker

Once you’ve researched and decided which companies you want to buy into, it’s time for you to actually buy the stocks. You cannot simply buy the stock from the seller directly. The trades are facilitated by brokers. In Guyana we have a few brokers – popular ones being Guyana Americas Merchant Bank Incorporated, and Hand-In-Hand Trust Corporation Inc.

Most brokers will require you to set up an account with them by providing them with identification, proof of income and proof of address. Once you’ve signed up, you can then carry out your trades.

Fees

You’ll be faced with with a few fees, which vary depending on your broker. Some charge a flat fee while others charge a percentage of the trade. Most broker commissions are usually around 2% of the value of your trade with some minimum commission. You may also incur a transaction fee.

Example: If you want to purchase $100,000 worth of shares, you may pay an additional $2,000 in fees.

Tip: Due to the structure of most broker commissions, you may incur less relative fees if your trade amount is higher.

Taxes

Short answer: there are no taxes.

You can expect to pay no taxes on dividends or share price appreciation once you reside in Guyana and your bank account is local. Dividend payouts to foreign accounts attract a withholding tax of 20%.

Purchase your Shares

Finally, tell your broker which stocks you’d like to buy, how many shares, and at what price you’d like to buy it. Note that some companies require you to buy a minimum of 1000 shares when buying for the first time.

“I want to buy 1000 shares of DDL at $173”

You’ll pay $173,000 + commissions & fees

Your broker will then collect payment from you and place the trade on your behalf the next trading day. In Guyana, our Stock Market is open to trading once per week on Mondays at 8am. Your trade may be executed the very next trading day, or may take potentially months to be executed depending on the trading volume of that specific stock.

Unlike some foreign markets, our market is pretty low volume and persons may not always be offering shares for you to buy, so be patient.

Once the trade is executed, your broker will give you a call to sign some transfer forms, and after some time more you may uplift your stock certificates. Keep your certificates safe! – away from water or potential fire hazard areas. A protected file cabinet or safe may come in handy.

That’s it! You’re done. You are now officially a part owner of a company! Congrats!

Time to sit back, relax and wait for your dividends to come in or for the share price to appreciate.

Quick Warning: Remember investing has risks and no guarantees. Invest in strong companies with proven business models and a strong brand behind them. Only invest money you are comfortable with losing if things go sideways.

What happens now?

Simply keep buying in consistently, month after month, quarter after quarter, year after year. You won’t see returns right away. Your very first dividends might be less than a dollar. There will be countless times you’ll think that it isn’t making sense. Sometimes the market will lose 5%, 10% or even 60% in bad cases, but guess what – you will not sell your shares. You will not panic. You will not give into market fear. You will hold on and remember that you are here for 20+ years, so you don’t care what happens this month or this year. Ignore it. Don’t even check on your stock prices. Pretend that they don’t exist. Forget about the money. Your older self will thank you so much for staying calm and collected.

One day in the future, your dividend payment will be $10,000. A few years later it will be $50,000 and you’ll be caught off guard in your 50’s when you check your bank account and see a deposit of $1,000,000 that you didn’t have to work for. That is what investing is all about.

This is my very first blog article so I’d very much appreciate your feedback. Did you like it? Was anything confusing? Is there anything I can improve on? Would you be interested in more like this?