While the trading process-flow of bonds is not very different from commonly traded securities such as equities, there are a few fundamental differences between bonds and equities.

Equities represent ownership of a business and such ownership maybe perpetual, while bonds are a form of debt that the issuing entity promises to repay at some point in the future. The owner of equity shares is entitled to a portion of the company's profits either in the form of dividends or capital gains when the value of a company's stock increases. Equities have an important place in a portfolio because they promise the highest returns over time as the company continues operating, growing and making profits while the share price rises in tandem with the company's fortunes.

However, equities also carry the most risk since equity share prices can fall dramatically at times depending on stock market conditions. The rise in share price is not guaranteed and the payment of dividends is not a contractual obligation despite some companies having a clear dividend policy. Bondholders are legally entitled to periodic interest payments at the stated rate while equity holders earn dividends only when the company has declared a dividend. The dividend a company pays its equity share holders can potentially go up, which helps investors keep up with the rate of inflation.

Most bond interest payments, however, stay the same throughout the life of a bond. This can be a good thing when investors consider that companies paying dividends can decide to either reduce or eliminate a dividend or when investors expect interest rates in the market to come down since they will remain holding an instrument paying them 'high' interest. Bondholders are assured of being repaid the capital invested on maturity but equity investors will have to sell their shares at the prevailing market prices to recover the initial investment. Over the full course of its life, a bond cannot earn more than its face value plus whatever the predetermined interest payments are. Portfolios heavily weighted with bonds are likely to maintain a stable, yet slowly increasing value. Portfolios heavily weighted with stocks would likely see more dramatic changes in value over the short and long term.

Securities markets are the catalysts for economic growth. Cognisant of that fact, FINSEC offers the right companies the ability to raise larger amounts of capital for a longer period and at a lower cost to spur economic growth. FINSEC has simple and clearly detailed processes for the issuing and trading of various types of fixed income instruments and equities. Secondary market trading of bonds is also possible via mobile and online platforms.

The Financial Securities Exchange (FINSEC) is a Zimbabwe registered securities exchange and a member of the Escrow Group. The Escrow Group has interests in the financial services and technology sectors. Corpserve Registrars and Escrow Systems are the other members of the group.

For more information contact: 2 nd Floor ZB Centre, Cnr Kwame Nkrumah and 1 st Street Harare, Zimbabwe Tel: +263 242 758193 Email: info@finsec .co.zw www.finsec.co.zw Twitter: @FINSECZim