Investment Vehicles in Zambia: Unit Trusts, Shares and GRZ Bonds
Understand the main investment vehicles available to individual investors in Zambia, how they work, the risks they carry and how each may serve a different financial goal.
What is an investment vehicle?
An investment vehicle is simply the structure or product through which your money is invested. Different vehicles behave differently, carry different risks and may be appropriate for different goals.
Unit trusts, shares and Government of the Republic of Zambia bonds can all be used to invest money, but they are not interchangeable. They differ in how returns are generated, how easily money can be accessed, how much prices may move and how much knowledge or involvement an investor may need.
That is why choosing an investment should not begin with: “What is paying the highest return?”
It should begin with your goal: how much money you need, when you need it, the return required to reach it, the risk you can tolerate and how much access to your money you may need along the way.
Explore the three core investment vehicles
Each guide below explains how the investment works in Zambia, what you need to start, the main risks and the role it may play in a portfolio.
Unit Trusts
Unit trusts pool money from many investors and place it under professional management. Depending on the fund, the portfolio may hold Treasury bills, bonds, deposits, listed shares or a mixture of different assets.
They may suit investors who want professional management, diversification and a relatively straightforward way to access several investments through one fund.
Explore Unit Trusts →Shares
Shares give you part ownership of a company. Investors may earn returns through dividends and increases in the market value of their shares.
Shares are generally associated with longer-term growth, but company performance, market conditions and limited trading liquidity can cause prices to rise or fall significantly.
Explore Shares →GRZ Bonds
GRZ bonds are longer-term securities issued by the Government of the Republic of Zambia through the Bank of Zambia.
Investors generally receive scheduled coupon payments and the face value at maturity, subject to the terms of the bond. Bond values can still be affected by interest rates, inflation and liquidity conditions.
Explore GRZ Bonds →Unit Trusts vs Shares vs GRZ Bonds
There is no universally “best” investment vehicle. Each has different characteristics and should be considered in relation to the investor's goal, time horizon, liquidity needs and risk capacity.
| Feature | Unit Trusts | Shares | GRZ Bonds |
|---|---|---|---|
| What you own | Units in a professionally managed investment fund | Part ownership of a listed company | A debt security issued by Government |
| Potential return | Depends on the assets held by the fund and changes in unit value | Dividends and possible capital growth | Coupon income and repayment of face value at maturity |
| Management | Portfolio managed by a licensed fund manager | Investor chooses which companies to own | Investor chooses the bond and maturity/tenor |
| Typical use | Varies by fund: liquidity, income or long-term growth | Primarily longer-term growth and possible dividend income | Scheduled income and medium- to long-term objectives |
| Main risks | Depend on the fund: market, credit, interest-rate, liquidity and currency risk | Company, market, liquidity and valuation risk | Interest-rate, inflation, liquidity and sovereign risk |
| Access to money | Depends on the fund's redemption rules | Requires a buyer in the secondary market | Normally held to maturity or sold in the secondary market |
How should you choose an investment vehicle?
Start with the investment decision before choosing the investment product.
Define the goal
State what the money is for, how much you need and the date by which you need it.
Calculate the required return
Consider how much you already have, what you can invest regularly and the growth required to reach the target.
Assess risk and liquidity
Consider how much volatility or loss you can tolerate and whether you may need access to the money before the goal date.
Choose and review the vehicle
Compare suitable investments, take action and periodically review whether the investment still supports the goal.
Where the PATH Investing Framework™ fits
Choosing the investment vehicle is only one part of the investing process.
The PATH Investing Framework™ follows four stages: Plan, Act, Track and Harvest.
During the planning stage, you define the financial goal and assess your capacity to invest. During ACT, you evaluate possible investment vehicles and select investments that match the goal. TRACK focuses on monitoring progress, while HARVEST deals with using the investment when the goal is reached.
This is why Insight Partners Africa teaches investors to begin with the goal rather than beginning with a product.
Explore the PATH Investing Framework™ →Learn before you invest
Once you understand the role of each vehicle, go deeper into the specific investment you are considering.
Learn to compare funds
Understand fund types, factsheets, fees, managers, liquidity, underlying assets and investment objectives.
Learn about Unit Trusts →Learn to analyse companies
Understand how to buy shares, evaluate listed businesses, interpret financial information, assess valuation and understand dividends and liquidity.
Learn about Shares →Learn how Government bonds work
Understand auctions, coupons, yields, tenors, settlement, secondary-market trading and the risks associated with fixed income.
Learn about GRZ Bonds →Build the knowledge before choosing the investment
Explore our weekly investment classes and learn how Unit Trusts, Shares and GRZ Bonds work before deciding which investment vehicle may fit your financial goals.
View the Weekly Investment Classes