INDEPENDENT STUDIES (Chilo Tumo Ketlhoafetse) 2016

BA (Hons) Accounting and Finance
A PROPOSED OUTLINE OF
THE DISSERTATION
- PRELIMINARY PAGES AND CHAPTERS
Word count: 12 317
Title page

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AN INVESTIGATION INTO INVESTING IN UNIT TRUSTS AS OPPOSED TO
STOCK MARKET IN BUILDING PROFITABLE PORTFOLIOS
RESEARCH DISSERTATION
By
CHILO TUMO KETLHOAFETSE
STUDENT NUMBER 100326620
Submitted as partial fulfilment of the requirements for the degree
Bachelor of Arts (Honours)
(Accounting and Finance)
UNIVERSITY OF DERBY
May 2016

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DECLARATION
I Chilo Tumo Ketlhoafetse hereby declare that this independent study is my own original work and
that no part of it has been plagiarised. Where ideas from other authors in any form (e.g. ideas, figures,
texts and tables) are used, they are acknowledged and referenced in accordance with the Harvard
referencing system.
_____________________________
Signature 5 May 2016
Chilo Tumo Ketlhoafetse

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Table of Contents
DECLARATION............................................................................................................................................. 3
ACKNOWLEDGEMENTS................................................................................................................................ 7
ABSTRACT................................................................................................................................................... 8
LIST OF TABLES ........................................................................................................................................... 9
LIST OF FIGURES/ILLUSTRATIONS................................................................................................................10
CHAPTER 1 ................................................................................................................................................11
INTRODUCTION AND BACKGROUND..........................................................................................................11
1.1 INTRODUCTION................................................................................................................................11
1.2 RESEARCH PROBLEM STATEMENT AND MAIN QUESTION ..................................................................11
1.3 AIM AND OBJECTIVES OF THE STUDY ................................................................................................11
1.4 BACKGROUND AND RATIONALE FOR THE STUDY...............................................................................11
1.5 DEFINITION OF KEY TERMS...............................................................................................................12
1.6 KEY FINDINGS OF THE STUDY............................................................................................................13
1.7 CHAPTER SUMMARY AND OUTLINE OF OTHER CHAPTERS .................................................................13
BIBLIOGRAPHY ......................................................................................................................................13
CHAPTER 2.................................................................................................................................................15
LITERATURE REVIEW ..................................................................................................................................15
2.1 INTRODUCTION ..........................................................................................................................15
2.2 PERSPECTIVES ON INVESTMENT VEHICLES...................................................................................15
2.2.1 Classification of the two asset classes....................................................................................15
2.2.2 Unit trusts Performance .......................................................................................................16
2.2.3 Stock market Performance ...................................................................................................17
2.3 CURRENT RESEARCH ON INVESTMENT STRUCTURING..................................................................18
2.3.1 Investment Theories.............................................................................................................18
2.3.2 Investor Perceptions ................................................................................................................19
2.3.3 Portfolio Building.................................................................................................................20
2.4 CONCLUSION....................................................................................................................................21
2.5 SUMMARYOF THE RESEARCH GAPS/SILENCES/CONTRADICTIONSTHAT EMERGE FROM THE
LITERATURE REVIEW..............................................................................................................................22
2.6 CHAPTER SUMMARY...................................................................................................................22
CHAPTER 3 ................................................................................................................................................23

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RESEARCH METHODOLOGY........................................................................................................................23
3.1 INTRODUCTION ..........................................................................................................................23
3.2 RESEARCH PHILOSOPHY ..............................................................................................................24
3.3 RESEARCH APPROACH ................................................................................................................24
3.4 THE RESEARCH DESIGN / STRATEGY ............................................................................................24
3.5 THE RESEARCH METHODS ...........................................................................................................25
3.5.1 Sample and sampling(size, criteria,justification,etc).............................................................26
3.5.2 Data collection instrument(s) (& pilot testing, if appropriate) .................................................27
3.5.3 Data collection procedure.....................................................................................................27
3.5.4 Data analysis procedure .......................................................................................................28
3.5.5 Reliabilitymeasuresandvalidityof the study(forquantitative study) orMeasurestoensure
trustworthiness (for qualitative study) .................................................................................................28
3.6 ETHICAL CONSIDERATIONS..........................................................................................................29
3.7 LIMITATIONS OF THE STUDY .......................................................................................................30
3.8 APPROPRIATENESS OF THE RESEARCH DESIGN (Reflection)..........................................................30
3.9 CHAPTER SUMMARY...................................................................................................................30
CHAPTER 4 ................................................................................................................................................31
DATA PRESENTATION AND ANALYSIS.........................................................................................................31
4.1 INTRODUCTION ..........................................................................................................................31
4.2 OBJECTIVES OF THE STUDY..........................................................................................................31
4.3 STATISTICAL (or textual) ANALYSIS TECHNIQUES USED ................................................................31
4.4 BACKGROUND DATA OF PARTICIPANTS.......................................................................................31
4.5 MAJOR FINDINGS.......................................................................................................................32
4.5.1 Objective 1..........................................................................................................................32
4.5.2 Objective 2..........................................................................................................................34
4.5.3 Objective 3..........................................................................................................................39
4.6 DISCUSSION OF FINDINGS...........................................................................................................40
4.7 CHAPTER SUMMARY...................................................................................................................41
CHAPTER 5 ................................................................................................................................................42
DISCUSSION OF MAJOR FINDINGS..............................................................................................................42
5.1 INTRODUCTION ..........................................................................................................................42
5.2 DISCUSSION OF MAJOR FINDINGS...............................................................................................42
5.2.1 Reinforcing what is already known........................................................................................42
5.2.2 What is new and different in the findings ..............................................................................43

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5.2.3 How the resultsextend knowledge in the field.......................................................................44
5.3 CHAPTER SUMMARY...................................................................................................................44
CHAPTER 6 ................................................................................................................................................45
CONCLUSIONS AND RECOMMENDATIONS..................................................................................................45
6.1 INTRODUCTION ..........................................................................................................................45
6.2 CONCLUSIONS............................................................................................................................45
6.3 RECOMMENDATIONS / IMPLICATIONS........................................................................................46
6.4 LIMITATIONS..............................................................................................................................47
6.5 CHAPTER SUMMARY...................................................................................................................47
CHAPTER 7 ................................................................................................................................................48
REFLECTIONS.............................................................................................................................................48
REFERENCE................................................................................................................................................50
APPENDICES ..............................................................................................................................................55
Appendix 1 – Investment Questionnaire..................................................................................................55
Appendix 2 – Portfolio Questions ............................................................................................................59
Appendix 3 – Earnings per share trends...................................................................................................60
Appendix 4- Ethical Considerations..........................................................................................................61

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ACKNOWLEDGEMENTS
This research represents a great portion of my undergraduate study in the Honours Degree in
Accounting and Finance with the University of Derby. The process of gathering throughout to
achieving the aim has been so intense in that it demanded a great deal of time, hard work, focus and
attention which in turn resulted in a greater understanding in the nature of this topic.
First and foremost, I would like to thank Mr Munyaradzi Nyandoro as my project supervisor for
sharing his intellect with me over this investment topic with him being the ‘Chief Economist’ in
Botswana Accountancy College. My sincerest gratitude and appreciation go to him as his support
acted as a gear towards my understanding of this research and it would have not been possible without
his assistance and unwavering support. For this, I would like to thank him dearly for his guidance and
patience throughout.
I would also like to extend my sincere gratitude’s for their continuous support in this research
understanding of its dynamics and thereby apprehending the footprint towards achieving my aim. Dr
Gande truly has been a blessing especially through his patience by lecturing us on Independent Studies
and also Financial Reporting hence spending a great deal of time amongst such a large number of
students. Again, I thank you dearly along with the other BAC lectures for their contribution expressed
anyhow.
Furthermore, I would also like to thank Thabelo Nemaorani of the Botswana Stock Exchange for his
extended support for providing information about stocks and the general overview of Botswana
investments though he was not obliged to do so. I thank him utmost. The same goes for Mogi Lebetwa
of Imara Capital Securities who took time off her busy schedule to assist me where possib le about
investment opportunities availed in the country and how I would incorporate that in my study. This is
truly heartfelt and I am really grateful.

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ABSTRACT
Investment opportunities remain vast within the Botswana economy and investors seek to make wise
choices about their investments hence would require help selecting the most profitable from the
options presented to them. Recent studies have showed their own view of unit trusts and the stock
market and how to benefit from them but none has touched on the long term investment especially
generally for Botswana. This dissertation aims to evaluate a structure of investing both unit trusts and
into the stock market using the unique earnings capabilities of the respective asset classes. Current
literature has outlined that the unit trust industry is one of the fastest growing in the finance sector and
their competitive edge lies with their diversification thereby minimising risk and creating room for
wealth creation while on the other hand the stock market bears a number of systematic risks for
different types of stock available. With higher risks are an expectation of higher returns hence risk
takers would benefit vastly. The researcher adopted an abductive approach for a pragmatist philosophy
so say that there are a number of ways to interpret one picture hence being open minded about
investment ventures available for inclusion in one’s portfolio. Instruments such as questionnaires were
used to collect data and analysis for which done though statistical software’s; archival research
analysis which was quantitative was through the assistance of Microsoft excel. The data was collected
from a sample of investors whom a good number of which are of have a University degree in Finance
hence have sound knowledge on the dynamics of investing. The study found that BIHL from the
sample of listed companies outperformed the others and is the most profitable stock on the stock
exchange; BIFM and Stanlib have profitable portfolios which investors should venture into and are the
money market and balanced prudential fund respectively. The study has also found that a number of
investors would like to invest in the future and are certain about investing their money in a company
than keeping it in a bank, only a fair number of the participants seem aware of fund managers
available in the country hence this research would like to bridge the gap of lack of sufficient
information. The concluding decisions emphasised henceforth was that indeed stock and unit trusts are
profitable in the short, medium and long term thus the recommendation is to invest in both starting
with unit trusts then the stock market given that capital is adequate. The limitation of the study though
is the assumption of adequate capital which is not always so and lack of a third party to corroborate the
prospected portfolio for Batswana investors.

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LIST OF TABLES
Table 1- Research methods ....................................................................................................................25
Table 2-SPSS reliability test...................................................................................................................29
Table 3- Background data ......................................................................................................................31
Table 4- Education level.........................................................................................................................32
Table 5- Earnings Per Share Analysis....................................................................................................32
Table 6- Questionnaire findings .............................................................................................................34
Table 7- Pearson Correlation: 1..............................................................................................................37
Table 8- Pearson correlation: 2...............................................................................................................37
Table 9- Pearson correlation: 3...............................................................................................................37
Table 10- Pearson correlation: 4.............................................................................................................38
Table 11- Pearson correlation: 5.............................................................................................................38
Table 12- Anova : regression analysis....................................................................................................38

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LIST OF FIGURES/ILLUSTRATIONS
Figure 1- Research onion. Source Saunders, Lewis and Thornhill (2012).........................................................23

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CHAPTER 1
INTRODUCTION AND BACKGROUND
1.1 INTRODUCTION
This chapter outlines the membrane of the research, in terms of intent, purpose and direction it will
follow through the mandate of investing into unit trusts as opposed to stock market in building
profitable portfolios. Herein forth, the rationale behind such a topic is emphasised in detail along with
the questioning to an outlined problem in the area of investment. The ideal conception would
henceforth be to strategize a plan to follow suit in order to find solutions.
The aim and objectives of the study would serve as a backbone and light of directions towards seeking
answers and solutions to the questions laid forth.
1.2 RESEARCH PROBLEM STATEMENT AND MAIN QUESTION
-Investment in the stock market and unit trusts is usually short term, there has not been a clear investment
portfolio which can be adopted for long term investing using the two investment vehicles.
-What investment structure mix of the two asset classes would yield optimum returns assuming
adequate capital…Ceteris Paribas?
1.3 AIM AND OBJECTIVES OF THE STUDY
To evaluate a structure for investing both unit trusts and into the stock market to build profitable
portfolios using their unique earning abilities.
1. To examine the profitability and earnings potential of investing in unit trusts and stock market.
2. To determine and scrutinize perceptions of investors against the two asset classes.
3. To construct and prospect an investment structure mix pertaining to the two asset classes.
4. To recommend models or theories to build profitable portfolios using unit trusts and stock
market.
1.4 BACKGROUND AND RATIONALE FOR THE STUDY
Unit trusts are not so popular within the Botswana economy on a general basis; it is still a developing
segment in the investment environment. Some of the Fund managers offering unit trusts are BIFM,
Stanlib and Investec along with other banks. The efforts towards marketing and advertising them are
not as robust and effective in being availed as compared to the stock market. Evidence of this procures
to the impact of the Initial Public Offering (IPO) by BTCL in that many Batswana came forth with

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their offers majorly because of the advertising. One would question though if the same efforts were put
in through for unit trusts since they too are profitable, would the turnout be as much? This study
focussed on the Botswana Stock Exchange and Fund Managers in Botswana.
To establish a ground of analysis and comparison behind investment and term earnings with regards to
investing in mutual funds known as Unit trusts as opposed to into the stock market. This is with
respect to bearing in mind which of the two asset classes would yield better returns and build better
portfolios and finally determine what investment mixture of the two would work best; done so because
many potential investors seem to lack knowledge of investment and how to build their portfolios.
The conception on this research would henceforth be conducted with the idea of the use of investment
structuring theories, such entailed would be but not limited to the Tangency portfolio approach,
Capital Asset Prising Model (CAPM), Two Fund Separation Theorem. This is done so to influence
potential investors to invest in capital markets from which hence forth increases their wealth and in
turn increases real GDP for the economy as a whole.
1.5 DEFINITION OF KEY TERMS
Investment – Investment is defined by Sevdalis and Harrvey (2007 pg 2) as “is a financial means
toward a non-financial goal.” They outline that the basis of such is usually based upon the intentions of
the investor, may it be short term like taking holidays within the year or long term like retirement
packages.
Stock Market – Fornazzari (2009, pg 380) defines this to be a “simulacrum of commerce than the
actual buying and selling of goods” thereby giving the implication of trade as an element in such a
business environment.
Unit Trust – McGrath and Viney (1998, pg 29) outline it as a financial asset to which a financial
institution invites the public to invest into the fund for the purpose of which the company has invested
into assets specified by the trust deed (Tng 2006).
Investment Portfolio – Different financial assets pooled together such multiple sources of income are
secured and risk is spread over the portfolio (Cortés et al 2013).
Fund Manager – Outlined as one to be accountable and responsible by acting as an agent on behalf on
an investor to manage a portfolio of funds especially mutual funds (Fang and Wang 2015).
Initial Public Offering – Titman et al (2014) classifies it as when a company issues stock to the public
for the first time, usually occurs on a primary market (Johnson and Sohl 2012).

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1.6 KEY FINDINGS OF THE STUDY
The study found that BIHL from the sample of listed companies outperformed the others and is the
most profitable stock on the stock exchange; BIFM and Stanlib have profitable portfolios which
investors should venture into and are the money market and balanced prudential fund respectively. The
study has also found that a number of investors would like to invest in the future but are uncertain
whether to invest their money in a company or leave it in a bank, they also seem unaware of fund
managers available in the country.
1.7 CHAPTER SUMMARY AND OUTLINE OF OTHER CHAPTERS
This chapter set out the foundation for the study such that the direction being explored by the
researcher can well be follows. It builds up the notion of understanding in terms of the question ‘why’
did he begin this study in the first place. Chapter two sets out and outlines the past and current
literature studies conducted on investment and this builds up the foundation for the methodology
emphasized in chapter three for which data would be collected regarding the objectives set out in this
chapter. Chapter four presents the findings collected and the analysis of which along with the
conclusion is executed in chapter five and six along with the limitations present within the study. The
final chapter is a reflection of the journey from this chapter down right to the last chapter.
BIBLIOGRAPHY
1. Coffie W., Chukwulobelu O., (2012), The Application of Capital Asset Pricing Model (CAPM)
to Individual Securities on Ghana Stock Exchange, in Kojo Menyah, Joshua Abor (ed.) Finance
and Development in Africa. Research in Accounting in Emerging Economies, Volume 12 Part
B. Emerald Group Publishing Limited, pp.121 – 147. Available at:
http://dx.doi.org/10.1108/S1479-3563(2012)000012B010
2. Draper P., (2006) Unit trust objectives and investor choice. Journal of Applied Economics. Vol.
18. Iss 2 pp 157-172.
3. Paulo S., (2010), Distributions, the UK Companies Act of 2006, and the Miller and Modigliani
(1961) dividend irrelevance argument, International Journal of Law and Management, Vol. 52
Iss 5 pp. 369 – 382. Available at: http://dx.doi.org/10.1108/17542431011076017
4. Paulo S., (2010). The United Kingdom's Companies Act of 2006 and the capital asset pricing
model: Attaining the corporate objective, International Journal of Law and Management, Vol.
52 Iss: 4, pp.253 – 264. Available at: http://dx.doi.org/10.1108/17542431011059313

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5. Paulo S., Gale C., (2012), The Miller-Modigliani 1961 Ponzi scheme, alias “dividend
irrelevance”, International Journal of Law and Management, Vol. 54 Iss 3 pp. 234 –
241Available at: http://dx.doi.org/10.1108/17542431211228638

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CHAPTER 2
LITERATURE REVIEW
PERSPECTIVES AND CURRENT RESEARCH ON PERSONAL INVESTING
2.1 INTRODUCTION
The aim of this study is to evaluate a structure for investing both unit trusts and into the stock market
to build profitable portfolios using their unique earning abilities. The researcher is therefore with
motive of establishing the two standpoints on these two asset classes relating to current research
conducted on investment in different economies and empirical evidence of performances and factors
affecting those performances. To establish a ground of analysis and comparison behind investment and
term earnings with regards to investing in mutual funds known as Unit trusts as opposed to stock
market shares as earnings determine firm value (Consler et al 2011). This is with respect to bearing in
mind which of the two would yield better returns and build better portfolios, or what set-up mixture of
the two would work best. Furthermore, it is with intent to understand the dynamics of portfolio
building with respect to how we can encompass the two asset classes thereby achieving the aim of the
study. However though, the former and current studies would be highlighted and related to the
Botswana investment environment looking at similar characteristics between the respective
economies. Finally, a research gap would be outlined on this current literature with respect to the
direction that the researcher would be intending on taking with respect to meeting the objectives of the
study.
2.2 PERSPECTIVES ON INVESTMENT VEHICLES
2.2.1 Classification of the two asset classes
2.2.1.1 Unit trusts
The nature of a unit trust is that of a mutual fund. According to Firth (1978), unit trusts are bought by
investors from stock brokers, solicitors, managers or banks and are grouped together to create a
vehicle known as a mutual fund comprising of other investors’ funds that would then as a group be
invested in the stock exchange or any stock option deemed best by the expert unit managers
themselves. A study from 1996 to 2001 by Rudman (2008) in South Africa has revealed that the unit
trust industry is one of the fastest growing areas in the finance sector.
2.2.1.2 Stock Market
Shares are found on the stock exchange which Slimane (2012) have found their activities to be
integrating and emerging at national and international scale from research conducted between 2000-

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2009 in Europe and USA. Evans, Hodder and Hopkins (2014 cited in Finger 1994) provide evidence
that past earnings have a predictive ability for future earnings ––and future cash flows.
The conception on this research would henceforth be conducted with the idea of the use of portfolio
and investment theories, such entailed would be but not limited to the Modigliani and Miller approach,
Capital Asset Prising Model (CAPM), international investment diversification and Equity return
predictability (Atanasov and Nitschka 2014).
2.2.2 Unit trusts Performance
2.2.2.1 Rewards
A study conducted from 1989 to 1993 back in Europe over 97 international equity funds by Kao,
Cheng and Chan (1998) has suggested that fund managers accountable for international unit trusts
possess good selectivity of profitable options and overall good performance as compared to domestic
mutual funds through decomposing performance into selectivity and market timing. This is supported
by with Eun, Kolodng and Resnick (1991) as they outline that investors need not restrict their
investment portfolios to domestic choices and attribute the use of portfolio managers in the use of
mutual funds in gaining better returns, more so that Tenk (2012) advises that there should be a
diversity in the portfolio so as to aid opportunity for higher returns. A study by Tng (2006) has found
that asset allocation, investment styles, risk and size amongst others influence the performance of
mutual funds, and hence fund managers can make informed decisions if they take into account these
factors (Rebello and Wei 2012, Kahn and Lemmon 2016). The study continues to argue that
independent investment firms (non-bank) are likely to have more clientele since they would conduct
greater researches for their investment styles aiming for higher returns which bear higher risks hence
management fees tend to increase as well thus making the portfolio costly and risky, this in effect
creates a great obligation by investment firms to provide better returns to retain clientele.
2.2.2.2 Risk
Brookfield, Su and Bangassa (2015) assert that mutual funds categorise their investment styles in a
manner well understood by the investment community (cited in Sharpe 1992). They bring into
concession and object that the downfall of unit trusts lie among strategies or styles employed by fund
managers as they do not exhibit timing abilities for investments (cited in Hendrickson 1984); this is
because they believe unit trusts generally chaise performance of stock options and their optimum
strategy for investing is known as style switching whereby past performances are used to adjust in
search for market performances. Furthermore, Brookfield, Su and Bangassa (2015) discredit the

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CAPM due to its anomalies presented in its applications to which a number of fund managers use. The
same stance is presented in evidence by Low (2007) whereby she attributes poor fund performance to
poor timing abilities and their failure to outperform the market to even be performing at a level inferior
to that of the market; this even dates back to early research (cited in Jensen 1969 and Sharpe 1966).
2.2.2.3 Author Advocacy
The author would therefore align with the conception of recommending unit trusts as the first
investment option to venture into based on the findings outlined by Tng (2006) in that investment
firms take risks that have proven to be worthwhile financially, this is evidenced by his research
conducted in Singapore during 1997 to 2003; more so that unit trusts are a tax-free form of income and
the trustee is guaranteed of the principal (Dunnan 1989). The author does note though that this is
during a period when the market was still highly penetrable and is before the global economic crisis
unlike now (2016) where some companies are still recuperating. This though, is corroborated and
supported by Kao et al (1998) as well in evidence that foreign unit trusts investments proved to be
profitable for the portfolio and that there is poor evidence that fund managers are poor market timers
but the author would question the reliability of these finding since they, in particular, date back
seventeen years past though there has not been any study to contend this. The author apprehends that
market conditions and changes in the global market has an impact on fund performances therefore
good selectivity and timing become the foremost determinants to gain sufficient returns though, on the
contrary, these studies were conducted in a well-diversified economy (Singapore) which would pose
much of a challenge incorporating in Botswana which has mining as its main economic driver.
2.2.3 Stock market Performance
2.2.3.1 Rewards
Studies conducted in the UK (Oxford and Cambridge college) from the 1921-1946 period by
Chambers, Dimson and Foo (2015), contends and makes note of the literature by a legend investor
John Maynard Keynes (Keynes 1936), they outline that the first investment philosophy he used, top-
down, proved to underperform whereby he used monetary and economic indicators instead of a bottom
up approach. Upon revision of this technique, he acknowledged that it would be essential to sell
market leaders on a falling market and buying on a rising market (Dequech 2011). The author sees this
quite feasible and opportunistic to prevent loses when you see them rising up and taking advantage of
opportunities of equity appreciation as the market becomes penetrable for thus. Furthermore,
Hammami (2013) in essence supports this with an extension to outline ‘momentum investing’ across
economic states whereby demand is for ‘recent winners’ while ‘recent losers’ are sold, though this has

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been found to cause market inefficiency. A study by Merikas and Merika (2006) attributed economic
instruments and variables to stock prices and stock returns, they go on further and expand the scope in
the sense that booming or growing economies would have reducing stock prices and weak economies
having increased stock prices; they set aside inflation though which seems to have a positive impact on
the variables of stock returns. This study would suggest that stock returns have a potential to become
higher and thus inducing aggregate investment.
2.2.3.2 Risk
In a study from 1976 to 2010 by Blazenko and Fu (2013), it was found that profitability increases
returns to a greater extent for value firms or companies that seem to be priced low relative to its
fundamentals; dividends, earnings, sales and so forth. The same is true expect for the extent of which
returns accumulate for growth firms though that seem to be growing at a rapid pace compared to its
peers. The author finds the study to be ambiguous as was conducted over sampled companies globally
thus economic perspectives cannot be scrutinized.
2.2.3.3 Author Advocacy
The author acknowledges that there are different perceptions about individual stock options available
on a stock exchange especially for a developing one like the Botswana Stock Exchange but thus far
shares seem to be more profitable in terms of findings and studies make in terms of portfolio building
but for the short term. The author continues to apprehend that the study by Chambers, Dimson and Foo
(2015) was ideal in that it used monetary and economic indicators for appraising investment
performance; they based this around certain economic assumptions as was conducted in the UK which
is of an high class economy with a high Gross Domestic Product (GDP) and vast economic activity as
compared to the Botswana economy which of recent is performing at a declining GDP.
2.3 CURRENT RESEARCH ON INVESTMENT STRUCTURING
2.3.1 Investment Theories
2.3.1.1 Theory of International Diversification
A study by Najeeb, Bacha and Masih (2015) suggests that investing in international stock markets is of
crucial importance in creating a well-diversified portfolio with low risk for the respective investors
(cited in Dajcman et al 2012). They outline that the reasoning around this is because there is a low
correlation amongst cross boarder markets hence the risk of loss is relatively low. They do dispute
though that empirical evidence has shown mixed results for such theories, though there is a
reconciliation to this as literature goes on to identify that there is an evolving interdependence across

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markets (cited in Engle 2002). The author would see fit henceforth that, such portfolios would work
best when managed by a fund manager whom observes and works best around this financial
information used for investing, hence it would not favour the individual investor who manages their
own portfolio unless adequately know-ledged on investment management. This study was conducted
in Malaysia in 2015 over investors who allocate their investments in international markets and has
found it to be more profitable to invest in developed markets such as those in Europe (Germany,
United Kingdom) than emerging markets such as those in East-Asian (China, Japan, Korea);
Furthermore, this is all dependent upon the holding period of those respective stocks (Najeeb, Bacha
and Masih 2015).
2.3.1.2 Equity Return Predictability
Johannes, Korteweg and Polson (2014) advocate for the equity return predictability as they outline that
excess returns are predictable through the use of accounting ratios such as dividend earnings and yield,
earnings per share and other financial indicators (cited in Lettau and Ludvigson 2001). The pride of
their advocacy is derived from that it has rarely been debated and the evidence is so strong and
important that the predictability is used by investors when making portfolio decisions. In 2008 though,
this theory was challenged by Goyal and Welch (2008) in that while evidence is there of predictability,
it is so weak and of no practical use to investors. To reconcile this, Johannes, Korteweg and Polson
(2014) support their theory in that sensible features have to be incorporated in their optimal portfolio
constructions such as accounting for time-varying volatility and estimated risk and not just take it from
the simple perceptive without incorporating the economic aspects of investing. To support this, Maio
and Santa-Clara (2015) have provided Empherical evidence that the predictability of dividend yields is
associated with future returns and dividend growth.
2.3.2 Investor Perceptions
The past decades have been showcasing the convergence of psychological biases towards financial
markets; overconfidence has been attributed to propel aggressive investing by individuals and fund
managers hence creating high risk with low net returns (Daniel and Hirshleifer 2015). They suggest
overconfidence to be a key factor for financial anomalies such as great loses made on investing though
not the only phenomenon worth considering. Furthermore, emphasis is placed upon unprofitable
active trading and return predictability being factors agreed upon by advocates of the efficient market
hypothesis in that portfolios can be constructed for high returns and low volatility based on thus
(Daniel and Hirshleifer 2015, Fama and French 1993, Fama and French 2015, Johannes et al 2014).
Bigda and Tepper (2016) emphasise that it is important to never panic in a market storm because

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selling securities on a declining performance often leads to investor remorse. They highlight actively
managed equity funds and US stocks to merit into investor portfolios and that one should always
appraise profitable stock hence the author would draw attention to Najeeb et al (2015) since they
aforementioned of international diversification to which a Motswana investor could venture into for
wealth creation.
2.3.3 Portfolio Building
Investors look for companies or investment opportunities that will yield great returns. A study from the
Nairobi Stock Exchange by Waweru (2010) outlines that dividend payments are affected by those
current years’ retained earnings and income more so that dividend yields affect stock prices which in
turn reflects greatly on the investors’ portfolio (Cochrane 2014). She further emphasises that managers
usually pay out dividend when they have reason to believe the shareholders equities have gained
earnings per share which again we can attribute well for the portfolio owner. The author does
appreciate though that profit over portfolios cannot just be predicted from the stock options or
securities (Black and Scholes 1973, Walkshausl and Lobe 2015).
A ten year study conducted in Malaysia by Taib and Isa (2007) found the average performance of unit
trust to be below market performance and this is similar to the findings in Low (2007); contrary to this
though, they applaud one form of unit trust known as bond funds which seemed to outperform the
market over and above since their earnings can be attributed to high interest rates kept during the crisis
period. The empirical findings from these two studies showcase that both Shares and Unit trusts can be
profitable for any investor, so it would just have to be a matter of which options to venture into thus
inducing the questioning of this research to explore possible ways in order to build profitable
portfolios. The lognormal model being an example for portfolio selection to discriminate between
stocks likely to perform well and otherwise (Cordis 2014, DeMiguel et al 2013).
The study aforementioned by Chambers, Dimson and Foo (2015), sets a profound understanding to a
portfolio guide with regards to investing on the stock exchange to which findings can be taken up by
individual investors whom manage their own portfolios and investment firms that manage on behalf of
their clientele to select stock options at opportunistic timings. They initially emphasised the technique
of selling value stock on a declining market and buying on a rising market and this was expatriated in
length by Keynes (1936). Such examples would include diversifying the investment portfolio by
having a combination of ordinary shares and preference shares, using the stock’s instristic value for
investment strategies and this is underpinned by asset prising models to which the author would align
with to certain extends (Carhart 1997, Calvet and Sodini 2014). This is a UK study, contextualising

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this to the Botswana pre-text, multiple companies on the Botswana Stock Exchange often have prices
fluctuating, for example Choppies PLC, investors can capitalise on the price movement as mentioned
by this current study while Companies like Botswana Insurance Holdings Limited PLC can be bought
for the sole reason of capital appreciation. Empherical findings also outlined that institutional fund
managers also followed this lead and approaches and have proven to be profitable (Chambers, Dimson
and Foo 2015). Furthermore, other opportunities present themselves once like whereby companies
venture into an Initial Public Offering (IPO) such as the case setting of Botswana Telecommunications
Limited (BTCL) whereby the trade offer price would be trading at a discount hence free capital
appreciation is handed on a silver platter.
Ryan (2015) puts emphasis greatly on the reliance of performance analysis either individually or by an
independent party during the decision making process for investing and that it should be practical
through the use of publicly available information on top ranked investment firms. He appreciates that
investors are different in that some are risk takers, some risk averters and neutral, hence value can be
placed upon performance behaviour and risk-adjusted performance, this is usually greatly emphasised
by fund managers; and there would obviously be another portfolio which can be considered naïve due
to the high risk it possesses though the portfolio can yield the highest returns. The author would
therefore see fit that; selection of portfolios at this stance should be determined by analysis of the
portfolio and professional judgement.
2.4 CONCLUSION
Portfolio building is a critical area which demands a great deal of attention to detail with respect to
looking for opportunities of wealth as and when they present themselves. The research by Tng (2006)
and Kao et al (1998) have brought about the significance of having an expert who devotes their time to
chasing earnings opportunities when they arise. For this reason the author concluded it would be best
to choose unit trusts as the first option given mutually exclusive events when capital is limited as the
diversity of the investment unit trusts undergo expands into future investment options such as
property, stock options, forex trading and even the global market. On the other hand though, the stock
market has a very competitive stance with regard to wealth creation in that two forms of earnings are
presented forth for the investment community, those of which being dividend payments and capital
appreciation of shares and bonds. The research by Waweru (2010) and Taib and Isa (2007) has well
commended that both unit trusts and the stock market can be profitable for any investor though the

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emphasis is greatly placed upon short-term investing. Henceforth, investors need to understand future
prospects of companies along with the industry where they are placing their investment so they
understand the dynamics of where their money is being run.
2.5 SUMMARY OF THE RESEARCH GAPS/SILENCES/CONTRADICTIONS THAT
EMERGE FROM THE LITERATURE REVIEW
Unit trusts are essential for investors whom seek to remain passive in their investment and would
prefer one to manage on their behalf based mostly on the study by Tng (2006). The author does note
though that returns on investments are not as significant as those one would yield had they invested in
the stock market which is subject to capital appreciation and dividend payments subject to discression
by the respective company shareholders though it would be of greater risk comparatively. Since there
is a correlation between high risks and high returns, one would conclude it would be worthwhile to
manage one’s own portfolio based on the findings of Hammami (2013). The silence that the author has
identified though from above, is that, with respect to the current literature, self-management of
portfolios would work best for investors who are highly active and buy and sell within the short-term
and hence does not cater for long term investments with optimum and sufficient returns with respect to
the two asset vehicle at hand. It contradicts though that the benefits of unit trusts are well commended
more so that a specialist is an agent but investors need also take charge of their investments, though at
times information interpretation is a hustle, hence the research question becomes ‘what investment
structure mix of the two asset classes would yield optimum returns assuming adequate capital…
Ceteris Paribas?’ The gap the author outlines though is that majority of these studies are conducted in
developed economies though of very recent dating, would the investment portfolio suffice given the
slow economic activities of Botswana and high unemployment rates standing at 17.8% (Honde and
Abraha 2015).
2.6 CHAPTER SUMMARY
The author appreciates that the idea of investing is that firstly potential and current investors must not
be misconceived into thinking saving is investing, investing would involve the proactive use of money
to make money while diversifying your income and inducing financial independency hence it became
fundamental that this research underpins the questioning that what investment structure mix of the two
aforementioned asset classes would work best to yield high returns bearing in mind long-term
investment.

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CHAPTER 3
RESEARCH METHODOLOGY
3.1 INTRODUCTION
The purpose of this chapter is to outline the methodology which would aid the author in conducting
the research and obtaining sufficient findings to decipher the research aim. Saunders, Lewis and
Thornhill (2012) outline that methodology is a plan and strategy of the go about of obtaining answers
for the research question outlined such that the objectives of the study can be underpinned and hence
achieving the research aim. The methodology of this research will be focused around six sections of
research, that of which being the research philosophy, research approach, research design, sampling
criteria, data collection instrument and procedures of data collection and analysis. These methods will
ensure that the most suitable research approach is being followed. The research itself will be through
the guide of a research onion outlined by Saunders, Lewis and Thornhill (2012) as a framework that
provides a systematic process of research and is shown in figure 3.1 below. The main sources of
information for this research are primary data as well as secondary data, on the other hand though,
quantitative data as well will be used in aiding the research from company publications. The chapter
would conclude by mentioning the ethical considerations made during the course of the study as well
as limitations incurred that hinder the sufficient conclusion of the research aim.
Figure 1- Research onion. Source Saunders, Lewis and Thornhill (2012).

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3.2 RESEARCH PHILOSOPHY
The chosen philosophy for this research is that of Pragmatism which Saunders et al (2012) outline that
there are many different ways of interpreting the world, every aspect can be very subjective and there
is no one method that could give an entire picture of one thing. Research philosophy is outlined by
Neville (2007) as a form of understanding and accepting that research is not neutral but rather a
reflection of the researcher’s different attributes like attitude, values, assumptions personal interests
and so forth. The author would therefore conclude that research philosophy forms the foundation for
the research approach as a guide towards implementation, collection and interpretation.
Adoption of the pragmatism conceives from appreciating the interpretivist stance conclusive of the
objective to construct an investment portfolio encompassing the two asset classes to which the use of
subjective interpretations becomes vital. Furthermore, the positivist is also acknowledged as facts
constructed from examining profitability and earnings potential of the asset classes; this in turn serves
to fit best of the midpoint being the pragmatist to appreciate both cohesions.
3.3 RESEARCH APPROACH
The use of the Pragmatist philosophy embedded for this research contemplates the author to choose
the Abductive approach throughout this research which Saunders et al (2012 pg. 145) outline to be one
where “known premises are used to generate testable conclusions”. It is well appreciated from the
concessions made by use of the positivist and interpretivist stances that the deductive and inductive
approaches are appreciated respectively for the application in examining earnings thus testing theories
and constructing profitable portfolios thereby creating a hypothesis which can be well tested to see
effectiveness (Goddard and Melville 2004; Lodico et al 2010). This allows the use of both qualitative
and quantitative analysis for drawing out more reasoned conclusions at the end of the study hence this
being related to the pragmatist (Denscombe 2007). In turn, the two serve well to the Abductive
approach since we are appreciating interactions between the specific and the general more so that risk
attitudes are recognized when dealing with investment from the investors’ point of view.
3.4 THE RESEARCH DESIGN / STRATEGY
The most prevailing and pre-dominant research design is a case study which Saunders et al (2012) see
fit to satisfy aims with an understanding of the 24 dynamics present focus on a single setting with the
highlight of an empirical investigation (Yin 2003). This becomes relevant for our objectives to be open
minded about earnings for both unit trusts and stock market since the aim is to evaluate an investment

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portfolio which would enable investors to earn more on their investments in wealth creation using the
two asset classes. The researcher would also incorporate a qualitative and quantitative analysis through
descriptive surveying, hence the positivist element in the research to aid the study with respect to the
examination the influences and interrelations to market investment such that the prospected portfolio
would be corroborated by findings from such data (Neville 2007).
3.5 THE RESEARCH METHODS
Tools that are used to collect data in the field, primarily are known as research methods and a number
of them can be used together to reach one conclusion in research (Dawson 2009).
Table 1- Research methods
*Objecti
ve
Participa
nts
(sample)
Data
Collection
Method
Reason
for
choice of
method
What is
to be
measured
?
Populati
on Size
Samp
le
Size
Sample
Criteria
Data
Collecti
on
Date
1
Botswana
Stock
Exchange
listed
companie
s.
Archival
research
Participa
nts can
add more
informati
on in a
quantitati
ve form
of
answers.
Return on
investme
nts and
earnings
per share.
Listed
compani
es &
Fund
Manager
s
6
Stratified
and
convenie
nt
19-01-
2016
2
Investors
through
stock
brokers.
Open and
closed
Questionna
ire
Participa
nts can
add more
informati
on in a
descriptiv
e form of
answers.
Risk
tolerance
levels
and
attitudes
Investors
; stock
brokers
30 Stratified
30-01-
2016
3
Botswana
stock
exchange
and fund
managers
Semi-
structured
interview
Helps the
researche
r to
receive
an open
wide
range of
responses
An ideal
model for
the
investme
nt
structure
mix
Regulato
ry body
and fund
manager
s
2
Convenie
nt and
stratified
21-01-
2016

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3.5.1 Sample and sampling (size, criteria, justification, etc)
Goddard and Melville (2007) outlines that sampling involves choosing a few to represent the whole
population. There are multiple industries on the stock exchange which are different in terms of their
earnings capacity thus FNBB, Standard Chartered, Sefalana and BIHL will be used respectively and
are chosen at random within the class of large corporations and market capitalisations. Botswana
Investment Fund Managers (BIFM) and Stanlib as fund specialists would be analysed since they have
availed unit trusts. BIFM and Botswana Stock Exchange as regulators are best suited to assist
construct portfolios thus convenient sampling is used. Customers from stock brokers would also be
used to assist in getting customer perceptions on risks against investing. Selected companies will be
chosen from those availing unit trusts and those with public traded shares in issue making up 2 and 4
respectively; this is so as to analyse their earnings potential of the two asset classes based on past
performance. 15 participants would also be chosen from an investor pool of an unknown population
during the conduction of the research, this would be a sample from customers of stock brokers listed
within the Botswana Stock Exchange and another 15 from the general public of potential investors
making a total of 30. Finally, the regulatory body would be best suited for evaluating an investment
portfolio and there is only one within the country, along it would be a fund manager as part of the
sample from another independent firm.
The researcher chose to use convenient sampling as a non-probability sampling technique to make the
study more comprehendible and relatable with the perception that fund specialists have experience and
skills ideal to back up theories on investment and assist in construction of investment portfolios
(Oliver 2006). Stratified sampling on the other hand as a probability sampling technique would also be
used to avoid being biased and appreciate that participants are likely to have different characteristics
thus assemble and sample according to their different classes (Neville 2007). This is efficient for
selecting the companies listed on the stock exchange for the purposes of analysing their earnings
performance. Stratified sampling is best appropriate for the population of participants aiding on
information for risk attitudes and investment influence such that we’d be able to depute findings and
comprehend on the objectives of the study.

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3.5.2 Data collection instrument(s) (& pilot testing, if appropriate)
Goddard and Melville (2007) clearly outline that any tool or device used for measuring variables in a
research are called instruments. This research encompasses both qualitative and quantitative analysis
and approach generally hence multiple instruments are used, that of which being; a questionnaire for
which is outlined to be a set of questions made to be adequate enough to gather data for the objective
of the study with multiple tick boxes as outlined by Fisher (2010). Secondly an interview which is a
set of questions being asked to a participant in person such that sufficient information is obtained and
then lastly archival research which involved meddling through vast data from records and archives
(Goddard and Melville 2007; Fisher 2010).
Open and closed questionnaire to obtain sufficient information on the attitudes of investors and
influences towards them investing; questionnaires though sometimes limit the discussion of topics but
being the pragmatist with an abductive approach, it becomes essential that facts and subjective
meanings to obtain specific and general views to draw conclusions (Beiske 2007). Interviews are to be
used to ensure adequate information is obtained from fund specialists in fund management companies
and stock regulators on building of profitable portfolios so as to build us discussion and interact with
the theories aforementioned as test them; this would be through the use of a voice recording session.
Archival research would also be used for obtaining annual reports to be used to analyse profitability of
the two asset classes.
3.5.3 Data collection procedure
Questionnaires are sent out to selected participants from the unknown pool of the population of the
investors under stock brokers. The construction of the questionnaire is based on knowledge acquired
through reading journals on investment and wealth creation along with portfolio company
prospectuses so as to have a substantiated questionnaire. An interview as well would be held with 2
participants so as to have an open discussion about portfolio building centred around theories on
investing. A voice recording of the interview would thereafter be transcribed (verbatim) such that
analysis can be placed upon. Information on these data instruments is in light of which factors and to
what magnitude influence selection of stock and investment choices along with what best suits would
work best which respect to how best to maximise individual wealth. For the purposes of quantitative
analysis, records and financial statements from the stock exchange website would be used along with
those from fund managers to analyse past performance for earnings tracking.

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3.5.4 Data analysis procedure
Post examining the earnings of the two asset classes aforementioned, their analysis would be that of
descriptive analysis as it gives us a representation of what the data looks like to which measures of
central tendency like the mean and measures of dispersion like the standard deviation and variance
analysis would be used. Furthermore, the Statistical Package for Social Sciences (SPSS) software
would also be used to assist in analysis and finally presentation through the use of a line graph would
then follow this. This is for the purpose of outlining the pros and cons of investing in the two asset
classes individually and respectively.
Inferential analysis involving having to draw up conclusions about a population based on their data
such that the characteristics outlined would represent the whole population (Saunders et al 2012); is to
be used for addressing the objective which determines investor perceptions towards the asset classes.
Groups would be compared for significant differences through the use of T-Tests; identifying groups
of similar cases through use of cluster analysis and finally identify significant relationships between
variables by use of Pearson correlation (Greener 2007; Dawson 2009). This helps aid the exploration
of the direction investors must follow in order to build their wealth and one way Anova as well for
judging the significant of means in a set (Kothari 2011).
Constructing and prospecting a profitable portfolio for wealth creation through finally evaluating with
the aid of an interview would hold for a qualitative analysis to which thematic analysis would fit best
through simultaneously displaying and reducing it, thereafter coding since interviews are subject to
interpretations that may be different from one reader to another. Data is to be described, classified and
then connecting it so as to use themes embedded in the instruments and questions that would be used
for drawing conclusions. The downside of any qualitative report is the fact that it is time consuming
and participants can be too busy for any interview hence frustrating the researcher; and can be costly if
for example, one hired a transcriber and certain points can be missed but in turn it helps to aid your
analysis more so if manual transcribing is involved since one would feel close to their data. The idea
behind this is to obtain and evaluate information from specialist or practitioners of how best to mix
investments and how to formulate portfolios that would earn profits.
3.5.5 Reliability measures and validity of the study (for quantitative study) or Measures to
ensure trustworthiness (for qualitative study)
The purpose of reliability is to ensure credibility of the data collected and the findings could then be
used to make reasonable conclusions (Goddard and Melville 2007). The SPSS software was used to

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test the reliability of the questionnaire for the quantitative analysis using a reliability test ‘Cronbach’s
Alpha’ on dummy data and the results are as follows;
Table 2-SPSS reliabilitytest
N %
Valid 20 100.0
Excluded
a
0 0.0
Total 20 100.0
Cronbach's Alpha N of Items
.724 25
Case Processing Summary
Cases
Reliability Statistics
The table above shows the reliability of the questionnaire as a data collection instrument to be very
good.
To ensure trustworthiness in the data collected, use of companies listed on the stock exchange that are
governed by laws and regulations for the issue of financial statements; as such, audited financial
results would be used when conducting the archival research. Interviews are subject to human
productivity thus it would be best suited that the interview be conducted in the morning where prompt
information and ideas are given and interactive discussions are fruitful. Furthermore, it becomes
essential that the interview be done with someone of managerial level whom understands the strategic
role of the company in the industry and the economic role they play at national level thus reasoning’s
are robust. Lastly, questionnaires are subject to human perceptions and trustworthy of the data would
come from insuring participants are made well aware of confidentiality of their data thus the whole
research in turn bears fruit and is able to achieve its aims and objectives.
3.6 ETHICAL CONSIDERATIONS
The researcher would be accountable for data collected from participants by ensuring it is kept in a
locked closet and passwords are placed to guard softcopy data. The study would also be conducted in
such a way that it does not harm the participants personally or at the work place. The subsequent

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aspects relating to ethical considerations made in light to the respective research at hand are fully
emphasised in appendix 4.
3.7 LIMITATIONS OF THE STUDY
Being frank, time does not ever favour anybody like in any other research which constraints the
availability of a number of resources, especially for data collection, to which otherwise would have
added a great deal of value towards apprehending the study.
Some participants just did not answer the questionnaires though they had consented to participation
reason being the timing of this research was bad on their part being that it was during the IPO of
BTCL to which a lot of stock brokers and investors were running around with it hence some were not
able to come around to responding to the questionnaire.
One of the participants was of a company that was currently implementing a strategy hence the use of
an interview for that individual went contrary to their busy schedule and hence an open ended
questionnaire was deemed more appropriate.
With relation to the quantitative analysis of listed companies’ earnings per share over a ten year
period, some data of past years was not available and for some which were available, the ratios were as
at a time prior to the companies listing on the BSE regardless of them being audited hence their
analysis would be on a proviso basis.
3.8 APPROPRIATENESS OF THE RESEARCH DESIGN (Reflection)
The researcher initially wanted to rely on a single-case setting of obtaining data from one source from
the stock regulator to which it would have seemed biased though we only have one stock exchange in
our economy hence the need to add another participants from an independent firm dealing with
investment hence their contribution would be conclusive see as though we only have a very few
number of fund managers in the country and one stock exchange.
The use of the EPS ratio for analyzing performance of listed companies is simply because the EPS
ratio (IAS 33) is the only approved ratio so far as the International Accounting Standards are
concerned for analyzing and presenting performance to current and prospective investors.
3.9 CHAPTER SUMMARY
This chapter has highlighted and expatriated in length, the angle to be adopted by the researcher in
collecting information with relation to the methodology. The transition henceforth post collecting the
data into chapter four would be to present the data in a well comprehendible manner.

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CHAPTER 4
DATA PRESENTATION AND ANALYSIS
4.1 INTRODUCTION
This chapter puts on consolidation, the findings from the data that is now in hand after being gathered
externally. The presentation of which is such that it is in line to the objectives set out for the purposes
of this research. It entails both qualitative and quantitative aspects as already prehemted and the
analysis of which shall be through inferential basis and the SPSS software respectively.
4.2 OBJECTIVES OF THE STUDY
1. To examine the profitability and earnings potential of investing in unit trusts and stock market.
2. To determine and scrutinize perceptions of investors against the two asset classes.
3. To construct and prospect an investment structure mix pertaining to the two asset classes.
4. To recommend models or theories to build profitable portfolios using unit trusts and stock
market.
4.3 STATISTICAL (or textual) ANALYSIS TECHNIQUES USED
The researcher adopted both qualitative and quantitative methods of research hence the analysis of
both would be inherent respectively. The former would involve the use of archival research and study
so as to use past studies to emphasise current findings and or extend the knowledge outlined. The latter
would involve the use of the statistics software SPSS and Microsoft excel. Emphasis too is extended
by the use of measures of central tendency, dispersion and frequency distributions.
4.4 BACKGROUND DATA OF PARTICIPANTS
Table 3- Background data
Statistics
How old are
you?
Which level of
educations
have you
attained?
N
Valid 29 29
Missing 0 0
Mode 20.00 5.00
Minimum 18.00 1.00
Maximum 49.00 6.00

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Table 3 above shows that from the sampled set of participants, the vast majority of them are of the age
of 20 with the oldest being 49 and the youngest being 18.
Table 4- Education level
Which level of educations have you attained?
Frequency Percent Valid Percent Cumulative
Percent
Valid
University degree in Finance 9 31.0 31.0 31.0
Diploma in Business Studies 1 3.4 3.4 34.5
Other academic training 14 48.3 48.3 82.8
Other, please specify 5 17.2 17.2 100.0
Total 29 100.0 100.0
Table 5 above indicates that the vast majority of the participants are qualified in other academic
training followed by those with a University degree in finance.
4.5 MAJOR FINDINGS
4.5.1 Objective 1
4.5.1.1 – Stock market Performance
Table 5- Earnings Per Share Analysis
Measure FNBB BIHL Sefalana Stanchart
Mean 19.68 131.39 37.06 75.33
standard deviation 6.60 58.61 21.39 30.90
coeffecient of variation 33.53 44.60 57.71 41.02
maxima 28.29 205.81 65.39 107.78
The sampled companies are analysed based on the earnings per share trends since it is the only
accounting ratio internationally recognised by accounting standards (IAS 33). Table 3 above show that
the EPS of BIHL had the highest average as compared to the other three sampled and this can well be
attributed to the general increase in revenues (25% revenue) and premiums as well as investments
(106%) while only incurring a slight increase in costs (13%) hence this can be concluded to translate
to good management following strategies outlined to which would be an attribute deceived well
desirable by investors (BIHL 2015). On the contrary though, FNBB shows to have the lowest average
comparatively and performing as 18% less for profit after tax in 2015 as compared to prior year. The

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performance can be well attributed to a 64% increase in impairment of advances and 43% increase in
interest expenses though only recording a 4% increase in revenue; this translates in the stock now
being attractive enough as there is an indications is poor management or poor market hence leading to
such poor performance (FNBB 2015).
Sefalana PLC has a coefficient of variation of 51.71% with a dispersion point of 21.39t apprehending a
number of variations in the EPS indicating an aggressive stock which responds highly to the market
hence the higher market risk attached to this comprehends well to an expectation of a higher return to
this particular stock. Contrary to this though is FNBB, recording the lowest coefficient of variation of
33.53% with a dispersion point of 6.60t indicating that performance of earnings is more stable
comparatively though it is lowest; this translates to being sceptical about the security as the required
return from it since the risk is lower would justifiably be lower as well.
3.6.1.1 – Unit Trust Performance
a. Money Market Portfolio
The money market fund is one which is generally classified as low risk and most liquid such that
investor can call on their monies as and when they require them.
The first fund from the sampled companies is that of Stanlib which had a portfolio size of P2 843.68m
with monthly income streams. This money market fund returned 1.34% in the fourth quarter of 2015
hence outperforming its benchmark by 118 basis points though interest rates were quite low, with
inflation at 3.1% by December; this means that the pricing in fixed deposits and other money market
instruments remains depressed more so that the Transport sector had a hard hit as petroleum prices
fell. Inflation is expected to remain within the Bank of Botswana target of 3-6% hence risks that come
about would be increases in utility bills, alcohol levy and food prices due to prevailing droughts.
BIFM Unit Trust Pula Money Market Fund is yet another local trust that invests in low risk assets so
as to manage short term cash needs. It has a fund size of P347 269 977 with income distribution
streams that occur monthly. The fund returned 1.74% in the second quarter of 2015 outperforming its
benchmark (0.24%) by a 150 basis points and this has been an occurring trend since inception which
can be well attributed to successful negotiations of better rates for fixed deposits and short term
investments that are liquid though offer higher returns comparatively and no major changes have
occurred since then. Monetary policies have been loosened hence around P2.2bn has been into the
domestic economy hence creating a hopeful outlook for the fund.
b. Balanced Prudential fund
This type of fund specifically is less liquid and calls of a moderate risk profile as ideally is created for
the purposes of the medium to long term investment.

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Stanlib Managed Prudential fund has a size of P579 600 000 which in an increase from the prior
quarter. The fund gained by 6.57% compared to the 5.05% target due to global equities that reversed
the losses that were incurred in the third quarter. Factors that were affecting this fund were the
devaluation of the Yuan, strengthening USD, expectations of increases in US interest rates and a
collapse in commodity prices due to a slowdown in the Chinese economy. Locally though, the
downfall was due to lower performances by the Domestic Companies Index and decreasing interest
from fixed securities.
On the contrary; BIFM Balanced Prudential Fund assembled a fund size of P54 967 454 investing in
local and offshore equities hence returning 2.15% compared to 2.05% benchmark aided by strong
world equity stock selection. Local performance of the fund is well due to investments in companies
like Letshego, Choppies and Wilderness though the fund marginally underperformed. Fund holdings in
the United Kingdom, France and Netherlands aided the funds’ performance and this translates further
for both local and global bonds which outperformed and underperformed their targets respectively.
4.5.2 Objective 2
The statistical analysis of the questionnaires was conducted though the SPSS software as
aforementioned. The results as such are presented in the following table.
Table 6- Questionnaire findings
Descriptive Statistics
N Minimum Maximum Mean Std. Deviation
How often do you invest? 29 1.00 5.00 3.3448 1.14255
How often do you encounter
problems when investing?
29 1.00 5.00 3.0345 1.29512
Would you like to investin a
companyin the future?
29 4.00 5.00 4.9310 .25788
Would you rather opt to
invest in a companythan
keep your moneyin a bank
account?
29 1.00 5.00 4.0345 1.45118
How often do you review
published companyresults?
29 1.00 5.00 3.5172 1.21363
Do you know of Fund
managers available in
Botswana?
29 1.00 5.00 3.5172 1.40460

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Have you invested in Unit
trusts before?
29 1.00 5.00 2.5862 1.82282
Would you like constant
information aboutyour
investment?
29 3.00 5.00 4.7931 .49130
Are foreign investments
financiallyworth it?
29 3.00 5.00 4.3793 .82001
Would you prefer an agent
to manage your portfolio?
29 1.00 5.00 3.6207 1.39933
An above-average rise in
marketprice accompanied
by an increase in turnover
29 2.00 5.00 3.8621 .95335
A marketprice that has
stabilised ata level
significantlylower than its
all-time high
29 1.00 5.00 3.4138 1.21059
Growing expectations
concerning higher dividends
29 1.00 5.00 4.1034 1.14470
The raising ofcorporate
earnings estimates by
analysts
29 2.00 5.00 4.0345 .90565
Observed purchases by
other institutional investors
29 1.00 5.00 3.4138 1.05279
Corporate announcements
and statements thatare
perceived as being positive
29 1.00 5.00 3.9655 1.08505
A low valuation,on a cross-
marketor cross-sector
comparison,based on profit
expectations for the coming
financial years
29 1.00 5.00 3.1724 1.25553
Technical analysis ofprice
trends,price formation and
turnover trends.
29 2.00 5.00 4.3103 .96745
Fundamental analysis
based on forecastfactors
29 1.00 5.00 4.0000 .88641
A portfolio optimisation
approach,based on
estimated yields and
covariance’s.
29 1.00 5.00 3.7241 1.22172
Trading costs,such as bid-
offer spread
29 1.00 5.00 4.0345 1.29512
Market capitalisation. 29 2.00 5.00 4.2759 .88223

36 | P a g e
Frequentreports and
availability of independent
analysts’ estimates
29 1.00 5.00 4.1724 .96618
Previous corporate
developmentas well as
performance on stock
market
29 3.00 5.00 4.5862 .62776
Availability of tradable
derivatives for transactions
or as a source of additional
information
29 1.00 5.00 3.4828 1.12188
Valid N (listwise) 29
The findings indicate that on average, the participants are neutral in investing with some often and
some not often as much with relatively high variations around this and a number of them encounter
problems when investing though the variations are spread as well. Almost all participants would like to
invest in a company in the future and there are close to zero variations on this and the same investors
seem to be keen to invest their money in a company than just keep it in a bank and on average, some
investors review published company results and there are vast variations on this. A fair number of
participants know of fund managers available in Botswana though a number of them have not invested
in unit trusts before with high variations moreover that the participants would like to receive
information about their investments constantly and most are not centred here. They further agree with
financial viability of foreign investments which would relate with only a fair number of participants
whom would prefer an agent to manage their portfolio whilst some prefer being independent.
Share price and revenue trends are used as primary determiners for inclusion into portfolios by the
average participants though disparities are high relatively. Optimising returns, minimising costs and
observing the market capitalization are considered important for selecting stocks while previous
corporate development is considered of importance as well.
In light of the above, the highest average from all the variables are ones which states ‘would you like
to invest in a company in the future?’ with an average of 4.93 with low variations and it makes sense
because the next higher average descending is for the variable which states ‘Would you like constant
information about your investment?’ with 4.7 and variations are lower and the use of previous
corporate developments as well as stock market performance with an average of 4.5.

37 | P a g e
Table 7- Pearson Correlation: 1
Have you invested in Unit trusts
before?
How often do you
invest?
Pearson Correlation
Sig. (2-tailed)
.500
.006
Table 7 above outlines the relations between two variables picked out as the relationships between the
two outstood. The strength of association between how often one invests over if they have invested in
unit trusts is relatively high and positive (0.500). Also we can say that 25% (0.5002) of the variation in
investment patterns is explained whether they invested in unit trusts before.
Table 8- Pearson correlation: 2
Which level of educations have you
attained?
Observed purchases
by other institutional
investors
Pearson Correlation
Sig. (2-tailed)
-.557
.002
Coincidentally, the two variables that interest the author came out to have a strong negative
relationship. The interpretation being that with lower levels of education would you find investors
observing other institutional investors for selecting stock.
Market capitalisation
How old are you? Pearson Correlation
Sig. (2-tailed)
-.483
.008
Table 9 above reflects a negative correlation as well to say that with the lower age group would they
use a figure for market capitalisation found on annual statements for selection of stock.

38 | P a g e
How often do you review published
company results?
Fundamental
analysis based on
forecast factors
Pearson Correlation
Sig. (2-tailed)
.498
.006
Table 10 above reflects a positive relationship translating that using fundamental analysis based on
projections would result in increase of reviewing published company results.
A portfolio optimisation approach,
based on estimated yields and
covariance’s
Frequent reports and
availability of
independent
analysts’ estimates
Pearson Correlation
Sig. (2-tailed)
.542
.002
Table 11 above reflects a strong positive relationship translating that reliance on frequent reports and
independent analyst’s results in basing on estimated yields for inclusion of stock in one’s portfolio.
Table 12- Anova : regression analysis
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1
Regression 1.432 1 1.432 1.097 .304b
Residual 35.257 27 1.306
Total 36.690 28
a. DependentVariable:Growing expectations concerning higher dividends
b. Predictors:(Constant),Would you prefer an agent to manage your portfolio?
Coefficientsa
Model Unstandardized Coefficients Standardized
Coefficients
t Sig.
B Std. Error Beta
1
(Constant) 4.689 .598 7.844 .000
Would you prefer an agent
to manage your portfolio?
-.162 .154 -.198 -1.047 .304
a. DependentVariable:Growing expectations concerning higher dividends

39 | P a g e
The unstandardized coefficients are the regression coefficients. The equation given is;
Growing expectations concerning higher dividends= 4.689 - 0.162(Would you prefer an agent to
manage your portfolio)
The regression coefficient is the change in response per unit change in the independent variable. In this
instance, using growing expectations concerning higher dividends as a factor for inclusion of stock
differs 0.162 units for the non-preference of having an agent manage their portfolio which indicates
that the graph if plotted would be negative. The standard errors are that of the regression coefficients
and can be used for hypothesis testing and constructing confidence intervals. The standardized
coefficient is just what the regression coefficient would be if fitted to standardized data but it is not
important for this data.
4.5.3 Objective 3
The ideal portfolio that is found to be more sound and conclusive is one emphasised as thus follows. In
an ideal world we would be given a set of two investors, one of which prefers to have an agent manage
their portfolio on their behalf and the other who would rather opt to manage their own portfolio. The
former would rather be better off investing in a company such as BIFM for a money market portfolio
given that they prefer liquid investments and they are risk averse; if on the other hand their risk
appetite is tolerable then they would be secured with a balanced prudential fund from Stanlib which
returns though can be realised in the longer term unlike the money market. The latter though who
would rather opt to manage their own portfolios are better of carefully strategizing their investment
ventures. Research by Dequech (2011) and Hammami (2013) as priory aforementioned has outlined
the strategy of investing in rising markets and selling in declining markets basing on the trend of past
recent performance. Because of this concession, it can be applied in practice in that whether an
individual investor or a fund manager can take up to increase the wealth of their portfolio. When
looking at the Botswana Stock Exchange, profitable stock is selected on the basis of past company
performances, corporate government ethics, future prospects and ratings by independent firms; in light
of this, from the list of sampled companies, BIHL is the most profitable which can create wealth for
investors so it would definitely be a buy choice. Venture capital companies such as Lucara and
Magnum as well pose a great opportunity in that they explore for natural resources like for example
how Lucara mine found the ‘Sedi Laaka’ diamond which immediately raised the share price of the
company by more than 1000 times and the fate can well be trusted for a company such as Magnum to
which if they found the natural resources they seek, it would raise their value by that much. Further
emphasis is usually placed around IPO’s that occur locally, of recent, two occurred being the BTCL

40 | P a g e
and the Far Property Company to which they are usually sold at a discount thereby creating a window
of opportunity for capital appreciation both in the short term and medium term.
4.6 DISCUSSION OF FINDINGS
Explanations and implications of the above findings is explained here, though greater emphasis is
stressed in length through chapter 5 which would then corroborate the findings together.
A good number of the participants are qualified in finance hence understand the dynamics of investing
while the vast majority are skilled in other academic training hence have a more sound idea about their
respective preferred stocks. The participants are very keen on investing in the future and would very
much like to invest their monies in a company than retain it in a bank. The vast number of them would
like constant information about their investment but a few average number have invested in unit trusts
before, though they seem uncertain as to having an agent manage their portfolio and the fruitful
benefits of foreign investments are known. This becomes the basis of the research in that the author
aims to bridge this gap of information asymmetry hence giving investors power to make independent
decisions about the type of investments they would prefer.
The analysis of unit trusts has proven profitable for both companies sampled, in that the objectives
they set out of investing in local equities as well as offshore assets has brought about excellent returns
as highlighted in the above pretenses to the extent of surpassing their company targets. The same can
be attributed for stocks on the exchange as some perform really well.
Taking into perspective the other measures presented forth by the statistical software, the significant
correlations would speak a lot to a dynamic of the understandings of investment. As aforementioned, it
was found that there is a negative relationship between age and market capitalization standing with a
correlation coefficient of -.483 hence translating to say, the younger the age, the higher the selection of
market capitalization as a dominant factor for deciding which stock to select for inclusion into an
individual portfolio. The next significant relationship was that of the level of education and the use of
observing other institutional investors for inclusion of stock in one’s portfolio which was identified to
have a relatively strong negative relationship to translate that, the greater the level of education, the
greater the ability to make an independent investment decision rather than observing other institutional
investors. The two relationships do speak to each other though in the respect that information
asymmetry is a burden for a number of investors. Typically, younger investors can be taught more
about investment opportunities if they would prefer to manage their own individual portfolios and if
otherwise have a fund manager whom is a specialist in the field of finance and investment to manage
ones funds on their behalf such that optimum returns are obtained. The author places great emphasis is

41 | P a g e
that windows of opportunity present themselves not so often hence as and when they avail themselves,
it is vital that they are exploited such that wealth can be earned because it simply cannot be handed
down to anybody on a silver platter.
4.7 CHAPTER SUMMARY
The roles of an individual investor seeking to venture into investment by handing their own portfolio
or having an agent manage it on their behalf has been greatly emphasised in that the unique earnings
capabilities if the asset classes is capitalised on for the purposes of wealth creation. Henceforth, the
implications of which would then be used to extend current knowledge in the field and this is
explained thoroughly in the next chapter.

42 | P a g e
CHAPTER 5
DISCUSSION OF MAJOR FINDINGS
5.1 INTRODUCTION
The author intends to outline current knowledge and studies pertaining to the two asset vehicles, being
unit trusts and the stock market. Preceding this would be outlining and picking out major findings
from the research conducted in terms of what is new and also what comes about to being different in
the research from the current studies. Finally a reconciliation is made with regards to how the findings
extend the current knowledge or how it brings about knew knowledge to which more studies can be
conducted upon.
5.2 DISCUSSION OF MAJOR FINDINGS
The discussion would be based on the framework of reinforcing what is already known, new
knowledge being brought about to the table by the research hence showing the interrelation and
extension of knowledge in the field.
5.2.1 Reinforcing what is already known
5.2.1.1 Objective 1
A number of investors have found unit trusts to be a profitable and wise decision to make when
investing their money in that an expert manages their portfolio on their behalf which benefits them
since they are being passive though they get returns they expect. Research by Tng (2006) has
attributed factors such as risk, size, asset allocation and investment style to be influencers of the
performance of mutual funds to which investment firms that are mostly non-bank take advantage by
conducting great researches in search of investment opportunities to invest their funds in hence making
them thus profitable. Unit trusts are also known to be profitable for both domestic and foreign
investments. On the contrary though, poor timing ability by some fund managers and failure to
outperform the market has been the downside of investing in unit trusts (Low 2007).
5.2.1.2 Objective 2
The ideal concession with the stock market is to sell market leaders in a falling market and buying on a
rising market (Dequech 2011); the same idea was brought about by Hammami (2013) whereby
demand was for recent winners and recent losers are sold. It must be highlighted though that the

43 | P a g e
performance of any stock market is highly dependent on the economic health of any country hence the
ideal selection of any stock would be highly dependent on how it is influenced by economic aspects
and or the strategies it has which outperforms the market.
5.2.1.3 Objective 3
With respect to portfolio building, the dividend policy that a company adopts becomes essential to the
performance of the stock on the exchange market as failure to pay for which results in investors having
to attribute this to poor management (Waweru 2010). Chambers, Dimson and Foo (2015) greatly
emphasise the tactic of observing the market as mentioned by previous authors to take up opportunities
of wealth as and when they present themselves. Furthermore, the advantage of the stock exchange lies
with the diversification of investment it presents thereby minimising the systematic risk arising in any
market.
5.2.2 What is new and different in the findings
The ideal expectation of any unit trust fund is that, because it involves having a professional agent
managing the portfolio, the returns less management fees would far outweigh that of which if it were
only an individual investor. Though the comparison of which has not been done, but the performance
of some local mutual funds has been underperforming. Such would include the Stanlib money market
fund which is greatly affected by economic aspects such as inflation though the expectation by
investors is that such would be foreseen by such practitioners unlike the rather naïve individual. The
competitor side with a greater risk too seemed to underperform with the portfolio now generating
enough returns to meet the target it set and this is the BIFM balanced prudential fund. Such was
attributed to underperformance by the Domestic Companies Index meaning inclusion of which into the
portfolio was not fully analysed and furthermore great reliance was placed on foreign equities which
ended up gaining from European markets though outperformed by the decline in the Chinese market as
it is the second largest economic driver globally hence the impact of which would be fully felt. A
consolation of this though would just be that this is a portfolio ideally created for the medium term
hence one would be hopeful to better returns in the future.
On a different note though, banks are usually expected to be market leaders on any stock exchange
since we do trust them with our money in the first place but this is now the case for the BSE as it
seems the banking companies have not fully recuperated from the 2008 global financial crisis and
hence we have the insurance company dominating and some property companies slowly and gradually
growing.

44 | P a g e
5.2.3 How the results extend knowledge in the field
Investment opportunities in Botswana remain vast with that of one on the stock exchange being
dominant in that wealth can be created vividly for a range of investors within the economic society. As
highlighted by the findings from above, opportunities lie in a number of ventures such as IPO’s to
which the prospect of capital appreciation stands clear; the consolation and faith of such stock can be
corroborated by independent stock brokers and valuers whom observe the future projections as
outlined by the IPO prospectus. The author therefore advices for the inclusion of new stock in their
respective portfolios for both individual investors and fund managers. Investors must also understand
that with high risks being assumed for any investment, high returns are expected hence it is a room of
opportunity to gain more depending on their risk appetite, the point being emphasised by the author is
that treasury bonds (government bonds) are not relatively profitable since they are risk free though this
can be questionable since during the 2008 global financial crisis, some governments defaulted on their
bonds. It is often advised that excess capital be employed into smaller and or cheaper equities such as
those of venture capital companies such that room for gaining vast earnings is higher. Further
emphasis is placed upon large companies on the BSE that are performing very well to buy more of
their equities, such greatly attributed to BIHL from the sampled companies followed by Standard
Chartered. Through such choices, one would be able to diversify their portfolio such that risk is kept at
a minimum.
5.3 CHAPTER SUMMARY
The research has highlighted the significance of investing in unit trusts and effectively individually on
the stock exchange to which the ideal portfolio can be used by both individual investors and fund
managers for make their portfolios profitable for both the short term and the long term. The
competitive edge expressed by having to invest in unit trusts highlighted though ate same time the
stock market too having its own advantages of receiving both dividends and capital appreciation of
stock hence the two asset vehicles can be used to construct an investment portfolio for Batswana to
encourage investment at national levels.

45 | P a g e
CHAPTER 6
CONCLUSIONS AND RECOMMENDATIONS
6.1 INTRODUCTION
The aim of the research is to evaluate a structure for investing both unit trusts and into the stock
market to build profitable portfolios using their unique earning abilities. This aim was intended to be
addressed though a number of objectives that would guide the study from the level of current literature
on the topic prescribed and the research methodology to be exercised.
6.2 CONCLUSIONS
One of the key drivers of GDP is investment to which the economic policy of any country can be used
to induce it or attractive portfolios being availed to prospective investors such that they would put their
money into it. From the questionnaire conducted by the researcher, it indicated that on average, 4.03
are keen not to keep their money in a bank but invest in a company, as such the researcher found it
best to construct a portfolio which would give investors piece of mind depending on their risk appetite
and investment period such that they would be more likely to receive the returns they desire.
The first objective of the study is to examine the profitability and earnings potential of unit trusts and
the stock market. Investing in unit trusts is suitable for investors whom prefer a specialist to manage
their funds on their behalf and it does cater for the risk averse and risk tolerable investors as per
indicated by the findings in chapter 4. Studies by Rudman (2008) in South Africa have revealed unit
trusts to be one of the fastest growing industries in the finance sector. Tenk (2008) has emphasized that
the diversification of investment exercised by mutual funds has been a competitive factor in increasing
opportunity for higher returns and minimizing risk of the investment. Examining the profitability of
which was conducted over two sampled fund managers locally namely BIFM and Stanlib and analysis
carried henceforth. The two portfolios of both companies was found to be profitable for both the short
term which is ideal for liquid investors and for medium term investors whom have a relatively greater
risk appetite hence the investment decision for which is a GO. The activities of the stock exchange on
the other hand have been found to be occurring at local and international levels (Slimane 2012). The
examination of which was conducted over four sampled companies listed on the Botswana Stock
Exchange namely Botswana Insurance Holdings Limited, Sefalana, First National Bank Botswana and

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