How Tactical Investors Master the Art of Long-Term Wealth Creation

Mr. Niroshan Wijesundere, Senior Vice President of Marketing at the Colombo Stock Exchange (CSE), emphasizes the wide range of investment opportunities and diverse capital market instruments available to investors. He highlights CSE’s role in equipping individuals with the knowledge and skills needed to navigate the market, while also encouraging them to make informed investment decisions with the benefit of professional insight.

QHow does the stock market typically perform in a low-interest rate environment, and what opportunities does it present for investors?

It’s crucial to distinguish between savings and investments. While savings are essential, investments aim for growth, ideally outpacing inflation. In such conditions, investors are compelled to look beyond fixed income instruments and consider equities as they offer higher growth potential, providing opportunities for capital appreciation that outpace inflation. 

In general, capital markets tend to perform well in low-interest rate environments, and Sri Lanka is currently experiencing such a regime. This has contributed to growing interest among retail participants, with retail participation now reaching 93%—a clear indication of strong domestic engagement with the stock market. The market also delivered solid returns in the previous year, with the ASPI gaining 49.66% and the S&P SL20 rising by 58.46%. Moreover, the country’s improved credit ratings and economic rebound, along with a market P/E of 8.71, indicating that valuations in the Sri Lankan stock market are very attractive compared to regional peers—create a favourable environment for equity investment. As at 23rd May 2025, the total return for ASPI for the year is 6.98%, reinforcing the stock market’s potential to generate meaningful returns in the current environment.

To further enhance investor opportunity, mechanisms such as Regulated Short Selling (RSS) and Stock Borrowing and Lending (SBL) allow investors to benefit not only during market upswings but also during downward movements. Given that volatility is a natural feature of all capital markets, these tools provide the flexibility to adapt—enabling gains in both rising and falling markets through well-informed strategies.

QSimilarly, how do tax advantages—such as the tax-free status of certain investments—impact the appeal of capital market products, and how should investors weigh this when making portfolio decisions? 

Tax considerations play a significant role in investment decisions. Interest earned from bank deposits is added to your total income and taxed according to your income bracket. This means that even a small amount of interest can push you into a higher tax bracket, increasing your overall tax liability. For example, if your salary is positioned just below a tax threshold, the addition of interest income could result in your income crossing that threshold, subjecting you to a higher rate of taxation. In contrast, capital gains derived from the sale of listed shares are exempt from capital gains tax, allowing investors to retain the full benefit of any appreciation in value. In addition, dividends received are subject to a final withholding tax of 15%, which is straightforward and not added to the investor’s overall income. This simplified tax treatment makes equities more appealing, especially for those looking to optimize their returns net of taxes. Therefore, when constructing a portfolio, investors must consider not only the potential gross return but also the tax-adjusted net return. By factoring in these advantages, equity investments stand out as a more efficient way to grow wealth over time.

QWhat role does the Colombo Stock Exchange play in improving financial literacy and helping investors make informed investment decisions?

Financial literacy in Sri Lanka remains a significant challenge. Approximately 40% of adults demonstrate an understanding of risk diversification, indicating that while progress has been made, substantial effort is still necessary. This highlights a valuable opportunity to strengthen awareness around key investment steps, as limited knowledge continues to restrict market participation and wealth-building for large segments of the population.

The CSE has made targeted efforts to demystify investing. The exchange has established a network of regional branches to reach investors across the country, ensuring that financial education is accessible to all. These efforts are further supported by trilingual webinars, a strong YouTube presence, and structured programs via the CSE Academy. The CSE Mobile App also plays a vital role, providing users with a convenient way to begin their investment journey, while offering access to market reports, analysis, and real-time information. These initiatives ultimately empower individuals to make informed investment decisions—contributing to the broader development of Sri Lanka’s capital market and fostering a more financially literate and investment-savvy society.

QBeyond equities, what other products and investment instruments are available through the CSE that investors should be aware of?

While equities are the most widely recognized offering, the CSE provides a broader range of investment instruments. Corporate debt securities, such as listed debentures, remain a strong option for investors seeking stable, fixed income returns with lower risk exposure compared to equity. There is also growing interest in sustainable finance instruments which are used to fund environmentally friendly projects. The CSE has established a comprehensive framework to facilitate the listing of green and blue bonds as well as social bonds, enabling investors to diversify their investment portfolios. These instruments are particularly attractive to investors who seek both financial returns and alignment with sustainability goals.

Shariah Compliant Debt Securities have also emerged as a viable alternative for those seeking investments that align with sharia principles, supported by increasing issuer interest and investor demand. High yield bonds which offer higher returns are more suitable for investors with higher risk appetite. Together, these products signal a shift toward a more diversified, dynamic capital market—offering multiple pathways for investors to achieve their financial objectives beyond traditional equity holdings.

QHow can first-time investors enter the stock market, and what should they keep in mind before getting started?

Entering the stock market is an exciting and empowering journey—and it’s much easier than many people think. First-time investors can begin by downloading the CSE Mobile App, which offers real-time market data and a wealth of educational resources to help you build confidence and make informed decisions.

The first step to start investing is opening a Central Depository System (CDS) account. This simple and user-friendly process gives you access to trade securities on the Colombo Stock Exchange (CSE), unlocking a world of investment opportunities.

While stocks can offer strong returns, it’s important to understand your personal financial goals and risk tolerance. With the right mindset and guidance from a trusted investment advisor, you can craft a strategy that aligns with your aspirations—whether you’re aiming for long-term growth, passive income, or short-term gains.

Thanks to the wide variety of listed products and the flexibility of the CSE platform, investors can act confidently and adapt to market trends with ease. With knowledge, support, and the right tools, the stock market becomes not just accessible—but an exciting avenue for building your financial future.

Start your investment journey by downloading the CSE Mobile App today!