Step By Step Guide to Stocks Investment
Currently, game betting ranks higher among Nigerian youths than investment in stocks. As a matter of fact, Nigerian youths can comfortably lecture on game betting than their academic pursuits.
Some Nigerian youths have changed the stock market investment terms buy low, sell high to “pam” low and bet large. In all honesty, while millions are on losing streaks in the game betting, few that are winning are of low probability to those losing.
Elsewhere, some are yearning to know-how, what, where of stock market opportunities. But, Nigeria education curriculum isn’t deep enough to address their needs.
For wannabe investors, the stock market and its process can be intimidating, especially when you don’t have an idea of the process. Like game betting and various lotteries around, investing in the stock market is risky. Well, that is the basis for investing – risk.
For every risk taken, investors want a return. Invariably, you deserve no return if you don’t take any risk. If you want to multiply your money, you have to take risks. The risks in stock market investment is because the price goes up and down based on various market development.
Think about this, in 2020, the stock market gained more than 50%! Let me tell you what that means. If you have N10 million in stocks, it was not impossible for your stock value to increase to as much as N15 million or more in the period.
Stocks are quite different from certificates of deposits, savings accounts, or money market funds because of their principal value rise and fall, says Quantum Zenith Securities in a note.
Therefore, to carve a niche in the investment world, one must be adequately armed with the necessary information and extensive research must be carried out. Just like in gambling, emotion has a role to play in stock market investments. Buy low, sell high will always remain a key guide.
But, how do you know when to buy or sell? It is easy to say buy the dips, when is the dip deeps? Stock market investors are always asked to have a tight rein on their emotions. That is why it is vital to learn the basics of investing in stocks.
Here is what Quantum Zenith Securities Limited explains:
Assess Your Present Situation:
The first thing to do before investing at all is to ensure that your general financial standing can accommodate a new activity without necessarily hurting other financial commitments.
Ensure that your finances are duly organized and there is room for investment.
To this regard, you’ll need to put the following factors into due consideration; employment (ensure that your source of income is secure enough to allow an investment), debt (don’t invest to clear outstanding debts, you might have more piled up on the present ones), family situation (ensure that your family is well catered for and there’s no extra mouth to feed on the way before you invest).
Goal Setting:
It is advisable to set goals for this investment before making it as it will guide you on the type of investor to be and possible expectations.
The three questions that will guide you in achieving these are;
• Are these investments for a retirement plan?
• Are these investments short-termed (5-6 years away)?
• Will you have exclusivity of access to the money?
These questions will guide you in the decision-making process; they are personal questions every investor should consider.
Money Reserve:
Before investing your money, which comes with risk, ensure you have some put away that will not be subject to any risk whatsoever, either in the money market, savings account, or certificates of deposits.
The purpose of this action is so that you can have an emergency fund that can cater to your financial needs in the advent of a momentary income disruption or if your investment takes a nosedive.
Open an Investment Account:
Overall, you need to have an investment account to invest in stocks. If you want to do it yourself, you will need to open a brokerage account but for those who are looking into getting help, you’ll open an account through a stockbroking firm.
In both cases, you get to open an account with a low amount of money, some providers even offer zero account opening.
Open a Retirement Account:
The best place to begin investing is in a retirement account because they stand for and ensure long-term investment, besides, they are tax-immune and are typically funded through salary deductions.
This retirement account can be through your employer or an Individual Retirement Account (IRA) if there is no employer plan if you are self-employed.
Start with Mutual Funds or Exchange-Traded Funds (ETFs):
For starters, it is better to begin with, mutual funds or ETFs rather than diving straight into stocks. The reason is that funds are professionally managed and will take away the responsibility of stock selection from you.
All you are required to do is open an account with one of the various available ETF trading apps (usually commission-free). Then, go ahead to determine how much money you want to invest in a certain fund or group of funds.
Another advantage of mutual funds is that you do not have to worry about diversification since each fund holds diverse stocks.
Be Long-term Focused:
The best thing to do – which is also the hardest – after investing is to conveniently forget it, do not look at them. Unless you are looking into becoming a guru in daily trades and subsequently becoming a broker yourself, it is best to avoid checking on the performance of your stocks obsessively.
Manage your Stock Portfolio:
While it is not advisable to fret over the state of your stocks, fluctuations, and whatnot, there is still a need to check in on your stocks from time to time.
Stock Market Rally Stalls as Investors Book Profits
This is to ensure that funds and/or stocks are still in tandem with your investment goals.
Remember, investing in stocks is a great way to build wealth, either for the present time or for your future but the investment is also always a risk, so it is important to try to invest wisely.
Step By Step Guide to Stocks Investment
