How Not to Invest in Companies Stocks Wrongfully
If you doubt it, don’t buy it, and before you buy any company’s shares, know those who are behind it. If you love them, you are probably making a good decision to cut from the pie; if you don’t become Usain Bolt – RUN!
Many people are planning to get their share of wealth; some listed stocks in the Nigerian Exchange have delivered in 2025. Anyone that has not gained more than 36% in 2025 invested wrongly. Some companies have doubled down on NGX index performance.
Still, you are just on time, though the dinner has been served for some, but then, you are here just in time. Nobody anticipated the fast and furious rally in the market would shift the investment ecosystem in 2025, and it has successfully changed some pessimists’ perception – for good.
If you never own a share of any listed stocks, what have you been doing with your free cash? People that understand money don’t keep it in banks; they invest because it costs money to save money. Now that you are making a foray into the stock market, you must know that it is not all stocks that could fit into your portfolio. Also, don’t hold on to one company’s stocks.
There are a lot of questions from investors seeking to buy stocks. Many of those questions have remained unanswered because most Nigerians don’t even know where to get non-exaggerated information about investing. Usual questions are: Where can Nigerians invest N1 million that will give them returns instead of letting the cash stay idle?
Stock trading is the right way to go for anyone seeking to boost income, and the Nigerian market has proven to be a money-making machine for those who dare. Everybody is gunning for unearned income, as Nigeria’s economic reforms appear to have helped reset our mentality now.
How much risk are you willing to take? The truth is if you don’t invest correctly, you might lose all your money. Some people cannot afford to lose the money they want to invest. The rule is, don’t invest an amount you cannot afford to lose – most times, outcomes are not predictable. Think about Heritage Bank that went down. Imagine you have sizeable investors in the bank shares if it were to be listed.
Union Bank of Nigeria was listed until it breached the regulatory capital requirement and was taken out of the stock market.
GlaxoSmithKline would have attracted some investors’ funds, and it was forced out of the local bourse over plan to exit the economy. You are on the safe side when you overstate the possibility of losing the money than when you to think otherwise.
When MTN Nigeria was losing earnings, some people exited positions in fast and furious manners. This plunged the telecom company stocks down to N200 range, and the last six-month rebound has fuelled a fresh rally that pushed MTN Nigeria to N435 as of Friday.
You don’t buy stocks and go to bed. You check it daily, trade it when necessary – thanks to Nigerian stockbrokers’ trading apps. Going to stock market means you are willing to take additional risks compared with someone seeking fixed interest rate on government borrowing instruments.
While you might get 20% yield on fixed assets (possibly), you might get as much as 200% investing in stocks – Wema Bank has gained 158% in 8 months due to healthy rally. So, if you are willing to take a risk, you have the right to strong upside potential. How do you know which stocks to buy?
It is all investors’ sentiment; the company’s fundamentals and bandwagon have helped some investors in pocketing some alpha profit on investment. As an investor, you must know the company whose shares you want to buy. That means you will always read financial news from a platform of your choice.
Track company share performance, and check the trend – meaning how the share performs over a period of time. Does the company pay shareholders interim and final dividends?
What to Look for
Is the company making profit and what is profit distribution like? If you are looking at investing big, then you must be concerned about key man risk – the person that influences the strategic direction of the company. You don’t buy stocks that rarely move when you are new in the stock market or if you have thin pockets.
Airtel Africa is N2310.50, if you don’t have an intention to sit at the board, or you are coming to the stock market with N100,000 it will be wrong for you to buy Airtel Africa. The telecom company’s share price rarely moves, but when it does, it is always a big move, and it could come either as a downturn or price appreciation.
For you to see capital gain on stock investment, the target company shares should not be stagnated for long. Share price volatility is the business when putting money in the equity market. So, you have to be able to understand share price movement.
One key question to ask yourself is when a share price rises or falls, what happened or what is about to happen? Investors always react to what happened or what is about to happen. Tier-1 banks drive the banking index downward last week as investors begin to take cover due to delay in releasing first half of 2025 earnings results.
Those that sell down are thinking about something – what if the Central Bank refused some lenders from paying interim dividends?
That information is significant for the next rally to take place… Investors don’t make decisions in the dark; they are now waiting to see earnings results, and a negative surprise would mean fast and furious position exits.
You have to think like sophisticated investors if you want to play strong in the equity market. You don’t need to become a finance expert, but you must be able to replicate their thinking. Some analysts’ thinking are informed by professional training, and the majority are driven by common sense.
A company that makes profit like GTCO, pays dividends, and has low-key man risk tends to outperform a financial services group like First Holdco, which has seen significant and perhaps unending infighting.
With your N100,000 savings, does it make sense to buy Dangote Cement Plc shares? Or would you consider buying BUA Foods Plc stock? Let say you have N1 million you want to put in stock; would you still buy either?
To invest, you must have a set target. You will get burnt if you take wrong positions in the local bourse. You don’t compete with lions when you are just an antelope. There are stocks you should avoid like plagues – especially where key man risk is loud.
Investors tend to do better with cheaper stocks. Take a look at Wema Bank rights issue at N10.45 a few months ago and as of Friday, the bank share price was N23.
What this means is that timing is important, and following a certain trend hasn’t failed to boost gain. If you had bought N10.45 million worth of shares, you will have N23 million in your portfolio now. #How Not to Invest in Companies Stocks Wrongfully Earnings Delay Spark Selloffs in Bank Stocks
