Stock investing is one of the oldest investments which took off in late 1990’s. Despite the risks associated with stock investment, many still invested in it and most lost millions to it. This arguably owes its root to the fact that people who actually ventured into stock investment didn’t really understand what they were investing in. If they had the basic understanding of what stock really is, perhaps they could have avoided some expensive mistakes.
EXPLORING THE BASICS
The most important basic in stock investment which many have failed to embrace is appreciating the risks you face whenever you invest your money in any investment opportunity. When you lose track of the basics, you lose track of why you invested in the first place. Stock investment goes beyond sending your money to a broker or opening a brokerage account, the first step is to find out as much possible as you can about what stock is and how to use them to achieve your wealth-building goals.
In Nigeria, an individual can only buy and sell shares of publicly quoted companies solely from the Nigerian Stock Exchange. However, you can also trade in equities of private companies through National Association of Security Dealers Over The Counter (NASD OTC). Gathering information is very critical in stock investment and there are basically two times this information is most required:- a) before you invest and (b) after you invest. It is most advisable that when you’re ready to start investing, you contact a trusted brokerage firm, especially as a beginner with little or no background on stock investment. Once you choose a company to invest in its stock, you must stay informed about what’s happening to the company as well as what is going on in the economy.
HOW MUCH RISK CAN I TAKE?
Whether you’re already in stocks or you’re looking to get into stocks, you need to find out about how much money you can afford to invest in stocks. No matter what you hope to accomplish with your stock investing plan, the first step a budding investor should take is figuring out how much you own and how much you owe, if successfully investing in stocks is the goal that you’re probably shooting. You must consider stock investing as a means to an end. When people buy a computer, they don’t think of buying a computer just to have a computer. People buy a computer because doing so helps them achieve a particular result, such as being more efficient in business, playing fun games, or having a nifty paper weight. Know the difference between long-term, intermediate-term, and short-term goals and then set some of each.
Long-term is a reference to projects or financial goals that need funding five or more years from now. Intermediate-term refers to financial goals that need funding two to five years from now, while short-term goals need funding less than two years from now.
Investing is the act of putting your current funds into securities or tangible assets for the purpose of gaining future appreciation, income, or both. You need time, knowledge, and discipline to invest. The investment can fluctuate in price, but has been chosen for long-term potential. Saving is the safe accumulation of funds for a future. Savings don’t fluctuate and are generally free of financial risk. The emphasis is on safety and liquidity.
Speculating is the financial world’s equivalent of gambling. An investor who speculates is seeking quick profits gained from short-term price movements in that particular asset or investment. These distinctly different concepts are often confused even among so-called financial experts.
As an advice, it is always better to start small and grow bigger. Once you decide to venture into stock investment, and there are wide ranges of investment options for you, however, it is safer to diversify in order to reduce the risk. By diversification, you can invest in a range of assets, thereby reducing the risk of one investment’s performance affecting the return on your overall investment.
Whether you’re starting with large sum or small sum, you must bear in mind that it is more complex and complicated than just choosing the right investment, you must be aware of the restrictions. More than any other thing, knowledge is power in business, you must as earlier stated be in the know, always update your knowledge of the market and above all be good at spotting opportunities.