BACK TO BASICS: INVESTING IN SHARES
• No. 1: WHAT ARE INVESTING AND SHARES?•
. “Investing Rule No. 1: Never Lose Money.
Investing Rule No. 2: Never Forget Rule No. 1″.
~ Warren Buffett.
•Investing is one of the best ways to create wealth and become financially independent. It is simply putting your money to work for you. It’s a necessity.
Unless you have benevolent loaded relatives, or you inherited (or hoping to inherit) a significant sum, from your parents or from marrying a rich man (for ladies), or in the case of men, especially those in the Diaspora, marrying an aged widow, you should take interest in securing your financial future. Investing for the future when you are so young gives you a great advantage – time!
If you want to accomplish important personal and financial goals, such as helping your children through college, owning a home, starting your own business, retiring young, and so on, you must know how to invest well.
For ladies, in the words of Kim Kiyosaki, author of Rich Woman and wife of Robert T. Kiyosaki (author of Rich Dad Poor Dad), “A man is not a financial plan”, if you wish to be fulfilled, stable, wealthy and happy in life.
The key to investing is having a strategy in mind with clear goals, discipline and consistency. Start small and commit to grow your investment periodically. It eventually leads to significant growth due to the power of compounding.
The best investment vehicles for building wealth are as follows:
. Shares (stocks).
. Real Estate (buildings etc).
. Business or Career.
Our focus here is on Investing in Shares (or Stocks). Stocks are an example of an ownership investment, because they represent shares of ownership in a company. If you want to share in the growth and profits of companies like Dangote Cement plc, Nigerian Breweries plc, Guaranty Trust Bank plc, Nestle Nigeria plc, Zenith Bank plc, you can! You simply buy shares of their stocks through a stock brokerage firm.
Before you invest in any individual stock, no matter how great a company you think it is, you need to understand the company’s line of business, strategies, competitors, financial statements, and Price/Earnings Ratio versus the competition, among many other issues. Selecting and monitoring good companies take lots of research and discipline.
Many of those investors who suffered the worst losses in the market decline at the end of the last decade (2008 to 2009) headed to the exits, vowing to never return. That’s a huge mistake. The real error these investors made was in chasing hot stocks and not being properly diversified.
Caveat: All investments come with varying degrees of risk. If you understand and are comfortable with the risks and take sensible steps to diversify (don’t put all your eggs in the same basket), ownership investments are the key to building wealth. To diversify means to spread market risks by holding a variety of several different securities (stocks etc) in your portfolio. Alternatively, you can seek professional advice so that the most appropriate choices can be made for you.
The Stock Market is a fine way to build wealth. You don’t need to be an “elite” to make money in the stock market. If you can just practice some simple lessons, such as making regular and systematic investments and investing in proven companies and mutual funds, you’ll be a winner.
Note: A Mutual Fund (Unit Trust) is an investment vehicle managed by a SEC (Securities and Exchange Commission) registered Fund Manager), such as the proposed I & I Investments’ Mutual Fund, that pools funds to invest in a portfolio of stocks, bonds etc. When investors buy shares of Mutual Funds, they are pooling their funds. Fund managers use the pool of funds to buy the stocks, bonds and other securities across sectors that form the portfolio and generate their desired returns. The Fund Manager will look at your risk tolerance, and your obligations in determining the most appropriate fund for you. Investing in Mutual Funds is easy because they are professionally managed. Rather than researching, analyzing, buying and selling stocks yourself, a skilled Fund Manager (like the Proposed I & I Investments Mutual Funds) is doing it all for you; more so as most of you do not have the time or inclination to build an investment portfolio.
BECOMING AN INVESTOR:
The Nigerian Stock Exchange (NSE) operates a fair, orderly and transparent market that brings together the best of African enterprises and approximately 5 million investors from around the globe.
To become an investor, an individual (or institution) must select a stockbroker and open an account with the Central Securities Clearing System Plc. (CSCS).
A stockbroker is an appointed agent who is authorized to execute, buy or sell instructions on an investor’s account, while CSCS issues central securities identification numbers to investors required for the clearing, delivery and settlement of transactions. A stockbroker, in this sense, does not refer to an individual, but to a broker-dealer firm that is (i) a dealing member of The Nigerian Stock Exchange (NSE), and (ii) is registered with the Securities and Exchange Commission (SEC).
In selecting a suitable broker to represent your interests as an investor, you should confirm the broker’s status with both The NSE and SEC. The NSE also recommends investors meet with the broker-dealer firm to determine whether the services they offer match their specific needs. Stockbrokers and custodians have a fiduciary responsibility to their clients which implies management and safekeeping.
Finally, I hope you’ve enjoyed this cruising session. Fasten your seat belts, as we enter the next session shortly. The doomsayers out there have been proved, so far, completely and utterly wrong about many many of the more exaggerated predictions touted for 2017. Resolve to invest in stocks!! There Is No Alternative (TINA)!!!
•My name is Chief Blakey Okwudili Ijezie, FCA (ITE-OZUBULU)•
Dated: Saturday, August 19, 2017 @ 11:57 am
With thanks! Valuable information!