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Things You Must Know Before Buying Shares



Leadership Nigeria News Today

•YOU OWN A PART OF THE BUSINESS: When you invest in stocks, you do not invest in the market (despite what you think). You invest in the equity shares of a company. That makes you a shareholder; you now own a small part of that business without having to go to work there. The good news is, since you own part of the company, you are entitled to a share in its profits. The bad news is that you are also expected to bear the losses, if any. That is why investing in shares is risky. If the company does well, you benefit. If it does not, you lose. There are no guarantees whatsoever.

•ALWAYS INVEST FOR THE LONG-TERM: The best way to make money is to buy low and sell high. This means you should buy the share when the price is low and sell it when it is high. That is why you must buy in a bear market. This is a term used to describe the sentiment of the stock market when it is low and the prices of shares have generally fallen. The best time to sell is in a bull market, when the sentiment is high and the prices of shares are rising.

•DECIDE HOW MUCH YOU WANT TO INVEST: Always remember one basic rule in finance — if something gives you a higher return, that’s usually because it carries a greater risk. That’s the reason why not-so-good companies will pay you a higher rate of interest for your deposits. The same reasoning goes for stocks too — they give higher returns than, say, bank fixed deposits because they are more risky. So the amount of money you invest in the market depends on your capacity to bear the risk.

– Source: Sulagna Chakravarty