Rudiments Of Investing In Stock Market

Investment in equity or stock is lucrative as it has the potential for high returns. 

However, equity investment can be risky but the good news is that the risk can be mitigated. 

Structure of Stock Market

Investing in the stock market involves trading (buying and selling) shares of publicly listed companies on the Nigerian Exchange Limited, while the Securities and Exchange Commission (SEC) is the regulator that sets the legal framework and oversees all entities operating in the market. Also, stockbrokers are the professional traders who buy and sell shares on behalf of clients.

Factors To Observe

Advising the public, analysts at ARM Securities Limited said: ‘the stock market can help you make a lot of money, if you invest knowing the nitty-gritty of the market.’

According to the investment outlet, “never jump blindly into stock markets. It often happens that while talking to your friends and colleagues, the discussion heads towards the stock market, and also how the stock market helps investors make big money. 

“You might never have invested in the market, but after hearing about all those things, you also decide to buy some stocks. This move is highly discouraged, because you are jumping in blind. You should invest in the stock market after getting the basic knowledge about it and in accordance with your financial goals.

“Before making your first investment, take the time to learn the basics about the stock market and the individual securities composing the market. Your focus will be on individual securities which you are investing in and the relationship with the broader economy and the factors that drive your stock.”

The company added that, “take out time to learn some of the basic jargons used in the stock market sphere. Invest only what you can afford to lose. The biggest mistake newbie investors make is to invest money that they can’t actually afford to lose. Investing in the stock market can be volatile, and that means that you can potentially lose or gain.

“You need to decide your own risk tolerance considering your age, financial strength, retirement goal, among others, and accordingly make your investment move.

“Avoid herd mentality: Unlike many investors, you should avoid the herd mentality that is influenced by the actions of your friends, neighbors or relatives without evaluating the current information and underlying stocks. Thus, if everybody around is investing in a particular stock, the tendency for potential investors is to do the same. But this strategy is bound to backfire in the long run if you have not chosen the stock by careful analysis, that meet your interests.”

Meanwhile, one best way to safely navigate the stock market investment terrain, the experts at the investment house said, is by partnering with a trusted professional stock broker.