The stock market generally has a long history of producing profits for investors, but not everyone ends up a winner. Short term trading in the Nigerian stock market is what most people are advised to go for. You can make quick money from speculation quicker than you can ever imagine. It is possible to get some stock unit, let's say for N200,000 and quickly make gain by selling it within the next few weeks or months.
However, it is possible to buy some unit for N200,000 and watch your money deplete into half within the next few weeks. So, this is a win or lose approach; but if you are well informed about the ins and outs of investing in the stock market and the Nigerian stock exchange, it is possible to avoid the risks and make quick cash.
Here are a few tips you might find useful.
- Get a Stock Broker/Brokerage Company
The Brokerage firm or your stock brokers act as the intermediaries between you and the stock market. They handle the intricate parts of your transactions and get commissions for their efforts. If you are not comfortable with using unnamed brokerage firms, a good option is the FBNQuest under which FBN securities limited is.
The Duty of Your Stock Broker is to help you open a CSCS (Central Securities Clearing System) account which in turn would make it possible for you to buy stocks as you may not be able to buy on your own. Even if you are buying from the primary market in which the company advertises directly, you must state the name of your stock broking firm and your CSCS account number in filling the forms.
For the secondary market, you must inform your stock broker, who will then go to the stock exchange and buy your desired stock on your behalf on a regular basis.
- Open Investors Account
The moment you decide to trade in the Nigerian Stock market, you have become an investor. Therefore, you will need an investors account. An investors account is an account that is unique and tied to your name as an investor. It is normally opened for you along with a CSCS account with which your stocks would be moved in. It is opened for you by the stock brokerage firm or broker whom you have assigned to act on your behalf. All transactions done on your behalf would then be recorded against your name in your investor's account.
Each time your broker wants to buy stock on your behalf, he buys it into your investors' account. The account is for both equity and bonds.
- Secure Trading Capital
Depending on the volume you want to trade or what I will call the number of risks you want to take, you will need enough trading cash that is proportional to your trading options.
More than anything else, knowledge is your power in this business. You must be in the know, constantly updating your knowledge of the market and be in-tune with the latest trends. You must be good at spotting opportunities and possess the ability to predict trends. Placing your finances in the stock market gives you the opportunity to grow your finances over the long-term. Many well-established companies also pay dividends to investors, which increases your overall return on investment.
Here are a few Pros and cons of investing in the stock market
Investing in the stock market is one of the easiest ways to become a minority owner within a company. When you buy shares of a company's stock, you take an ownership stake in the business. Although the ownership percentage is relatively small, you receive the right to vote on certain business decisions and corporate leadership. Unlike some other types of businesses, you can easily exit out of your ownership stake by simply selling the shares to someone else desiring to invest in the stock market.
- Subject to Higher Risk
When investing in the stock market, the higher the return the greater the risk of losing money. Stock market prices are linked to the issuing company's earnings. When a company is experiencing financial difficulties, the price of the stock can decline rapidly. Stock market volatility can lead to a substantial loss of investment. If the majority of the market is experiencing loss and leaving the market because of economic factors, you may find it difficult to sell your shares to someone else.
- Time Consuming
Investing in the stock market is not like playing the lottery. You need to perform research and investment analysis to find potentially profitable stock. This can be done by your brokers. For many individuals, investing in the stock market is a time-consuming, complex task. Even after you find a stock to buy, you must monitor the movement of the stock price. Although many investors implement a long-term buy and hold strategy, it is important to know when to exit a stock position if it turns out to be a bad investment choice.
Buy the rumours and sell the news. That's a very popular saying among investors. It means Do not trade on sentiment.
We hope we've been able to calm your fears and clear your doubts with regards to stock trading. If yes, please share with us in the comments section and if otherwise, please feel free to share your concerns too. Don't forget to share this article too.