We’ve all heard the famous maxim, “Buy Low, Sell High” but it’s easier said than done. It

seems so obvious, but many investors often do the exact opposite! Because of a strong

aversion to risk and the fear of loss, so many people sit on the sidelines and watch

opportunities pass them by. Are you nervous about investing in the stock market? Have

you had a bad experience in the past that has kept you out of the market? Here are a few

things to bear in mind as you consider investing:

What are you investing for?

The best way to navigate the investment environment is to have set goals in place and a

clear plan on how to achieve them. Your focus will then largely be on accomplishing them

and your plan will provide you with direction on the most appropriate way to invest your

money.

What are you setting money aside for? To fund your child’s education? To make a down-

payment on a new home, or for your retirement? When you have concrete goals that you

are working towards, you are not as easily swayed by market hype and volatility. Your own

unique circumstances should ultimately determine how much, how and when you should

invest.

Build your knowledge

Make an effort to improve your knowledge of investing; this will help you make better

financial decisions. There is a plethora of information and research by professional

analysts and experts, which will be a good guide. Investment seminars are also available

that can develop you and point you in the right direction. Resolve to make the time to

educate yourself.

How much risk can you endure?

Risk is a fundamental part of investing. Stock market investments are not guaranteed.

Sometimes, you need nerves of steel to sit tight when the market dips sharply. It is

important to be aware of your attitude to risk. If you are so risk averse that you feel

comfortable in only guaranteed investments, bear in mind that when it comes to investing,

playing it too safe isn't necessarily the winning formula. If you invest only in the money

market, with rates barely keeping apace with inflation, it will be challenging to achieve

even the most modest financial goals.

Invest for the long term

A mistake that many investors make is putting money that they need next year in the stock

market. How much money can you really afford to put away for say 5 years and beyond?

When you think of investing in the stock market, adopt a long-term strategy rather than

looking to make a quick profit. Avoid investing more than you can comfortably afford to be

without during your time horizon. Historically, stocks have generally outperformed other

investment classes over the long term. However, in the short term, the market can be

unpredictable and carries a far greater risk of loss.

It is impossible to predict accurately what the stock market will do tomorrow. Many factors

come to bear as to the way the market will go, such as market trends and economic

forecasts, the political situation, investor perception, emotions, greed and fear.

“Don’t put all your eggs in one basket!”

Don't put all your money in one stock and don’t invest in stocks alone. When it comes to

buying shares, diversification is essential. Instead of investing all your money in just one or

two companies, its best to diversify by buying shares in different companies and sectors.

It is also important to diversify your investments across different asset classes including

real estate, money market accounts or bonds.  That way, if one asset class under-

performs, you will have some exposure to other assets that might do well. It is unlikely that

all segments will perform in exactly the same way and decline together.

Invest in mutual funds

If you are new to investing or don’t have that much money to invest, mutual funds are a

very convenient way to invest. A mutual fund pools investor’s funds and manages them in

stocks, bonds, money market instruments, etc. The benefits of mutual fund ownership

include the wide variety of investment types to choose from, having a diversified portfolio

of stocks, bonds and cash, and having access to professional management, usually the

prerogative of substantial investors.

Seek professional advice

Most of us do not have the time or expertise to make sound investment choices without

the help of a professional. Professionals have the expertise and an enormous amount of

information with which they can make well-informed decisions. An advisor will work with

you to create an investment strategy that suits your unique situation and your risk profile to

ensure that the appropriate investments are in place for your changing circumstances. But

don't take a back seat. You should be involved and understand what is being done for you.

Don’t be greedy

Don't be enticed by short-term profits; for every lucky person there are many more who

have been badly burnt and lost their entire investment. When you make an investment,

you should know your reasons for doing so. Relying upon every rumor of fabulous returns

being made in the stock market in a short period of time is tantamount to gambling.

Invest regularly

Allocate a part of your investments in a systematic investment plan. Instead of trying to

time the market, invest on a regular basis say monthly, or quarterly in an appropriate

vehicle, and even when your finances are stretched. It is a particularly useful tool in a

volatile market as you can reduce the average cost of your shares by purchasing more

shares when prices are low, and fewer shares when they are high. A consistent disciplined

approach takes away the speculative element of investing and reduces stress and fear.

Be realistic about your expectations of the stock market. Set reasonable long-term profit

expectations for your investments. Depending upon your own particular circumstance,

your age and the time frame within which you wish to invest and your overall objectives, do

consider putting at least part of your money in the Nigerian stock market; it offers great

prospects for long term growth. As always, seek professional advice.