“Buy Low, Sell High”
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
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
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
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.
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.