Investment decisions can be good or bad depending on the profit or loss made. However, there are some mistakes that every wise investor should avoid in other to avoid regrets in the stock market. These mistakes include;
1. FEAR
Investment decisions that are based on fear are usually the costliest investment
mistakes. Many investors do their research and select a great stock. But when
the stock market experiences slight set-back, they dump their shares for fear
of losing money. This investment behavior is absolutely foolish. The stock is the same good stock you bought before the market as a whole fell, just that the share price is now cheaper. Common sense would dictate that you should buy more at these lower share price. An investor can sell off his stock if the good fundamentals he saw in the company are now dwindling not because the market is generally down.Most investors follow the crowd to sell off their stocks, instead of staying around and buying up a good stock for ridiculous low prices. The Nigerian stock exchange experienced this in the first half of 2008. The stock market was generally down, many investors were dumping their stocks and running out due to fear. But the knowlegeable investors sat back and bought great stocks at very low share price. They made huge profit when the market bounced back. The key to being a successful stock investor is to buy low and sell high. Many investors know this but only a few practice it. True money is made when you, as an investor, is willing to sit down in the empty room that everyone else has left, and wait until they recognize the value they left behind. When they do run back in, you will be holding all of the cards. Your patience will be rewarded with profit and you will be considered "brilliant" (ironically by the same people that called you an idiot for holding on to the company's stock in the first place).
2. OVER DIVERSIFICATION
Over the years, some financial advisers have preached the importance of
diversification, telling it to every investor that cares to listen. Everyone in the stock market knows that you shouldn't keep all your eggs in one basket - but there is much more to it than that. In fact, many people are doing more damage than good in their effort to diversify. Like everything in life, diversification can be taken too far. If you split up N10000 into one hundred different companies, each of those companies can only have a tiny impact on your portfolio. In the end, the brokerage fees and other transaction costs may even exceed
the profit from your stock investments. Many successful investors like warren buffet made billions by using the concentration strategy as against over diversification. i.e concentarting most of their investments in stocks that they are doubly sure will appreciate in price. Investors that are prone to over diversification would be better served by investing in mutual funds which are made up of many companies.
3. FREQUENT TRADING
When you invest in a stock, your fortune is tied to the fortune of the
company. You are a part-owner of the business; as the company prospers, so do you. Hence, the investor who takes the time to select a great stock has to do
nothing more than sit back and watch his money multiply in the stock market.
Daily quotations on the stock exchange are of no interest to him because he
has no desire to sell. Over time, his intelligent decision will pay off as
the value of his shares appreciate. The stock market is a long term investment platform and long term investors make the best of the stock market. A trader is one who buys into a company because he expects the stock to jump in price, at which point he will quickly dump it and move on to the next stock. Trading is not tied to the economics of a company but rather to speculation, chance and human emotion. Trading is a form of gambling that is seen as a money maker because of some few success stories. They never tell you about the millionaire who lost it all on his next bet.
4. IGNORING TIME HORIZON
The type of asset in which you invest should be chosen based upon your time
frame. Regardless of your age, if you have capital that you will need in a
short period of time, please do not invest that money in the stock market.Although the stock market offers the greatest chance for long-term wealth building, it frequently experiences short-term gyrations that can wipe out your capital if you are forced to sell. It makes no sense to invest money
that you will need soon because by the time you need it, the prices of your
stocks might be very low forcing you to loose money.
Avoid these mistakes to avoid huge losses in the stock market.
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FACTORS THAT INFLUENCE A STOCK'S PRICE
Stock prices are influenced by three main factors. If you understand these factors, it will help you decide whether a price movement (price change) is a signal for a buy, a sell or a hold.
Fundamentals
Clearly, the most direct influence on a stock’s price (share price) is a change in the fundamentals of the business.
If revenues and profits are continously increasing, you can expect the share price to rise as investors bid to buy into the increasing fortunes of the company. On the other hand, if the profit is flat or, worse, declining with no change in sight, investors begin to abandon the stock and the price will fall.
These are simple examples of changes in fundamentals. Other more complex and subtle changes can occur that may not dramatically affect the share price immediately (increased debt, a poor acquisition and so on can also cause price changes).
The point is that changes in the underlying business have a direct impact on the share price. Smart investors spot the subtle changes before they become price-movers and take the appropriate action.
Sector Changes
Changes in the stock’s sector can have positive or negative effects on its price. Some sectors or industries are cyclical in nature and you should know that would affect price.
However, when a whole sector begins to perform exceptionally well those companies that have solid fundamentals are pulled along with the rest of the sector. Think of bank stocks in 2006/07, in the nigerian stock exchange. When investors can"t lay their hands on the top stocks in the sector, they go for the other ones within the sector because of the general boom the sector is experiencing.
Therefore, some stocks' price increases artificially if they find themselves in the right industry at the right time.
Market Swings
"The market goes up and the market goes down." That’s about all you can say with certainty concerning the stock market. The market experiences bullish season and bearish season.
During the bullish season,prices of stocks generally move up. In the bearish season, stock prices generally move downward.
As the market moves up and down, your stock may move with or against it. Most large-cap (blue chip companies) stocks will follow the market to some degree, but smaller companies may not get the same push every time.
In general, a strong market move either up or down will carry more stocks with it than not, so your stock may be up or down for no other reason than the market was up or down.
Conclusion
How do you use this information? A change in fundamentals may be an opportunity to buy more shares of a growing company or it may signal the time to sell if the changes are for the worse.
A change in the sector is usually temporary so most long-term investors will ride out dips due to these factors. However, if something drastically changes in the stock’s industry due to regulation or a new technology, for example, you may want to re-evaluate your position. Is the company capable of adapting or do you own a dinosaur?
Market swings that move your stock’s price can be opportunities to buy additional shares (assuming all the company’s fundamentals are good). If the rising market pushes up your stock’s price, it may be time to take a profit on part of your holdings and wait for the price to come back down to earth to re-invest.
Fundamentals
Clearly, the most direct influence on a stock’s price (share price) is a change in the fundamentals of the business.
If revenues and profits are continously increasing, you can expect the share price to rise as investors bid to buy into the increasing fortunes of the company. On the other hand, if the profit is flat or, worse, declining with no change in sight, investors begin to abandon the stock and the price will fall.
These are simple examples of changes in fundamentals. Other more complex and subtle changes can occur that may not dramatically affect the share price immediately (increased debt, a poor acquisition and so on can also cause price changes).
The point is that changes in the underlying business have a direct impact on the share price. Smart investors spot the subtle changes before they become price-movers and take the appropriate action.
Sector Changes
Changes in the stock’s sector can have positive or negative effects on its price. Some sectors or industries are cyclical in nature and you should know that would affect price.
However, when a whole sector begins to perform exceptionally well those companies that have solid fundamentals are pulled along with the rest of the sector. Think of bank stocks in 2006/07, in the nigerian stock exchange. When investors can"t lay their hands on the top stocks in the sector, they go for the other ones within the sector because of the general boom the sector is experiencing.
Therefore, some stocks' price increases artificially if they find themselves in the right industry at the right time.
Market Swings
"The market goes up and the market goes down." That’s about all you can say with certainty concerning the stock market. The market experiences bullish season and bearish season.
During the bullish season,prices of stocks generally move up. In the bearish season, stock prices generally move downward.
As the market moves up and down, your stock may move with or against it. Most large-cap (blue chip companies) stocks will follow the market to some degree, but smaller companies may not get the same push every time.
In general, a strong market move either up or down will carry more stocks with it than not, so your stock may be up or down for no other reason than the market was up or down.
Conclusion
How do you use this information? A change in fundamentals may be an opportunity to buy more shares of a growing company or it may signal the time to sell if the changes are for the worse.
A change in the sector is usually temporary so most long-term investors will ride out dips due to these factors. However, if something drastically changes in the stock’s industry due to regulation or a new technology, for example, you may want to re-evaluate your position. Is the company capable of adapting or do you own a dinosaur?
Market swings that move your stock’s price can be opportunities to buy additional shares (assuming all the company’s fundamentals are good). If the rising market pushes up your stock’s price, it may be time to take a profit on part of your holdings and wait for the price to come back down to earth to re-invest.
UNDERSTANDING THE STOCK TABLE
Understanding the stock table and making investment decisions based on its result is quite easy and requires little dedication. A look at a typical stock table presents us with some useful information that enables us make profitable investment decisions and forecast stock prices if only we can understand and interpret the headers. The headers in a typical stock table include;
> opening price
> closing price
> % change
> quantity traded
> value of shares
> Number of deals (or deals)
> year high
> year low
> E.P.S
> P/E ratio
OPENING PRICE:
This is the price at which the stock opened trading for the day. In other words, it is the price of the stock before the day’s trading activity began. In most cases, this is usually the price at which the stock closed the previous trading day. But in some cases the opening price varies a little bit from the price the stock closed the previous day. It is important to note here that on the Nigerian stock exchange, there are five (5) trading days in a week, which are Mondays to Fridays excluding public holidays.
CLOSING PRICE:
Closing price is the price at which the stock under consideration closed for the day. i.e. this is the last price at which the stock was traded on the particular trading day. it is also important to note here that the price of a stock changes severally within a trading day due to forces of demand and supply. Say a stock opened at N10 and closed at N10.50 within a trading day, during the trading period, the stock might be sold and bought at different prices like N10, N10.25, N 10.40,etc before closing at N10.50. Therefore, your broker might buy or sell at any price between the opening and closing price depending on when he executed the transaction. It is also very important to state here that according to the present SEC rule, a stock cannot lose or gain more than 5% of is price within a trading day. This means that a stock that opened at N10 cannot go below N9.50 and above N10.50 within a trading day. Also, according to latest sec rule (2008), at least 100,000 units of a stock must be traded within a trading day for the stock to witness price change (increase or decrease)
% CHANGE:
This is called percentage change. This is the percentage change in the price of the stock. This is calculated by subtracting the opening price from the closing price to get the change in price. Multiply the change in price by 100,and then divide by the opening price. The figure is negative if the stock depreciated in price..
Example from
Opening price N10
Closing price N10.50
Price change = 10.50 -10 = 0.50
% Change = price change * 100/opening price
= 0.50 *100/ 10
= 5%
QUANTITY TRADED
In some publications, this is called volume traded. The quantity traded represents the total units of the stock that was traded on that trading day.i.e the quantity of the stock that was bought/sold on that trading day. According to the new sec rule, this quantity traded of a stock must exceed 100,000 units for the price of the stock to change (increase or decrease). To some stock analyst, the quantity traded of a stock is an indication of the level of investor interest in the stock. The quantity traded of a stock is also seen as liquidity. This is one of the factors you look out for when buying a stock. Always buy a stock with high liquidity (large volume of quantity traded). Due to the high investor interest in the stock it is easier to sell because you easily get interested buyers.
VALUE OF SHARES:
This represents the total value of shares traded on a trading day. This is calculated by multiplying the quantity of shares traded by its price. Taking a look at wema bank, if the quantity traded is 100,000 and the price is N20,
Then for wema;
The value of stocks traded = 100000 * 20 = N2, 000,000.
NUMBER OF DEALS:
In some publications, this is referred to as deals. In stock trading, deals refer to the number of transactions that were made on a stock. This can also be understood as the number of times a stock was traded within a trading day. Some analysts argue that deals should be the main factor in determining the most traded stock rather than quantity traded because it is a more accurate measure of peoples (individuals and investors) interest in a particular. They base their argument on the fact that all the quantity traded of a stock can be done by one or few investors and so does not accurately measure investors interest. Hence, it should be noted that deals is a very important factor in determining the liquidity of a stock.
YEAR HIGH:
Year high as represented on the stock table means the highest price at which the particular stock has been traded (bought or sold) within the year under consideration. From figure 1,it can be seen that the year high of NEM insurance is N5.59 even though its current price is N3.98. This means that from January 1st 2008 till now, the highest price NEM insurance has been traded is N5.59.
YEAR LOW:
Year low is simply the opposite of year high. It tells the lowest price at which a stock has been traded within the year. From the figure (figure 1) it is seen that though NEM insurance sells at N3.98 currently, previously within the year it had traded for as low as N2.80.
E.P.S:
This simply means earnings per share. This represents how much each unit of the stock earned. i.e. how much net profit each unit of the stock earned within the period under review. the EPS is calculated from a simple formula as follows:
EPS = net profit / Outstanding number of shares
Net profit means profit or revenue after tax and interest has been deducted from the profit. It is also referred to as profit after tax.
Outstanding number of shares means the number of ordinary shares issued by the company.
Earnings per share tells more about the profitability of a company especially when compared with their past results and that of other companies. Earnings per share are a very important factor in making investment decisions and also in calculating the P/E ratio, hence many investors pay adequate attention to this column.
If company A made a net profit of N1, 000,000
While their outstanding number of shares is100, 000.
Then EPS is N10. Applying the formula thus arrived this at:
EPS = 1000000 / 100000 = N10
P/E RATIO:
P/E ratio means price/earning ratio i.e. price to earning ratio. This is the ratio of the price of the stock to its earnings and it describes the relationship between the price of the stock and its earnings. You get P/E ratio by dividing the current price by the EPS. i.e.
P/E ratio = current price / E.P.S
This is about the most important factor to consider when making investment decisions because it tells you about the price of the stock and how much it has earned. A stock with low P/E ratio is highly preferred (better) to that with higher P/E ratio i.e. the lower the P/E ratio, the better. A high P/E ratio indicates that the stock is over priced. This means that the stock is priced more than its worth. a look at figure 2 shows that the P/E ratio of company C is 15.This is calculated using the formula above.
Current price = N30
Current EPS = N2
Hence P/E ratio = 30 / 2 = 15
STOCK AND SHARES - HOW TO START INVESTING
stock investment can be started with little amount of money.A survey carried out by my team in 2008 showed that the most common reason people in Nigeria do not invest in stock is because of the lack of money. Another large portion of the people were waiting to accumulate so much wealth before they go into stock investment. This is an erroneous belief digested by many people.
The beauty of stock investment is that you don’t have to accumulate millions of naira before you start investing neither do you have to wait till you save N10000.The Nigerian stock market is a place for all class of people - wealthy, rich, middle class, poor, etc. But I so much beg you not to see yourself or ever regard yourself as poor because that is the beginning of poverty. AS A MAN THINKETH IN HIS HEART, SO IS HE. Poverty is a deadly disease that begins in the mind. From the moment you belief yourself to be poor, you have set a limitation for yourself. Your actions and ways are governed by that poverty mindset you created by yourself and for yourself, definitely you begin to see some opportunities as exclusively for the rich and wealthy, thereby missing great opportunities that you will live to regret. Lets go back to business.
You can start investment in stocks with as little as N500, depending on how you start.
1. Open an account with a stock broking firm (which is usually free), you can deposit as low as N500 and instruct him to buy shares for you on the floor of the Nigerian stock exchange.You can let him choose for you or you choose for yourself. some stocks are sold for N5,
N2, N1 and even less. With as little as N500, you can get 100 units, 300units, 500 units or more of a stock depending on the price of the stock. The blue chip (big companies) stocks you see today where once penny stocks. Those that bought it at that very low price made the most gain. Guarantee bank stock that sells for above N40 today was once sold for about N2, the bank Phb stocks that is above N30 today, was once sold for N2.65 and they will keep appreciating. If you had bought it then, where would you be today?? It is never too late, there are still penny (low-priced) stocks that are very good today, so start today with the little you have because the penny stocks of today are the blue chips of tomorrow. The N2 stock of today is the N50 stock of tomorrow. Most of the big investor you see today started from a low level.
2. In the absence of a stock broking firm, there are some public offers that sell as low as N2.looking at 2006,Aiico insurance did a public offer at N2.20.with just N2200, you could get yourself 1000 unit. Around June 2008,the same Aiico insurance was selling at N7, if you had bought 1000 units, by June 2008,your N2200 will worth N7000 excluding the dividends. Imagine the worth if left for another 5 or ten years? Without waiting for 5 or 10 years, you can decide to sell and get N8000. With this buy 2 or 3 other stocks and keep growing. those that keeping waiting to accumulate millions will definitely have missed this and so many other gold mine in the Nigerian stock market. The reality of the matter is that the thousands of today make the millions of tomorrow, if well invested. The few thousands you invest today will give you millions tomorrow with which you can make more millions, that’s the beauty of the game.
Investment in stocks requires discipline. In our world today, there is never enough money. No matter how much you make there are needs and responsibilities waiting to take that money from you, it requires discipline and commitment to set aside a little portion for investment in a brighter future. But like most of us, once you get into stocks you are hooked, because you can’t easily ignore this easy way of money making. Money come and goes. It is not how much you make that matters but how much you invest into the future. Investment is stocks is one of the surest way to a happy and fulfilled future. You should not leave your future to chance and luck. Have a say in your destiny. Invest in your future today.
GO. SUCCEED.
For any comment or enquiry, please email:
reazonit@yahoo.com
The beauty of stock investment is that you don’t have to accumulate millions of naira before you start investing neither do you have to wait till you save N10000.The Nigerian stock market is a place for all class of people - wealthy, rich, middle class, poor, etc. But I so much beg you not to see yourself or ever regard yourself as poor because that is the beginning of poverty. AS A MAN THINKETH IN HIS HEART, SO IS HE. Poverty is a deadly disease that begins in the mind. From the moment you belief yourself to be poor, you have set a limitation for yourself. Your actions and ways are governed by that poverty mindset you created by yourself and for yourself, definitely you begin to see some opportunities as exclusively for the rich and wealthy, thereby missing great opportunities that you will live to regret. Lets go back to business.
You can start investment in stocks with as little as N500, depending on how you start.
1. Open an account with a stock broking firm (which is usually free), you can deposit as low as N500 and instruct him to buy shares for you on the floor of the Nigerian stock exchange.You can let him choose for you or you choose for yourself. some stocks are sold for N5,
N2, N1 and even less. With as little as N500, you can get 100 units, 300units, 500 units or more of a stock depending on the price of the stock. The blue chip (big companies) stocks you see today where once penny stocks. Those that bought it at that very low price made the most gain. Guarantee bank stock that sells for above N40 today was once sold for about N2, the bank Phb stocks that is above N30 today, was once sold for N2.65 and they will keep appreciating. If you had bought it then, where would you be today?? It is never too late, there are still penny (low-priced) stocks that are very good today, so start today with the little you have because the penny stocks of today are the blue chips of tomorrow. The N2 stock of today is the N50 stock of tomorrow. Most of the big investor you see today started from a low level.
2. In the absence of a stock broking firm, there are some public offers that sell as low as N2.looking at 2006,Aiico insurance did a public offer at N2.20.with just N2200, you could get yourself 1000 unit. Around June 2008,the same Aiico insurance was selling at N7, if you had bought 1000 units, by June 2008,your N2200 will worth N7000 excluding the dividends. Imagine the worth if left for another 5 or ten years? Without waiting for 5 or 10 years, you can decide to sell and get N8000. With this buy 2 or 3 other stocks and keep growing. those that keeping waiting to accumulate millions will definitely have missed this and so many other gold mine in the Nigerian stock market. The reality of the matter is that the thousands of today make the millions of tomorrow, if well invested. The few thousands you invest today will give you millions tomorrow with which you can make more millions, that’s the beauty of the game.
Investment in stocks requires discipline. In our world today, there is never enough money. No matter how much you make there are needs and responsibilities waiting to take that money from you, it requires discipline and commitment to set aside a little portion for investment in a brighter future. But like most of us, once you get into stocks you are hooked, because you can’t easily ignore this easy way of money making. Money come and goes. It is not how much you make that matters but how much you invest into the future. Investment is stocks is one of the surest way to a happy and fulfilled future. You should not leave your future to chance and luck. Have a say in your destiny. Invest in your future today.
GO. SUCCEED.
For any comment or enquiry, please email:
reazonit@yahoo.com
STOCK AND SHARES - WHEN TO SELL
To make millions from the stock market, you need to know when to sell your stock and shares. This is usually called share exit strategy. Exit strategy means a method of selling your stocks or shares on the stock exchange. Simply, exit strategy means when to sell your stocks and shares.In the business of stock trading, there are three basic issues;
a. When to buy
b. When to hold
c. When to sell
Out of these three basic issues, “when to sell” is the most difficult. Hence, the need for you to master when to sell if you really want to make millions from the stock market.
Over the years, research and experience have shown that there are five basic share exit strategies in the stock exchange;
1.Situational exit strategy
2.Period exit strategy
3.Price exit strategy
4.Closure of register exit strategy
5.Past performance exit strategy
1.SITUATIONAL EXIT STRATEGY
This strategy is used when an occurrence or situation pushes up the shares prices. A good example is when Otedola bought a controlling quantity of shares in AP stocks in 2007. The price of AP moved from N 60 to N260 under two months. You don not need a prophet to tell you to sell and take profit if you had bought cheap. A similar situation also occurred in international breweries plc.
2.PERIOD EXIT STRATEGY
This strategy is used when you have to buy and sell stocks within a period of time. It is usually applied to funds borrowed from banks and other financial institutions. Here, there is a time frame within which you have to invest the money in stocks and shares.You pay back at the expiration of the given period.Therefore you sell your stocks and shares within that period.
3.PRICE EXIT STRATEGY
This strategy is applied to a stock bought at a price and sold at a higher share price. Here, when you buy a stock in the stock market, you have a target price at which to sell. Hence, if the price share price appreciates to the price, you quickly sell off, take profit and move on to other stocks.
4.CLOSURE OF DATE EXIT STRATEGY
Companies that declare bonus or dividends always give a date for closure of register. The date for closure of register is the date at which anybody that have the company’s shares on or before that day is entitled to the declared bonus or dividends. Anybody buying after that day is not entitled to the declared bonus or dividend. The strategy here is to sell at a day after the closure of register. With this, you gain the bonus, dividend and still gain the capital appreciation in the share price. I.e. you gain it all.
5.PAST PERFORMANCE EXIT STRATEGY
This strategy informs or suggests to an investor to sell a stock based on past price trend of the stock. Here, investors use the past behavior of the share price to decide when to sell the stock in the stock market.
GO. SUCCEED.
a. When to buy
b. When to hold
c. When to sell
Out of these three basic issues, “when to sell” is the most difficult. Hence, the need for you to master when to sell if you really want to make millions from the stock market.
Over the years, research and experience have shown that there are five basic share exit strategies in the stock exchange;
1.Situational exit strategy
2.Period exit strategy
3.Price exit strategy
4.Closure of register exit strategy
5.Past performance exit strategy
1.SITUATIONAL EXIT STRATEGY
This strategy is used when an occurrence or situation pushes up the shares prices. A good example is when Otedola bought a controlling quantity of shares in AP stocks in 2007. The price of AP moved from N 60 to N260 under two months. You don not need a prophet to tell you to sell and take profit if you had bought cheap. A similar situation also occurred in international breweries plc.
2.PERIOD EXIT STRATEGY
This strategy is used when you have to buy and sell stocks within a period of time. It is usually applied to funds borrowed from banks and other financial institutions. Here, there is a time frame within which you have to invest the money in stocks and shares.You pay back at the expiration of the given period.Therefore you sell your stocks and shares within that period.
3.PRICE EXIT STRATEGY
This strategy is applied to a stock bought at a price and sold at a higher share price. Here, when you buy a stock in the stock market, you have a target price at which to sell. Hence, if the price share price appreciates to the price, you quickly sell off, take profit and move on to other stocks.
4.CLOSURE OF DATE EXIT STRATEGY
Companies that declare bonus or dividends always give a date for closure of register. The date for closure of register is the date at which anybody that have the company’s shares on or before that day is entitled to the declared bonus or dividends. Anybody buying after that day is not entitled to the declared bonus or dividend. The strategy here is to sell at a day after the closure of register. With this, you gain the bonus, dividend and still gain the capital appreciation in the share price. I.e. you gain it all.
5.PAST PERFORMANCE EXIT STRATEGY
This strategy informs or suggests to an investor to sell a stock based on past price trend of the stock. Here, investors use the past behavior of the share price to decide when to sell the stock in the stock market.
GO. SUCCEED.
PRIVATE PLACEMENT STOCK - HOW TO SELECT THE GOOD STOCKS
Private placement is an investment window open to high net worth investors. Here, companies seeking for funds offer their shares to high net worth investors (usually by written letter). These companies need money for expansion but are not listed on the stock exchange, so they invite selected investors to invest in their shares. As profitable as private placements are, some steps must be taken to avoid huge loses. Factors to consider include:
1. COMPANY’S MANAGEMENT
The management of a company is very vital to its success because they are in-charge of the day-to-day running of the business. It is therefore very necessary that those managing the company have cognizant experience of the business. Do not invest in company with a management whose experiences and qualifications are irrelevant to the success of the business. Always find out the credentials of those in the management.
2. COMPANY’S FINANCIAL REPORT
Always check at least five years financial report of the company whose private placement you want to invest in. Find out the profit growth trend as well as the turn over growth trend. The company’s growth trends need to be consistent in all parameters. Never invest in a company that does not have consistent profit and turnover growth. Past financial report is very vital because that is the available evidence of performance with which you can assess the company. Also demand to know the company’s growth plan for the next five years and determine if it meets your investment ambition. Do not invest in a company with history of losses or without positive future prospect.
3. MARKET SECTOR
The market sector where the company operates must have strong potentials for growth. There should be expected future increase in the demand of the company’s goods and services. Increase in demand for the company’s goods and services bring about increase in turnover and profit. Hence increased profit for you. You must also ascertain it is not in a sector where competition will stifle its operation. Hence, where the future looks bleak or uncertain, do not invest. There are other opportunities that can yield you sure profits.
4. CONSISTENCY
Do not invest in a company without history in its line of business. You need to know how long the company has been in operation. The company must have proved its worth in its line of business; this will help you ascertain its strength and ability to carry on. Investing in young companies has higher risk. Companies without history but with great promises have failed to deliver in the past. Research has shown that companies that have existed for more than ten years cannot suddenly collapse.
5. LISTING OF SHARES
Always ascertain the company’s readiness to become a quoted company (i.e. to list its shares of the floor of the stock exchange). Do not buy into a company that is not ready to list its shares. When a company’s fortune begins to dwindle, listed shares are the only possibility of you to recoup your money. Many investors money are tied down in companies whose shares are not listed.
6. RISK FACTORS
The company’s risk factors must be carefully considered before investing in it. The risk factors are likely to affect the company’s profitability, hence its importance. The risk factors for the market sector where the company operates are usually stated in the offer memorandum. Go through it carefully, if they are too great for you to bear, do not invest.
7. MEMORANDUM
Do not be a foolish investor. Stock investment is not a gamble; it is a knowledge-based investment. Before buying into any private placement, you must get the offer memorandum and study it carefully. Seek professional advice where necessary. You can become very wealthy through private placements, if you take the right steps.
GO. SUCCEED.
1. COMPANY’S MANAGEMENT
The management of a company is very vital to its success because they are in-charge of the day-to-day running of the business. It is therefore very necessary that those managing the company have cognizant experience of the business. Do not invest in company with a management whose experiences and qualifications are irrelevant to the success of the business. Always find out the credentials of those in the management.
2. COMPANY’S FINANCIAL REPORT
Always check at least five years financial report of the company whose private placement you want to invest in. Find out the profit growth trend as well as the turn over growth trend. The company’s growth trends need to be consistent in all parameters. Never invest in a company that does not have consistent profit and turnover growth. Past financial report is very vital because that is the available evidence of performance with which you can assess the company. Also demand to know the company’s growth plan for the next five years and determine if it meets your investment ambition. Do not invest in a company with history of losses or without positive future prospect.
3. MARKET SECTOR
The market sector where the company operates must have strong potentials for growth. There should be expected future increase in the demand of the company’s goods and services. Increase in demand for the company’s goods and services bring about increase in turnover and profit. Hence increased profit for you. You must also ascertain it is not in a sector where competition will stifle its operation. Hence, where the future looks bleak or uncertain, do not invest. There are other opportunities that can yield you sure profits.
4. CONSISTENCY
Do not invest in a company without history in its line of business. You need to know how long the company has been in operation. The company must have proved its worth in its line of business; this will help you ascertain its strength and ability to carry on. Investing in young companies has higher risk. Companies without history but with great promises have failed to deliver in the past. Research has shown that companies that have existed for more than ten years cannot suddenly collapse.
5. LISTING OF SHARES
Always ascertain the company’s readiness to become a quoted company (i.e. to list its shares of the floor of the stock exchange). Do not buy into a company that is not ready to list its shares. When a company’s fortune begins to dwindle, listed shares are the only possibility of you to recoup your money. Many investors money are tied down in companies whose shares are not listed.
6. RISK FACTORS
The company’s risk factors must be carefully considered before investing in it. The risk factors are likely to affect the company’s profitability, hence its importance. The risk factors for the market sector where the company operates are usually stated in the offer memorandum. Go through it carefully, if they are too great for you to bear, do not invest.
7. MEMORANDUM
Do not be a foolish investor. Stock investment is not a gamble; it is a knowledge-based investment. Before buying into any private placement, you must get the offer memorandum and study it carefully. Seek professional advice where necessary. You can become very wealthy through private placements, if you take the right steps.
GO. SUCCEED.
STOCK AND SHARES - BENEFITS OF INVESTING IN THE STOCK MARKET
Benefits of stock investment are numerous. Some of these benefits are realized in the short term while some are realized in the longer term. Some of the benefits include;
1. Dividends
2. Bonus shares
3. Capital appreciation
4. Voting right
5. Collateral
6. Protection against inflation
7. Semi-liquid investment
8. Right issue
9. Ease of transfer
10. Base asset
11. Good savings
DIVIDENDS:
At the end of a fiscal year, the company calculates the profit it made and pays you some money out of it (called dividends) depending on the number of shares you have in the company, don’t forget that you still own and keep your shares, you are just being paid part of the profits because you are a shareholder.
BONUS SHARES
Bonus shares are extra shares given to you in addition to the number of shares you already have in the company. This is a good way of increasing the number of shares one has in a
company and many companies do this a lot. In 2007,Zenith bank plc gave a bonus of 1 for 4 (1: 4), this means that if you have 10000 units, you are given extra 2500 units to make your total stock equal to 12500. Also in 2008 Julius Berger plc gave 3 for 1 (3: 1). That is if you have 10000 units, you are given extra 30000 to make your total holdings in Julius Berger equal to 40000 units. This is very good.
CAPITAL APPRECIATION:
This means increase in the value of your money/capital. Say you bought 10000 units of a stock at N2, if it gets to N12, you can sell and get N120000, but you initially spent N20000. Like in January 2007,bank PHB was selling at about N2.50 but by July 2007, it was selling at 25.if you had bought in January; you can sell in July and make 1000% gain. Imagine the profit. If you invested N100, 000, you will get N1, 000,000.So much money.
VOTING RIGHTS:
If you own shares in a company, you have the right to attend their annual general meetings (AGMs). At the meetings, you have the right to vote for or against a decision the directors want to make. You can also vote for people to be appointed as directors and you also have the right to submit yourself for election into administrative and executive positions in the company. Generally, you have a say in how the company is managed because you have shares in it. AGMs are also nice place to network with people of like minds and higher status in the society. I advise you to go for AGMs; you have a lot to gain from them.
COLLATERAL:
When you are in need of money for a project, you can use the stocks you have as collateral to borrow money from banks and other financial institutions. This serves a wonderful purpose because you will get money to carry out the project you want, make profit, and still retain your shares after settling the bank loan.
1. Dividends
2. Bonus shares
3. Capital appreciation
4. Voting right
5. Collateral
6. Protection against inflation
7. Semi-liquid investment
8. Right issue
9. Ease of transfer
10. Base asset
11. Good savings
DIVIDENDS:
At the end of a fiscal year, the company calculates the profit it made and pays you some money out of it (called dividends) depending on the number of shares you have in the company, don’t forget that you still own and keep your shares, you are just being paid part of the profits because you are a shareholder.
BONUS SHARES
Bonus shares are extra shares given to you in addition to the number of shares you already have in the company. This is a good way of increasing the number of shares one has in a
company and many companies do this a lot. In 2007,Zenith bank plc gave a bonus of 1 for 4 (1: 4), this means that if you have 10000 units, you are given extra 2500 units to make your total stock equal to 12500. Also in 2008 Julius Berger plc gave 3 for 1 (3: 1). That is if you have 10000 units, you are given extra 30000 to make your total holdings in Julius Berger equal to 40000 units. This is very good.
CAPITAL APPRECIATION:
This means increase in the value of your money/capital. Say you bought 10000 units of a stock at N2, if it gets to N12, you can sell and get N120000, but you initially spent N20000. Like in January 2007,bank PHB was selling at about N2.50 but by July 2007, it was selling at 25.if you had bought in January; you can sell in July and make 1000% gain. Imagine the profit. If you invested N100, 000, you will get N1, 000,000.So much money.
VOTING RIGHTS:
If you own shares in a company, you have the right to attend their annual general meetings (AGMs). At the meetings, you have the right to vote for or against a decision the directors want to make. You can also vote for people to be appointed as directors and you also have the right to submit yourself for election into administrative and executive positions in the company. Generally, you have a say in how the company is managed because you have shares in it. AGMs are also nice place to network with people of like minds and higher status in the society. I advise you to go for AGMs; you have a lot to gain from them.
COLLATERAL:
When you are in need of money for a project, you can use the stocks you have as collateral to borrow money from banks and other financial institutions. This serves a wonderful purpose because you will get money to carry out the project you want, make profit, and still retain your shares after settling the bank loan.
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