Stories by Chinenye Anuforo
Waiting for the best time to invest in the stock market? Now is the time. The lure of big money has always thrown investors into the lap of stock markets. However, making money in equities is not easy. It not only requires a lot of patience and discipline, but also a great deal of research and a sound understanding of the market, among others.
Added to this is the fact that stock market volatility in the last few years has left investors in a state of confusion. They are in a dilemma whether to exit, invest, hold or sell in such a scenario while others have exited the market.
But according to a certified financial planner, Peter Lazaroff, Portfolio Manager at Acropolis Asset Management, “even though investing seems risky, not investing means taking risks, too, when you consider the long-term threat of inflation. If you don’t grow your money, you may not be able to afford things in the future. So, you invest to grow wealth and preserve purchasing power.”
So, despite the prolonged lull and losses experienced in the nation’s capital market in 2016, financial experts have predicted that the market might experience some rebound in 2017 if the Federal Government would come out with appropriate policies to drive the growth of the general economy, capital market inclusive.
They argued that innovative macroeconomic policymaking with strong strategic insight would provide the platform and delivery system to improve economic activities, including the capital market.
On why investors should take position on stock market this year, the Chief Executive Officer, High Cap Securities, Mr. David Adonri, argued that, “there is projection that the economy will recover much more this year, and so we are going to have economic activities increasing again and that will impact positively to the capital market. We will even have more demand in stocks in the capital market.
“So, those who have not invested before now or left the market when prices were completely down at rock bottom level, still have the opportunity to jump into the bandwagon now before the market starts appreciating.”
Adonri noted that, “if you look at 2016, the market declined and that was the third straight year of market decline. But with the positive forecast, I believe the economy will experience higher rate of recovery, so the earlier the investors who failed to invest when the economy was down come in, the better for them because once the market starts appreciating, it would not be a good time again to invest.
“Also, we expect the primary markets to become more vibrant because if they are vibrant, it is a positive sign to the economy; companies will want to raise money to meet the demands of their various customers so they will want to access the market to increase their capacity.”
In his own contribution, the CEO of Pac Securities, Mr. Eugene Ezenwa, explained that, “oil prices are going up and that determines a lot of things that happen in the economy. Now, if oil prices continue to go up, it means all things being equal more revenue will go the government and if there is more revenue to the government, it means domestic debt will be paid and if domestic debt is paid, capital market will pick up because part of the money will find its way to the market.
“If you look at money market, it has been the worst hit throughout last year because of forex that was hitting the roof. People were selling, taking position in money market; treasury bill and forex were not helping issues but in all of that, those ones more or less like fixed income, you know the expected income, unlike the capital market’s own, which is speculative and those that play in the market know that most often the level of profit you make when market is good can’t be compared with money market transactions. So, generally we are expecting recession to be a thing of the past this year and if this happens, the stock market will rebound.”
Apart from the above expectations from stock market this year, there are important things for fresh investors to know before buying stocks and they are:
Why stock market?
The first question fresh investors should ask is why am I choosing to put my money in stocks? The stock market comes with healthy risks and attractive rewards, both for short and long term players. Investors are said to prefer the stock market because it offers the greatest returns in the short term. But stocks are also very volatile as they are driven by speculations regarding market activities; the value sometimes can fall below the price you purchased.
Hiring a broker
Now that you understand a bit of what you are going into, the next step is to employ the services of a stockbroker. A broker, or brokerage firm, is licensed to access the stock exchange. Once you have hired one, he or she will receive orders from you (to sell or buy stocks) and process on the exchange.
Building your portfolio
Given that the market is littered with risks and rewards, it is important to keep the word “balance” in mind when building your portfolio. Ensure you have a mix of high flyers (stocks with high growth rate), slow-and-steady (shares with high prices but steady yields) and a few gamblers (those that can either plummet or soar quickly). This allows you to manage and enjoy the gains of investing in stocks as well as absorb unusual shocks.