| Investing in stocks has been very profitable over the years. Last year was a particularly rewarding one for investors as some witnessed capital appreciation as high as 574 per cent on some stocks.
This is above the 37.8 per cent growth recorded by the Nigerian Stock Exchange All-Share index. More investors have been attracted to the market because of the high returns on investment.
However, investing in stocks comes with its own risks. While you can earn significant profit, you can also lose a significant part of your investments. For instance, while some investors celebrated a good outing last year, others lamented their venturing into the market. Many investors recorded 60 per cent returns on some of their investments.
Despite the risks, some leading investors said one could still experience peace in stock investments. The President, Association for the Advancement of the Rights of Nigerian Shareholders, Dr. Faruk Umar, says there are ways to invest in stocks and be independent.
According to him, the first principle is not to be greedy. “In investing in stocks, greed is very dangerous. An investor should not look for too much. Once you have recorded significant returns, you can sell and invest in another stock or wait for the price of the stock to depreciate before investing in it again,” he said.
Another factor, he says, is courage. He explains that an investor must not panic if prices of stocks are dipping.
“Once you have confidence in a company, hold on to the stock until it bounces back. But if you sell out of panic, there is every tendency that you will lose your investments,” Umar said.
The Chairman, Consolidated Shareholders Association, Mr. Raymond Anyiwo, says that to avoid being under pressure in stock investment, an investor should try as much as possible to invest with personal funds.
Some investors obtain loans to invest in stocks, a practice that is becoming very popular. However, Anyiwo said, “When you invest with borrowed funds, you will be under pressure when prices of stocks are going down. This is so because you will be thinking of how to repay the loans. That is why it is advisable to invest with personal funds.”
Anyiwo agrees with Umar that investors should not panic if prices are fluctuating.
“Fluctuation in prices is part of stock market. When prices go down, investors should stay calm because such prices will definitely rebound,” he said.
According to the CSAN boss, a good knowledge of the market is very important if an investor wants to enjoy playing the market. He advises that investors without a good knowledge of the market, should remain close to their stockbrokers.
Again, just like Umar, Anyiwo emphasises the need to avoid being greedy. “You can set an exit target and once your investments have reached the target, you can sell. Some investors sell once their investments have fetched them the initial sum invested with little gain on top,” he said.
A stockbroker and Managing Director of Altrade Securities Limited, Mr. Yusuff Alhassan, says that on the average, if a portfolio of investments records 50 per cent, it has done well.
“If an investor decides to exit such portfolio, it is not a bad idea. Because after removing the inflation rate and other costs, you may still end up with significant gain,” he adds.
However, he advises that exit targets should depend on individual stocks.
“There are some stocks that have the potential of rising by 100 per cent or more, if an investor exit such stocks, the potential has not be maximised,” Yussuf says.
A look at the stock market in the first quarter of 2007 shows that some stocks have fetched investors significant returns in terms of capital growth.
For instance, National Aviation Handling Company Plc posted a record 821 per cent capital growth, while Costain West Africa Plc 432 per cent capital appreciation from January to Wednesday, April 11, 2007.
Tripple Gee and Company Plc, which returned a total of 264 per cent to investors last year, posted another 346 per cent so far this year. Avon Crowncaps Plc rose by 282 per cent, while UTC Nigeria Plc appreciated by 276 per cent.
Eterna Oil and Gas Plc posted 277 per cent just as Beta Glass Plc posted 212 per cent among others.
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