I find the stock market interesting for one main reason- it is loved and hated in almost equal measures. Some of the divine proponents of the stock market are investors who drive their inspiration from people like Warren Buffet. Warren has made a fortune in stocks to become one of the world richest persons and a celebrated investor. On the other side of the divide are people who fear the reoccurrence of the market crashes that are characterized with massive erosion of wealth. Of course the market is cyclic.
When you think that the minimum number of shares you are required to become an investor in the Nairobi Security Exchange is just a hundred, you might feel to jump in like yesterday. Hold on! You need to have a share account first. Or basically what is referred to as a CDSC account.
So what should you know before investing your money in stocks?
Returns are not guaranteed
This should be loud enough for everybody to hear. In the stock market returns are not guaranteed. You can either make money or lose your hard earned money. So before you invest, one main question to ask yourself is, would I before comfortable in case I lose the entire investment?
How do you make money in the stock market?
The mantra is buy low sell high. The difference between the low price and the high price is called the capital gain and it is what you make as profit.
Another way to make money is through dividends. Profitable companies give a portion of their profit to their shareholders. However, not all profitable companies pay dividends. So be keen to investigate a company performance and dividend payment before picking a stock.
At the moment the prices are low due to covid. Is this the right time to buy? Well, this is a debate for another day.
You need to operate a CDSC account
Before venturing into the stock market, you have to open a CDSC account with a broker of your choice. The broker will facilitate all your transactions. To get a list of all licensed brokers, kindly click the link https://www.cdsckenya.com/investor-education/cda-list
Do a simple analysis of the company that you want to invest in
By investing, your hard earned money is at stake. To make a correct bet, perform a simple analysis. Get to know the company and the industry it operate in. What is the company’s core business? How long has they been in business and how have they fared so far?
Most importantly get an honest financial advisor who can do all the complex analysis for you. You better part with a small charge rather than putting all your money in a drain.
Keep reviewing your investment
‘I am buying shares for my children so I don’t need to keep track of them often’ I would confess this is the most absurd thing I have heard over the years. Prices in the stock market go up and down. Even prices of fundamentally sound company fluctuate. They don’t go up to eternity. If you make some good capital gain and you fail to sell your shares, you don’t realize the profit. Tomorrow it will be eroded if the price retrace.
I believe you love your children or whoever beneficiary true enough. Keep checking your investment often. Realize the profit when you have made good profits and wait for other better opportunities.
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