Survival Tips During Bearish Market

Prices of Shares Going Down? Don’t Panic. It is a Blessing.

Looking at prices of shares these days, it will be noticed that the prices are very low compared to what they were around this time last year. For all categories of investors, particularly those who invested for short term expecting capital gains, it may be a source of worry and stress. It is actually a blessing in disguise for the following reasons:

1. Low prices is an opportunity to buy more shares cheaply: The fact that the prices are low now compared to what they were before is an opportunity to buy more shares with the same amount of money. Last year for instance, if you want to invest N10000 to buy 10000 units of company X’s shares at N10.00 per share, that same amount of money will procure for you 15,714 shares at 7.00 per share.. In other words it is an advantage in the sense that you are likely to get more shares, more bonus shares and dividend payments, compared to when prices are higher
2. Prices are not going to remain low for ever: Observations of price movement of stocks over the years indicates that there will always be fluctuations, no matter how perfect the market is (Read (MULTIPLE STREAMS OF INCOME to see relevant charts illustrating this fact). In fact, falling prices should be expected on the average of every ten years. The good news is  that the period of low price is usually  followed by a period of increase in price when all the so called loses will be recovered. This is the reason why you should continue to invest in shares even when the prices are low. I have always advised that you should not invest borrowed money if you are investing for short term.. If prices go down you can decide to hold your stocks for as long as possible if you invested your money. Since the invested money is yours, you will not be under pressure to pay back or to sell the shares at a loss.

TIPS FOR SUCCESSFUL LONG TERM INVESTMENT IN STOCKS

For  successful investment long term, I will highlight the strategies that must be followed to achieve success in this article.

1. Be ready to hold your stocks for as long as possible: Right from the day you buy your first set of shares, make up your mind that you are going to hold those shares for as long as possible. Study the dividend and bonus record of each company for the past five years and make a choice to pick those companies. Though past records may not always be repeated, yet companies that have been able to pay dividends for at least 10 years consecutively are likely to continue to do so for another five years at least.. Since you are investing for long term, you are sure of getting some income as the years roll by.
2. Sell those shares that did not meet your expectations: You may not be 100% sure of realizing your expectations for every company’s shares you bought. My recommendation is that if a company has not paid you dividends or given you bonus shares for five years, it is better to sell such shares and use the money to buy others that fulfill these two goals.
3. Diversify your investment: It is better to invest in more than one sector of the economy. It is like saying you should not put all your eggs in one basket. You know what could happen if all your eggs are in one basket
4. Don’t panic when there are fluctuations in price of shares: In his book titled MULTIPLE STREAMS OF INCOME, Robert G. Allen said that every investor should expect price fluctuations. Most of the time the downward movement of prices is a blessing as it affords you the opportunity to buy more shares cheaply. I strongly recommend this book. It has really blessed me tremendously
5. Invest Day in-Day out: No matter what is happening in the stock market, make sure that you invest regularly. This is particularly true if the prices go down. You should know that the prices will not be down perpetually. Therefore keep investing.

STEPS TO INVESTING IN STOCKS IN NIGERIA (PART 2)

In the first part of this write-up, I mentioned reading of relevant books on investment and saving of money for investment. This segment will highlight the remaining steps involved in investing in the stock market.

4.         Open a stock account with a stockbroker: Many investors only invest when companies declare public offers. They are not aware that they can buy shares on any working day. You should know that shares are being traded from Monday to Friday of every week. To be able to participate in the market, you must open an account with a stockbroker. Make sure that such a broker is registered and he is reliable. Once the account is opened, start buying shares of your choice. You must be aware that the market is categorized into sectors. Look at the various sectors and place orders based on your interest.

5.         Do your research before buying shares: You should know what your goals are before buying shares. The goals may be connected to the category of investor you want to belong to. Try to find out about each company before you buy shares. Be ready to hold your shares long term, if need be, and make sure that you invest regularly.

I came across a book which really explained more on this topic. It is titled

MULTIPLE STREAM OF INCOME. I strongly recommend this book to any would-be investor in the stock market

STEPS TO INVESTING IN STOCK MARKET IN NIGERIA PART 1

Investing in stocks is one important way of preparing for the future. It is unfortunate however that many people know so little about the stock market and how to invest. This article highlights the steps involved in investing in the stock market in Nigeria. The steps are also applicable in other countries.

1. Read Books and Magazines on investment: The first step towards profitable investment is to read relevant books and magazines that focus on how and what to invest in. An example of such book which I found very useful is MULTIPLE STREAMS of INCOME. The author discussed extensively the importance of investing, how to obtain money for investment and the relevant things one can invest in. One important area he discussed was investment in the stock market. By reading as many books as possible, you will gain relevant knowledge on the working of the stock market, the risks involved and the ultimate benefits.
2. Save Money: Investment of any kind involves money. It is not the best for you to rely on loans as the major source of funds for investment in the stock market. This is particularly true if you are investing on a short term, hoping to sell the shares when prices increase. You will not be under stress to pay if prices did not appreciate soon as expected. You should set aside at least 10% of your income for investment.
3. Decide on which category of investor you want to be: There are two categories of investors in the stock market i.e. short term investors (stock traders) and the long term investors. The short term investors are interested in getting an increase in price ; and when that happens, they sell and make gains. The long term investors on the other hand are ready to hold their shares for as long as possible. They are not interested in immediate gains; but they are interested in getting bonus shares and regular dividends. On the long run prices o f shares are going to appreciate. On the short run, the behaviour of the market is usually based on fears, news, speculations and rumours. On long term however, the earnings of each company will determine whether the prices will go up. I will continue the remaining steps in part two of this write up.