Investing is one of the complex concepts of personal finance.
Investing is one of the complex concepts of personal finance and as such can seem like an impossible venture, but it is also a key strategy for building wealth. That is why we have created a short list of things every beginner investor must know before investing in the stock market. This list, however, is non-exhaustive, but we have to consider key personal financial attitudes and an all-encompassing strategic approach to create this list. Which by our estimation, will help you go from a novice to a professional.
How to Start Investing in the Nigerian Stock Market?
Investing in the stock market can be a most exciting and seemingly impossible adventure, especially as a beginner. However, with access to the right information and set financial goals, you can navigate the world of stock market investments with confidence. In simple terms, deciding where you want to be financially and matching this plan with the right investments will get you to your financial destination.
It is important to note there is no shortcut to success in the stock market. Stay with us as we walk you through 7 things you should know before venturing into the world of investments.
Set Financial Goals
Setting financial goals is the first and most important step towards becoming an investor. Goals give investments direction, simplify the investment process and determine investment strategies and risk tolerance. Your financial goal will help determine if you will be an active or passive investor. Your goals could range from saving to buy a house, starting a business, building an emergency fund or having enough for a comfortable retirement. It also helps to set milestones which will include specific amounts saved or invested by predetermined dates.
Accumulate Funds
You need money to invest, so first, you must save a part of your monthly income to gather the funds needed to invest in the stock market. You must first have an active income to become a passive investor. No matter your income level, the key to an effective saving habit is creating a spending budget and sticking to it. Also, registering on automated savings platforms can make your savings process easier. In your budget, you can decide to save up 10% of your monthly income and then allocate a part of your savings to investment.
It is also vital to understand the power of continuity, building a habit of saving and investing regularly as early in life as possible is a good step to building wealth.
Invest in Yourself
Now you have set your goals and saved up money to invest. The next thing to do before diving into the world of stock market investments is to invest in yourself. Through gathering knowledge on the stock market, getting acquainted with stock market terms, and researching investment securities. And you can do this by taking advantage of financial websites, books, seminars and so on. It is important to note that learning is a life-long journey, as continuous financial education will empower you to make informed financial decisions
Assess Your Risk Tolerance
With great reward comes greater risk. But lucky for you that in the world of investments, you can choose the risk you are willing to take. To do this you should be able to give direct answers to the following questions;
- What is my financial goal?
- How much do I have to invest?
- How much am I willing to lose?
- How will the fall in stock prices affect me?
- What type of securities do I plan to invest in?
- Will I be an active or passive investor?
Asset allocation and Diversification
Deciding what assets to allocate funds to over time is very important. As a beginner, it is important to start with small investments and diversify over time. Diversification helps to manage risk and maximise profits by spreading investments across various asset types.
Choose the Right Online Broker
As an investor, you cannot control your returns on investment, but you can control investment costs by choosing a good broker. When choosing a broker platform, it is important to take note of fees such as transaction costs, management costs, and account fees associated with the platform. Conduct thorough research and compare various broker platforms to determine which aligns with your needs. Also, consider the availability of securities you want to invest in.
Stay Committed for the Long Term
Investing is not a sprint but a marathon. To be a successful investor you have to have a long-term perspective. Staying committed to your investment strategy despite short-term market fluctuations will pay off in the long run.
What do I need to know before Investing in the Stock Market?
Before investing in the stock market, it is important to know your investment goals, the basics of the stock market, risk tolerance and your investment strategy. Also, it is crucial to state that, if you do not understand an investment security do not invest in it.
Is 5,000NGN Enough to Start Investing?
It is a common opinion that to make profits on the stock market you need to invest with a lot of money. This is true in the actual sense because the more money you invest the more profits you get. However, as a beginner, you do not have to start off investing millions. You can start with as little as 5,000NGN or less depending on the minimum deposit of your brokerage account. Re-investing profits and more capital will lead to significant capital growth in the long term. So, in simple terms, start from where you are.
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