I have broached this topic with younger folk many times and when I ask if they would consider investing in equities (company shares), I usually get some interesting feedback. The top two responses by far are that they don’t have enough money to begin with, and that they don’t want to take that much risk. So, how much risk are we talking about here? And how much money should you put in the Nigerian stock market as a beginner? Interestingly, these are questions with no right or wrong answers and would simply depend on your preferences as an individual; your savings, financial goals and timelines. Generally, it’s been proven that younger investors have an advantage in the stock market as you can afford for time to do some magic.
Risk tolerance and financial goals aside, I find that many young people are utterly scared of the stock market. My sense is that this stems from prior experiences (both personal and others), market news, inexperience and sometimes a lack of understanding. Therefore, we would do well to demystify stock investing a bit. This fear is not only keeping many of us from achieving our long term financial goals, it also reduces our chances of building the kind of wealth that is transferrable.
All the reasons listed above are valid because the stock market is truthfully not a gaming centre. When you buy a stock, you obtain ownership stake in the entity and there is no investment maturity until you decide to sell. You own the shares for as long as you like and can even transfer to your children if you please, as long as the company still exists. Take the wrong call and you would suffer losses as returns are not always guaranteed. Conversely, if you take the right call, the upside/financial gain is unlimited as you get to sit back and watch your money multiply. The beauty of being financially responsible as a young person, is that you get to achieve your dreams and afford to live the life you want. You become limitless!
How then can we attempt to benefit from this – to grow our money whilst also managing the attendant risks of stock investing? I have some tips to get you started on your journey, should you decide to try this out;
Start small and think long term – Begin with an amount you can forget for a long time. In a down market, you can patiently wait until things get better. As you continue to learn the ropes, your confidence in the market will rise.
Diversify your investments – If you invest all your capital in one company and it ends up being the wrong call, you will lose out completely. Spread your risk.
Seek out companies that are doing well and also pay dividends – During a market downturn, you should be confident that the companies with good fundamentals will bounce back faster when things turn around.
Seek professional advice – This is important if you need some guidance in navigating the market. You may even outsource your investment management for a small fee.
Granted, it is better to think long-term when investing in equities, nonetheless, there could be opportunities to sell at a profit along the way. There are also opportunities to make more than what you invested over time from dividend income.
You simply need to overcome that fear and purpose to become more financially intelligent. It is not as scary as you may think and you must be intentional about it. Now is the time to make the right moves to secure your financial future and I really hope that you make it count.
Temitope Obasanya
Temitope is a Chartered Financial Analyst with over 11 years’ work experience spanning regional markets across sub-Saharan Africa. She is a multi-media specialist and her passion for Impact and sustainable wealth solutions has seen her deliver financial literacy coaching to individuals and small businesses, helping them make better financial decisions.
Email: [email protected]
LinkedIn: https://www.linkedin.com/in/temitope-busari-cfa/
