• Thursday, July 18, 2024
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BusinessDay

Buying stocks… what you must do

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I hear a lot of us saying….this may be a great time to buy stocks, now that many stocks are still near historic lows.

No doubt, this could be the inference many investors draw as stock tips spill from everywhere: from analysts, on television, at parties, in the gym, and even in clubs.

One of the true cornerstones of real wealth creation has always been based on not climbing on bandwagons. Yes, you may be lucky to gain at first… for a while, but when they start to sink, you sink along with them.

But being a cyclical market, the past years of experience and history tend to prove otherwise because the market most times proved stubborn for analysts to predict.

Trend has shown that even many wealth seekers email boxes today are full of grounds for can’t-miss moneymakers to buy right now. Even your own scouting can turn up stocks that look like solid-gold opportunities.

But the truth remains that there are questions you must ask yourself before delving into this form or investment because even professional investors follow many different methods to hunt down stocks to recommend, from computerised screening programs to gumshoe field work.

Many personal finance experts believe that when going into this kind of investment, there are key mistakes to avoid. First, you must be cautious about highflying stocks. They may be closer to the end of their run than the beginning, no matter how good the company is.

Secondly, avoid hunches and headlines: Leave impulse buying for the supermarket. Have patience about selling. Time give individuals a rare edge because longer horizons make losses less likely.

Also, try to ignore pump-and-dump scams. This is because internet chat rooms, bulletin boards, unsolicited emails, newsletters –even radio and TV adverts –can all be sources of stock touting. Don’t take the inducement.

Furthermore, many wealth managers believe that though you may love a stock, it won’t love you back. This is very simple because if losses start to mount, you have to know when to break it off and sell. Best defense is to stay disciplined and diversified.

In addition, remember that when climbing on bandwagons, you will almost always be too late. Instead, buy into companies with a history of superior earnings, barriers to entry in their field and a track record of wise investment.

IHEANYI NWACHUKWU