Why Invest In The Stock Market?

Mr A

NSE - Beginners guide on how to invest in the Nigerian stock market and make quick profit within a short period of time.

Investing in the stock market is the first option that comes to mind when the word 'investment' is mentioned. Whether you are going to win or lose in this business depends on your prediction and speculation abilities. This means that you need to be able to tell which companies would do well in the next few months, and which ones will not.

For a brief introduction, allow me to explain a few terms used in the stock market industry.

Stake: This is the amount that an individual or group of people have invested in a company. It is usually expressed in percentage.

Stock: This is the measurement of all the assets of a company. The amount of stock owned by a stockholder is determined by the amount invested (stake).

Shares: The stock owned by a company is divided into shares. The amount of share unit a company possesses is usually stated at the time of launch of the business or when it releases an initial public offering (IPO).

Dividends: This is the amount of money paid by a company to its shareholders. Dividends is like the portion of a company's profit entitled to a shareholder. When a company releases shares to the public, it usually states its 'dividend per share'.

Shareholder: A shareholder is an individual, group of people or an organisation that owns a number of shares in a company.

Stock Broker: This is like a middleman that aids and advices a potential shareholder in securing share offerings from a company. A stock broker mostly works for a brokerage firm and does not necessarily work as a sole individual. The movie 'Wolf of Wall Street' comes to memory. If you have seen that movie, then you have a pretty good idea of who a stock broker is.

Equity: Equity is the interest allocated to a shareholder of a business. If you buy shares at a particular price and it appreciates in future, you would be said to have gained 'positive shareholders equity'. Note that this is different from dividend in that dividend is the 'value of returns per share unit' while equity is the 'value of returns for your total investment minus your initial investment'.

Bonds and Securities: Bonds are assets or cash lent to a company by an individual or organisation. Think of it as a loan given to a company. In a business, the bond holders (creditors) have more priority than the shareholders because the shareholders are also partial owners of the business. When a company goes into bankruptcy, the bond holders are paid before the shareholders.
Shares and bonds are generally referred to as 'securities'.

Why Invest In The Stock Market?

Investing in the stock market is the quickest way to double your cash, as well as the quickest way to split it in half.
To prosper in this business you should have good business analysis skills. Find good startups that look promising and who are serious about their business, then discuss investment possibilities with them in exchange for a percentage of stock. If they eventually become successful, you could become the next big thing after Warren Buffet. Yes, much of Buffet's wealth was from investing in other companies.

What You Need To Start Investing

Brokerage Firm: Keeping up with stock price fluctuations and company forecasts is not an easy task. Unless you do not have a job and will be ready to spend the entire day in front of your computer monitoring the stock market in your underwear, I'd say that you will most likely need your own stockbroker.
Sam7, regarding your question. You would need to have good knowledge of past stock price patterns of companies to be able to confidently find and invest in promising stock. This is why stockbrokers exist, this is what they have been trained to do. Brokerage firms have the technology and software required to track stock patterns and display realtime price fluctuations.
The job of a stock broker is to find promising shares and then informs their clients to buy them. This is a win-win situation because if the shareholder makes gain, the stockbroker gets commission.

Trading Capital: This probably shouldn't be explained. Your trading capital is the amount of money you are willing to invest. The bigger the capital, the bigger the profit (or loss!). People who engage in sports betting would have an idea.

Investment / Brokerage Account: This is a bank account that will be opened on your behalf by your stock broker. You could open this account yourself though if you know what you are doing and can handle the technicalities.

Central Securities Clearing System (CSCS): This is the platform used for clearing and settlement of transactions in the stock market. You would need to register an account on the CSCS online portal in your country to start trading. The CSCS website for Nigeria is located at www.cscsnigeriaplc.com

Benefits Of Investing In The Stock Market

Like I said before, investments could double or triple your cash in a few short weeks. If you buy N150,000 worth of shares from a company at 1 kobo per share, and next month the price of shares at that company rises to 6 kobo per share, N900,000 would be in your possession, including the commission for your stockbroker which is mostly 10%.

In investment, patience is key. There are a lot of businesses whose early investors have become millionaires today because they held on to their stock and did not give up.

Like they say, "You have to risk it to get the biscuit".

Mr Paul

Interesting ! thank sir, for the information.
We're expecting more info on this and most especially how to predict which companies are serious and are having high probability of making it(profiting).

Mr A

Thank you for reading. I should complete this today.

Mr A

Updated.

Mr Paul

O yes !
Interesting and realy helpful.
Thanks a lot Mr A.

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