Are you looking for ways to invest in the stock market and make money from it? Well, do not worry because in this article, I will be tutoring you on how to invest and make money from the stock market. So you can see this article as how to make money in the stock market for beginners
With the sole assistance of online brokerages, people can now monitor/manage their own investments from the comfort of their homes or anywhere else. All it requires from you is having an internet connection and some amount of money to invest and be sure you can make good returns on your investments.
Investing in the stock market is not like the buying and selling of tangible goods which transactions can take place any time. Stock market business is different because you cannot buy stocks directly from the stock exchange without going through a broker. The broker is legally empowered to deal on the floor of the stock exchange, so any potential investor must engage a stock broker.
If you are looking for how to invest and make money from the stock market, you are still in the right place. The Nigerian stock market was established in the year 1960 while being called Nigerian Stock Exchange. The exchange deals on existing stocks and shares while new issues come to the public via a merchant bank. After a new issue has been marketed by a merchant bank, future trading on the shares must be through the stock exchange and that is where the stock market comes in.
At this stage, it is important to separate “how to invest in the stock market from “how to make money from the stock market”. So let us start on how to invest on the stock market and a little while, talk about how to make money from the stock market
To invest in the stock market, you must have a broker ( a broker is a member of the stock exchange and is allowed to buy and sell shares or stocks on the floor of the Nigerian Stock Exchange). No other person is allowed to trade on the floor of the Nigerian stock exchange. So you must engage a broker who buys and sells your stocks and shares. However you have the right to monitor the movement of your stocks and instruct your broker when to buy and when to sell your stocks. So register with a broker.
Below are the procedure on how to engage a broker and open an account:
1. Opening a Nigerian Brokerage Account
If you are looking to invest and make money from the stock market, you must open a Nigerian brokerage account. I will be listing out the steps you would have to take if you want to open a Nigerian brokerage account.
The CSCS is a short form for Central Security Clearing System. The CSCS mainly does the work of recording the ownership of every Nigerian securities while using electronic account. To plainly prove this point to you, if you ask any broker to assist you to open a trading account, the broker will at first send to you a CSCS form for you to open your account. When you complete the form, you would be issued a CSCS number which will eventually be used to record the stock you buy on the Nigeria Stock Exchange. In addition, the number would make it relatively easy for CSCS to have records of every stock holding you transact.
2. Pick a broker
Choose a broker who will act as your financial adviser. He/she will buy and sell shares on your behalf. He/she will tell all the requirements concerning becoming an investor. They include sending the original completed CSCS form, the broker account opening form, passport pictures, copy of your identity card and utility bill. All these must be mailed to your broker who will oversee that your registration is completed.
3. Transfer funds to your brokers account
This will depend on your financial capacity and the types of shares you want to buy.
4. Choose the stock you want to buy
After you have researched the stocks available, choose which company’s stock you want to buy and when. The broker will carry out your instructions and buy the stock. The broker will always advise you when to buy more shares and/or when to sell because the rule of the shares is that the share price can go up as well as go down.
At the appropriate time, the company will declare dividend if the company makes profit. The share price can go up and also can go down. Basically, you as an investor have two sources you can grow if you invest on the stock market: shares can go up which means your holdings can appreciate in value, and you can receive dividend when the company makes profit.
Having completed the procedure on how to invest on the stock market, the next thing is to show you how to make money from your investment. How does it work?
6. Do not put your money on stocks without proper research.
First look at the companies in which shares are traded on the stock exchange and see how they are doing in terms of profit, dividend policy, re-investment of surplus funds, how the shares are behaving on the stock exchange and how the shares are bought and sold by investors. Also, you must invest in safe shares, i.e share of manufacturing companies such as Unilever, Nigerian Breweries, Nestile, etc.
7. Invest funds you do not have immediate use for
It is of no use investing your children’s school fees when they are on holidays in the hope that you make quick money when they resume school again. The reality is that your investment would have gone down so low because the company might experience unexpected problem such as a major competitor hit the market with superior products and its customers switch over or information about a possible takeover of the company by another company can trigger a major falling in the price of shares.
For example, you may borrow from the bank to buy shares being floated by ABC Bank, only to realize that ABC bank did not do well in the year the of floating of the shares and the result is that the share price will fall.
9. Don’t follow the Joneses
Don’t invest in a particular stock because your friends, neighbours and colleagues are rushing to invest in it, without evaluating the stock in terms of profit potential, dividend policy, the brand equity and long term growth of the company.
Don’t put all your eggs in one basket. No matter how good the stock is doing, don’t invest all your funds in the same stock because anything can happen. Instead share the funds and invest in different stocks so that in case the unexpected happens in a particular company share, you can fall back on the others.
11. Don’t venture to time the market
You must always study the market and avoid assuming that the market would behave in a particular way. Most of the time, the market behaves according to facts about profit, dividend, community relationship, product acceptance, company’s payment of taxes and other dues, expansion and future growth and direction of the company.
12. Don’t allow emotions to affect your investments
Invest in stocks you have sufficient information about and avoid speculative and unknown stocks which did well may be in the past but might be too risky now to invest.
A lot of people are looking for how to make money in the stock market with little money. The stock market can make you rich but don’t let your emotions to make big money quick with little money drive you.
13. Your expectations must be realistic
You should always hope for the best returns for you investment but let your assumptions be realistic. For example, if a particular stock had done well in the past because of the boost in the minimum wage, and as a result of the minimum wage new companies sprang up and existing ones came up with similar products as the one that made the company’s share to do well, the reality is that what happened before may not happen this time.
Investing on the stock market and making money is a business for someone who has patience, meticulous and who is not greedy because the stock exchange market is sometimes volatile and a lot of factors influence the behaviour of shares in the market.