Thursday, March 28, 2024

Tips for young investors at the Nairobi Securities Exchange

Investment Expert Rufus Mwanyasi: As the year kicks off, I know many are eager to start with fresh resolutions touching on anything from investing in one’s health, mind, relationships and yes, letting your money work for you.

While the latter may seem a daunting task to undertake, it should not discourage new investors from taking a risk especially when it comes to stock market investing.

In this article, I share a few suggestions with the novice investor plus tips on money and portfolio management.

First, it is advisable to settle your finances.

Dig your way out of debt. You are not ready to start investing until you have paid off any high-interest debt. Then, any funds you will need to use in the future (emergency money or money needed within five years) should be in something safe like money market funds, or perhaps bonds. Whatever remains is likely to grow most quickly in stocks.

Second, set expectations and learn what to expect from the stock market.

Learn to evaluate businesses. Learn to decipher financial statements and crunch some numbers. Gather information on companies that you are thinking of investing in. This should come in the form of financial statements issued by the company, news items, press releases and more.

After you begin investing, consider monthly investment plans (MIPs) to regularly invest small amounts of money into your investment account. This system allows one to accumulate shares in a stock over time and is especially good if your budget is limited. Buying regularly through MIPs is a form of cost averaging.

Thirdly, any potential investor should also learn how to use historical precedents.

History repeats itself in the stock market. Many stocks price patterns and price consolidation structures are repeated over and over again, just as geological formations recur.

In addition, one should learn about advanced investing issues, such as derivatives, options, technical analysis and margin trading. These are concepts that will soon to be introduced in the market and if you are familiar with them, you will be better prepared to use them profitably.

Lastly, a final consideration is mutual funds.

These are good places for one to accumulate money if you are not yet ready to select individual stocks. Essentially, they permit you to earn while you learn. Those who have no interest in learning more about investing might just stop at mutual funds and leave it at that. Having said that, mutual funds can also underperform the overall market and therefore one should carefully select the most suitable funds to invest in.

Above all else, have patience.

It takes time for a stock to make a large gain. As a matter of fact, achieving huge profits in a stock usually takes one to three years of patience.

According to Jesse Livermore, one of the greatest market traders of the last century, “It never is your thinking that makes big money, it’s the sitting.”

If you know a company and its products well, you will have the additional confidence required to sit tight through several, inevitable normal corrections.

Connect With Us

320,549FansLike
14,108FollowersFollow
8,436FollowersFollow
1,880SubscribersSubscribe

Latest Stories

Related Stories