There are certain things that make for success as an investor in the stock market. These are secrets, as it were, that the successful investors have which separate them from average and unsuccessful investors. We shall look at them one by one.
1. The successful investor has a motive or objective for investing. This simply means that the successful investor has an objective for investing which is for him to make some returns on his investment within a time-frame. This time frame could be short, medium or long term in scope.
1a. Short-term investment is usually done by market players. It could be for 3, 6 or 9 months or 1 year. This is when the investor seeks to get returns on his investment within the shortest possible period. But this is highly risky. The market players are the stockbrokers, corporate investors, mutual and fund managers, portfolio managers, private investors etc who more often than not try to take advantage of the short term, especially those that have knowledge about the stock market and have access to current market information
1b. Medium-term investment could be between 2 – 5 years and is usually for a specific project that you want to carry out within that period e.g, investing to build up capital to start a company, embark on some capital projects, hit a particular financial target etc.
1c. Long-term investment is basically for the far future and is usually not for specific projects. Essentially, it is a kind of investment put aside for the future where the Investor can fall back on perhaps for retirement.
2. The successful investor consults and uses professional help e.g. stockbrokers, financial advisors etc. Stockbrokers are trained to deal in the stock market, i.e. buy and sell stocks, shares, and other securities for clients on a commission basis. They act as middlemen between the stock market/exchange and investors. The stock market is where stocks, i.e. companies’ shares are traded (that is, bought and sold).
Factors to consider before selecting a stockbroker
(a) Trust. The stock market is based on trust. As an investor, you should look out for the credibility of the stockbroker or firm you want to use. You should verify his/her level of credibility and transparency. You can ask questions from existing investors who can give recommendations for a broker/firm. Visit the firm to see things for yourself, look at the setting and the environment. Again, to get a stockbroker, you should get to the stock exchange of your country and ask for the list of registered stock broking firms with them. Or, as I suggested earlier, ask around from existing investors.
3. Successful investors have a financial plan which guides and regulates their spending. Thus they keep to this plan in making all their investment choices.
4. Successful investors are risk takers. They are not negative people who want money but are doing nothing to create or attract it. They invest, and keep investing their funds. This is what you too should be doing to guarantee yourself a beautiful financial future.
5. Successful investors delay gratification of certain desires to achieve wealth. They are future-driven in all their plans.
The players involved in the business of equity investment are:
This is the guy who puts down his money
2. The regulatory authorities like
a. The Nigerian Stock Exchange (NSE). This body provides the market where stocks and other securities are traded.
b. Security and Exchange Commission (SEC). This is the government organ set up to monitor, regulate and supervise the Nigerian Stock Exchange through its policies, laws etc.
c. Central Security & Clearing System (CSCS) is where all trading transactions and stock related matters between and amongst stockbroking firms and their clients are carried and sorted out.
They keep the registers of members of individual quoted companies e.g. First Bank and others. Note: it is very important you know the registrar of the companies you are buying into so that you’ll know where to run to concerning issues relating to dividends, bonus shares, missing certificates etc.
They are the people who act as middlemen between the Exchange/Market and investors. They are empowered to buy and sell stocks of quoted companies. They are indispensable when it comes to the issue of purchase and sale of shares.
A good knowledge of the parties involved in the market and their responsibilities and functions will help you appreciate the market more and recognize that certain checks and balances have been put in place to help secure your Investment.
However, I must say with an air of seriousness, that everything we have discussed here will make no meaning if you do not take a step. You have to take a step to get ahead.