“I Have N400,000 and I Want To Invest in Stocks. How Do I Get Started? Expert Advises

“I Have N400,000 and I Want To Invest in Stocks. How Do I Get Started? Expert Advises

  • A young Nigerian who is craving financial freedom is looking at investing in the Nigerian stock market
  • He is worried and unsure how to begin, so he is seeking guidance on how to buy shares in Dangote companies, banks, and other businesses
  • Gilbert Ayoola, a lead adviser, capital market advocacy educator, and market analyst, has provided eight valuable steps to take when investing in the stock market

An anonymous Nigerian asked:

"I love reading your stock market reports, especially those highlighting how billionaires are increasing their wealth. Your most recent report on Fidelity Bank's public offer has sparked my interest in starting to invest in stocks.
"I have N400,000 in savings. How do I buy Dangote companies, banks shares. I would like to have an idea of what it takes from an experienced expert to start my journey toward investing in stocks for financial freedom. Please tell me what I need to know to begin my journey.”

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Stock market investements
Gilbert Ayoola gives tips on stock investment. Photo credit: Westend61
Source: Getty Images

Gilbert Ayoola is a lead adviser, capital market advocacy educator, and the general secretary of the Ibadan Zone Shareholders' Association. He also has over a decade of experience as a capital market analyst.

Starting to invest in the stock market can be a lucrative way to build wealth over time, but for many young Nigerians, the prospect of entering this complex financial world can be daunting.

However, even those with modest capital like N400,000 can begin their journey towards financial prosperity through stock market investment with the right requisite knowledge and guidance.

Before diving into the stock market, it is essential to educate yourself about how it works. This includes understanding basic investment concepts, familiarising yourself with different types of stocks, and learning how to analyse companies and their financial performance. There are numerous resources available, including books and courses, that can help you build a solid foundation of knowledge.

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Step 1: Defining your financial goals

To start investing, you must define your investment goals before investing. Are you looking to grow your wealth over the long term, save for a specific goal like starting a business, or generate passive income? Having clear objectives will help you determine your investment strategy and risk tolerance.

From there, to buy and sell stocks, you will need to open a brokerage account with a reputable licensed stockbroking firm listed on the Nigerian Exchange.

These you get on the website of the exchange. In Nigeria, several brokerage firms offer online trading platforms, making it easy for individuals to invest in the stock market from the comfort of their homes. Certain charges are paid, such as brokerage fees, customer service, and the range of services the firm offers, though they slightly vary in line with acceptable standards.

Step 2: Minimum amount needed to start

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With N400,000.00, you can start building a diversified portfolio of stocks. Diversification helps reduce risk by spreading your investments across different companies and industries. Consider investing in a mix of sectors such as banking, consumer goods, oil and gas, industrial foods, insurance, and pharmaceuticals to mitigate the impact of market fluctuations on your portfolio.

While the minimum amount needed to start investing in the stock market can vary depending on your financial goal and the price of individual stocks, N400,000.00 is a reasonable amount to begin building a portfolio in the Nigerian stock market.

With this capital, you can purchase shares of multiple companies, which can help spread your risk and increase your chances of long-term investment success.

Step 3: Monitor your investments

Regularly monitor your investments to track their performance and make informed decisions about buying or selling stocks. Stay updated on market trends, company news, and economic indicators affecting your investments. Remember that investing in the stock market involves risks, so staying informed and prepared for market volatility is crucial.

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Step 4: Consider long-term investment

While short-term trading can be tempting, especially for beginners, consider adopting a long-term investment approach. Investing in quality companies with solid fundamentals and holding onto your investments for the long term can help you benefit from the power of compounding returns and reduce the impact of short-term market fluctuations on your portfolio.

Also, avoid making impulsive decisions based on short-term market fluctuations or emotions. Stick to your investment plan, review your portfolio regularly, and adjust based on your financial goals and market conditions.

Step 5: Research and due diligence

Before investing in any stock, conduct thorough research and due diligence on the companies you are interested in. Analyse their financial statements, business model, competitive position, growth prospects, and management team. Understanding the fundamentals of the companies you invest in will help you make informed investment decisions.

Step 6: Risk management

Manage your investment risk on your portfolio by limiting potential losses and avoiding investing a significant portion of your capital in a single stock. By spreading your investments across different assets, you can reduce the impact of any individual investment underperforming.

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Step 7: Continuously learn and adapt

The stock market is dynamic and ever-changing, so it is essential to continuously learn, adapt, and refine your investment strategy over time. Stay open to new investment opportunities, learn from your successes and failures, and be willing to adjust your approach as you gain more experience in the market.

Step 8: Seek professional advice

Consider seeking advice from financial advisors or investment professionals who can provide personalised guidance based on your financial goals, risk tolerance, and investment horizon.

A qualified advisor can help you develop a tailored investment strategy and provide valuable insights to navigate the complexities of the stock market.

In conclusion, investing in the stock market can be a rewarding journey for young Nigerians looking to build wealth and secure their financial future towards achieving their objective. Remember that patience, discipline, and continuous learning are key to successful stock market investment.

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Disclaimer: Advice given in this article is general in nature and is not intended to influence readers' decisions about solving issues of threats. Readers should always seek their own professional advice that takes into account their own personal circumstances before making any decision. Do you have a story to tell? Want an expert's advice?

Please email us at ask.an.expert@corp.legit.ng with 'Ask an expert' in the subject line.

Report shows Nigeria's most profitable banks

Legit.ng earlier reported that following impressive earnings, Guaranty Trust Bank Holding Company Plc (GTCo) and the United Bank for Africa (UBA) emerged as Nigeria's most profitable banks by Return on Equity (ROE) in 2023.

RoE refers to the ratio that provides investors with an understanding of how efficiently a company handles shareholders' funds.

Findings showed that GTCo declared a 44.82% RoE from the 18.65% it recorded in 2022.

Proofreading by James Ojo Adakole, journalist and copy editor at Legit.ng.

Source: Legit.ng

Dave Ibemere avatar

Dave Ibemere (Senior Business Editor) Dave Ibemere is a senior business editor at Legit.ng. He is a financial journalist with over a decade of experience in print and online media. He also holds a Master's degree from the University of Lagos. He is a member of the African Academy for Open-Source Investigation (AAOSI), the Nigerian Institute of Public Relations and other media think tank groups. He previously worked with The Guardian, BusinessDay, and headed the business desk at Ripples Nigeria. Email: dave.ibemere@corp.legit.ng.