How to make money with stocks for beginners
I didn’t get to be serious about the stock market and stock investment until in 2004 when I attended a lecture on investment. It was an eye opener for me and I began to dig deep into the stock market. I began looking for materials on that subject to further understand how the stock market investment works.
But it was during the banking consolidation in Nigeria, where banks were forced to raise 25 billion naira as the capital base if they want to operate, that stocks popularly call shares buying expanded. People were buying shares in thousands.
Something then happened in 2008 where the value of the shares started dropping and there was panic what was happening, little did they know that the global financial meltdown was hitting us indirectly. People began to lose confidence in the stock market till this moment am writing this article.
The main problem that made people hates stock investment
Most people ventured into the stock market investment because of the following reasons
- It was the simplest and cheapest way to invest
- It was a get rich quick scheme
- There is no risk
- I will always get 100% return on investment.
It was when companies started declaring a dividend that got to some people. The majority their dividend is nothing compare to the money they invest and the price per share has dropped.
How to make money with stocks
Having said all that, it’s quite difficult to buy the stock at N5 per share and within one month the price per share to be N20. This was possible in 2004 and not today (there are exceptional companies that can have that, but it’s difficult to find an investor that will sell his stake to you).
People also say that stock market investment is the riskiest form of investment. Well, that is true for the naïve investor. The savvy investor knows exactly what to do to make money with shares and to minimize risk.
The following are steps to follow if you want to make money with stocks.
- 1. Know the basic steps of stock investment
Before you get into investing in stocks, try and know what stock investment is and how to go about it. Knowing that will give you an insight of what and how to go about it. There are basic things you need to know about the stock market.
- 2. Begin with a plan
Device a plan of action. In the stock market, buying 1000 or 10000 shares might not account for much return on investment at the end of the day. Another thing you need to consider is either you’re investing for capital gain or cash flow. In my opinion, cash flow is better since we’re talking about making money here.
- 3. Buy private stock
These are stock sold before a company goes public. Usually, the stock is cheap at that moment and profitable when listed. The only problem is sometimes you might not get your hands on the private offer because it’s competitive.
If you’re after capital gain, this is the type of stock you should be buying. It can give you 100% return on investment. But make sure the company has strong fundamentals before you can subscribe to it.
- 4. Buy certain percentage to maximize profit and minimize risk
As stated above, buying 1000 unit will not take you anywhere even in the long term. To make sure you want to maximize profit, you’ll need to buy a stock that makes you own a certain percentage of the company.
For instance, buying 5% or 10% and above and you get the percentage of that profit at the end of the financial year as well as making you stay in control of your investment. So whether there is capital gain or not, the dividend declared or not, you’ll still be making money from your investment.
- 5. Seek professional help
Don’t do it all alone, you’ll need some advice from a stock broker. Use his advice as a guide, but do your own too before making any decision.
The stock market has come to stay. Buying shares should be done with caution as not all stock listed on the stock market are profitable.