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Be an informed investor

By Babajide Komolafe

Ignorance is dangerous. It is the reason why many people have lost money investing in shares. For you to make profitable investment in shares, there are so many things you need to know, and that you must regularly be aware of, otherwise you may end up regretting buying shares.

In the last edition, we said that you must invest in a good company in order to make money, but no company exists in isolation. The company may be producing or selling an essential good, and has sound management, but that does not protect it from what happens in the national and global economy.

Government policies have killed good companies selling necessities in the past. A good example is Dunlop Plc. Sharp rise in crude oil prices, which rose to as high as $140 per barrel, resulting into high cost of diesel, have made many good companies to close shop.

So, as you are buying the shares of that good company, realise that nothing is static; anything can change at any time. Fortunately, we live in an age where information on anything is available and can be accessed almost freely either via newspapers, radio, television, or internet. There is nothing about everything and you can get it even for free.

The problem with many investors is that they don’t consider or realise that being informed is critical to making money in shares. Most investors especially retail investors are indifferent or apathetic to information about development in the stock market and in the economy.

Such indifference is reflected in the inquiry by one of our readers. He inquired, “I bought 4000 units of FinBank’s shares six years ago. I have never received dividend or bonus. I need to know the worth of my shares.” This implies that the investor just bought the shares; he did not monitor or pay attention to what happened to FinBank.

He seems not to be aware that Finbank is one of the banks the CBN took over, and it has been acquired by FCMB, and that the shareholders of Finbank were given one share of FCMB for 48 shares of Finbank. It is also obvious that he does not have information about the registrars of Finbank, and what happened to them.

Now, these are information  he could access via the internet. In fact, most of the complaints and enquiries sent to Investor’s Forum reveal that a lot of retail  investors are ignorant of   essential things relating to investment in shares. Some don’t even know that their stock broker had changed address, or even about the Central Securities and Clearing System (CSCS), or CSCS account.

Many do not even know about company registrars and what they do, or about the Nigeria Stock Exchange, and the Securities and Exchange Commission. Yet the activities or inactivity of these organisations to a large extent determine whether your investment in share will be profitable or not.


Disclaimer

Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.