By Babajide Komolafe

There are many people out there who want to buy shares as investment but they are confused on what to buy. Though stockbrokers are supposed to advise people in this regard, many have however lost confidence in stockbrokers. From this week, we would be providing information that could help investors overcome some of these confusions.

Last week’s edition highlighted the dangers of following the crowd in making investment decisions.  “Profitable investment requires buying or selling based on specific goals and purposes”, it concluded. This implies that you must first determine why you want to invest in shares. That money you want to invest, why do you want to invest it?  The answer to this question is critical in determining the shares you should buy.

Assuming your goal is to invest the money for a short period, say less than two years, for safe keeping. That is, you want the money to be out of your reach so that you don’t spend it, then you should buy shares of companies that enjoy stable price movement and that you can easily sell.

Note that while share prices always move up and down, almost on daily basis, there are shares that the price movement overtime always even out, and in fact rises. It may gain 10 kobo today, lose 10 kobo tomorrow, but it would recover. Also such shares must be one that you can easily sell when you want to recover your money and utilise it.

The reason behind the stability of the price of such shares, and why you can easily sell them is because the price movements are not manipulated. Secondly, the movements are product of demand and supply. Thirdly, the companies are always doing well in terms of revenue, profit and dividend. Hence, there is always demand for their shares. These are mostly referred to as blue chip stocks. These include GTBank, First Bank, Zenith Bank, Nestle, Unilever, Dangote Flour and Dangote Sugar etc.

The above indicates that it doesn’t really matter when you buy these shares, over the short period you set for yourself, most likely, the price would remain the same or go up slightly. So, you would not lose your money.

One thing you must also note is that not all price movements are product of demand and supply, some are manipulated. When you see the price of a share rising persistently, beware! Ordinarily, price of a share would go up when it announces its result and, it shows profit and dividend or when the company announces it has received a major contract or introduce a new product, indicating the prospect of a more business turnover and profitability.

But when there is no such announcement or any development, yet the price of the share is rising almost daily and weekly, it is likely due to manipulation.  The same way the price went up, so would it come down persistently, even below its initial level. So beware!!