Investing in the financial markets like Stock Market, Forex, Cryptocurrency is becoming very popular in Nigeria, as we see it as a way to make potential income. But investing in the markets may not be for everyone.
Do you really know what it takes to be successful in the Financial Market?
We have listed down 5 important things that every Nigerian must know before investing in any Financial Market.
Education First
First and most important thing is investor education. As an investor you must know about the market and instrument, you want to invest in. You must understand the market terminology and market fundamentals i.e: how the market works and what are the major factors that can affect the market or contribute to the rise and fall of the prices of the instruments.
Most markets like Forex and Stocks are affected by the condition of the economy/country which they are related to. So investors must be aware of data and recent news of the country and sectors in which they are investing.
You can learn about the basics of investing and markets from various free online resources like: Investopedia (for general investing knowledge), ForexTrading.NG (for forex education), NSE Investor Education Website (for Stocks & general market education).
The Risk Factor
Investing in the markets is very risky, and an investor must never forget this.
Even experienced investors lose their money, and may lose big in cases of high volatility in the markets or sudden market movements. No one can predict an unexpected market move like Swiss Franc crisis or Thai Baht crisis or Mortgage Crisis in USA. Many big investors lost money during these volatile times.
So remember to use proper money management, and never invest what you can’t afford to lose. You must always have good risk management in place like: stop loss, using low leverage.
Emotions & Stress
Common emotions that investors/traders experience is greed, overconfidence, investing more in a losing trade etc. Such bad decisions taken with emotions can cause even more loss, and also give you a lot of stress.
So investors must try to never bring their emotions into their investments, and always follow their trading strategy no matter what the situation. But it’s easier said than done, when you are experiencing the up/downs in the markets. Many investors have a bad habit of bringing their emotions to trade, which should be avoided at all costs.
According to Babypips: “Emotional stability, matched with proper risk management, is the name of the game.” You must check your emotions & stress by keeping a trading journal as suggested by babypips.com
Regulation Matters
New traders/investors are often misled by advertisements by Fake Investment Firms promising high returns. According to some estimates, many new investors fall victim to these investment scams through these advertisement campaigns. These ads target often target youth in Nigeria (and other developing countries) who have no idea of the markets and they tell them to invest in Forex and Stocks through them.
These advertisers are often fake traders (people with no investment background) running Fake Investment schemes. Some unlicensed brokers are also active in Nigeria targeting new unsuspecting investors with their fraudulent schemes.
As a rule of thumb for any investment, never trust anyone offering high returns without your knowledge. Always remember our first rule of investing: Investor Education.
When you have gained adequate knowledge of the markets & investment, then only should you invest in the markets, and that through a Regulated or licensed Broker.
In case you want to invest in Stocks, then you can see the list of NSE licensed stock dealers. For Forex Trading, you must only trade with FCA, FSCA, CySEC regulated forex brokers in Nigeria.
Regulated brokers are kept in check by Government Regulators in different countries. These government regulators have made various policies to protect investors against unscrupulous practices of brokers like extraordinarily high leverage, bucket shops, insider trading etc.
Be Consistent
The last thing to remember is consistency. You can’t get rich overnight, it takes years of experience and devotion to learning about investments.
Sometimes you are going to lose & sometimes you will win. The important thing is to have more winning trades/investments on your side, and make more when you win. You must remember to devise a good investing strategy and trade with it regularly.