5 Lessons I Learnt from Investing in Stocks
If you had a piggy bank as a child, gather here.
If you are a team, spend it all, gather here too.
How did you feel being able to save towards buying a new shoe or achieving a saving goal as a child? For me, I felt fulfilled anytime I was able to do that.
And if you grew up in a typical African home, you would understand what it meant when your mother gives you that weird look when visitors came around and gave you money to buy something for yourself.
I recall how my mum told us to keep the money in a piggy bank so that she would use it to buy gifts for us at Christmas. For some of us, that promise never got fulfilled. Instead, she would borrow from us and when we decide to ask her, she would open her transaction history and show us how she bought several things for us with her own money without asking us. That way, we were guilt-tripped and would just give up. But this generation would not even fall for those gimmicks.
Now, the good side to this is that some of us started learning the act of savings from those little experiences. We were taught how to hold on to money, rather than letting it go. The latter, however, is how to become wealthy through investing. Below are some of the lessons I learnt from investing in stocks.
1. A lot of money is not needed to start investing.
Before I bought my first shares, I thought I would need thousands of naira to enter into the stock market. Besides, I never thought a time would come when I would be able to buy shares of foreign companies. Today, there are several apps that allow one to buy both local and foreign shares. So even when our parents had limited options, we are surrounded with so many options, and we have no excuses.
Also, investing in fractional shares is possible. Fractional shares are partial shares of a company's stock such that instead of owning one or more full shares of the stock, one could own a portion or fraction of one. Purchasing fractional shares is a good strategy for those who would like to buy certain stocks that are beyond their budget. Let’s say your budget allows for you to invest N50,000 a month, but you’re looking at a $500 share. You can just take that N50,000 and buy a fraction of that share, which allows you to slowly buy into the stock over time.
2. Investing without a stock broker is possible.
Traditionally, in order to buy shares, especially the ones that are listed on Nigeria Stock Exchange, you would need to open a Nigerian brokerage account, complete the Central Securities Clearing Systems (CSCS) account opening form, fund your brokerage account and then submit a trade offer once you have decided what you want. However, the easiest way to buy stocks today is through fintech apps that offer local or foreign stocks. Once you have opened and funded your account, you can buy shares and stocks online through these apps.
3. Most people grew up with scary stories about investing.
The trauma associated with money can come from your childhood experiences with finances, how people in your life negatively thought about money, and the limiting beliefs you have about acquiring wealth. For folks with money wounds, it's important for them to be aware of these things so that their interest in investing in the stock market is not compromised. Being deliberate about stock market investing may take time and education. So, if you find yourself in this category, the best decision will be to take time to learn how to invest and also learn about a company before deploying your hard-earned cash.
4. Consistent investing pays off.
The best time to invest in the stock market is when a stock is trading at a low price; however, being consistent in your investments is better than timing the market correctly. Personally, I do what is called 'dollar-cost averaging,' which is the practice of investing the same amount on a regular basis, regardless of a stock's share price. The reason you want to be consistent as opposed to waiting to invest when a stock is low, is that it is basically impossible to time the stock market. This is because you do not know exactly when it would do well and when it would not. So, it is better to steadily invest the amount you can comfortably afford. In the long run, if you are consistent in doing this, it would pay off.
5. The market swings.
The nature of the market is such that it goes up and down—that is just the way it works. Having this mindset reminds me that bad days are an opportunity to invest more in the companies I believe in. The fact that a company’s share falls is not enough metrics to conclude the company is going down, nor does it mean the company is going to disappear.
Nobody likes to lose money, I don’t either. But I don't treat my investment account like a savings account. My investment account contains the money I do not need right away. The hard truth, however, is that even though I lose money temporarily, in the long run, I am confident that I would see a return on my investments. Investing in the stock market isn't MMM or a get-rich-quick scheme.
And if you are still thinking of when to start your investment journey, let this article be a wake-up call for you to join the MoneyAfrica community, where you would learn everything about investing in the stock market.
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