Before you buy your first stock on the Nigerian Stock Exchange, take a moment to read this. It could save you from the regret I experienced and guide you to make your money work smarter, not harder.
Investing in the stock market is an exciting journey, but it’s also one that requires patience, knowledge, and discipline. Here are some crucial lessons I learned the hard way as a beginner investor on the NGX.
The Stock Market Is Not a Get-Rich-Quick Scheme like some people try to portray it.
When I first started, I believed that buying a stock would be easy and result in quick, huge gains, maybe even doubling my money in a month or so. Unfortunately, that’s not how the market works.
Wealth in the stock market builds over time, through consistent strategy and patience. The Nigerian stock market, like other markets, rewards long-term thinking. Prices fluctuate daily, but the real gains come from holding quality stocks and allowing your investment to grow.
If your intention is to make quick money, that means you’re not investing, you’re gambling.
Instead of hoping for quick wins, focus on understanding the companies you invest in and their long-term potential.
If the Price of a Stock is Falling, it doesn’t always mean it’s time to Run, rather it could be a time to buy more.
My first stock dropped by about 16% shortly after I bought it, and I panicked. I sold immediately to cut my losses. A few months later, that same stock had doubled in value. I soon learned about “Averaging”, meaning when a Stock drops in price below your cost price it would be safe to buy more to average down your cost price.
What did I learn? Market volatility is normal, especially on the NGX, which can be influenced by economic news, political events, and sector-specific trends.
Before making a panic sell, ask yourself;
Do I understand the business behind this stock?
Has anything fundamentally changed about the company?
Am I reacting emotionally or logically?
Understanding the business behind the stock helps you stay calm during price dips.
Emotions Are More Dangerous Than Market Crashes.
The stock market doesn’t defeat people; their own emotions - fear, greed, impatience do.
When the market dips, fear can push you to sell at the worst time. When prices soar, greed can tempt you to buy overpriced stocks. Without a plan, these emotions can cause costly mistakes.
Having a clear investment strategy protects you from emotional decisions.
Your strategy should include:
Your investment goals (e.g., planning for retirement, buying a property, etc)
Your risk tolerance
How long you plan to hold your investments
Rules for buying and selling
Stick to your plan, and don’t let short-term market noise derail you.
Not All Cheap Stocks Are Bargains
I was tempted to buy “penny stocks” on the NGX because they were cheap and seemed like an easy way to make money. Unfortunately, many of these stocks stayed cheap because the underlying businesses were struggling.
Price alone doesn’t determine a good investment; value does.
Before buying a stock, look beyond the price:
What does the company do?
Is it profitable or growing?
Does it have a competitive advantage?
What are analysts saying about its future prospects?
A good stock is not about price, it’s about value.
The stock market is a learning journey. The more you study companies, financial reports, market trends, and investment strategies, the better your chances of success.
Take advantage of resources like:
- NGX official website and investor education materials
- Financial news platforms covering the Nigerian market
- Books and courses on investing basics
- Joining investment clubs or online communities
- Commit to continuous learning to become a smarter investor.
- Getting started on the Nigerian Stock Exchange can be rewarding, but it requires the right mindset and preparation. Here’s a quick checklist before you buy your first stock:
- Understand that investing is a marathon, not a sprint.
- Learn about the companies and sectors you’re interested in.
- Develop a clear investment plan and stick to it.
- Don’t let emotions drive your decisions.
- Focus on value, not just price.
- Keep learning and stay informed.
By following these principles, you’ll be better positioned to grow your wealth steadily and confidently on the NGX.
Ready to take the plunge? Open a brokerage account with a reputable NGX-licensed broker, start small, stay patient, and keep learning, and build your portfolio with patience and knowledge.
Your investment journey is a marathon, not a sprint. Your future self will thank you!
Happy investing!
