Thread by @quansimodo

Fridays are usually for Faaji, but custom streets remain busy. So here's a quick thread on investing for beginners. @Nairametrics

@Nairametrics For investing in stocks, there are two key benefits. Capital appreciation. Simply meaning the price going up over time. Then dividend payments.

@Nairametrics You can combine both, but it's good to have at least one firmly as a goal.

@Nairametrics Next thing is to decide how much you are looking at investing. To an extent, your budget determines the kind of stock ( and indirectly the goals you may have to follow)

@Nairametrics So let's say you have N5000 monthly or quarterly to invest. That would get you roughly 9 units of Seplat. Not worth it.

@Nairametrics On the other hand it could get you about 2500 fcmb shares at current price. Or 700 fbn shares.

@Nairametrics Even at that, 5k is a bit small. So your goal would be to gradually build a significant stake. This would also help in making dividends worthwhile.

@Nairametrics Let's assume you are going significantly bigger. Say 50k or 500k. Monthly or quarterly.

@Nairametrics You can then consider investing with capital appreciation in mind.

@Nairametrics Because 30% of 5000 is just 1500. Not worth cashing out. 30% on 500k is about 150k.

@Nairametrics For capital appreciation, you have to set an exit point of some sort. Will you exit at 30% ? 50% ? 100% 1000 % ?

@Nairametrics Will you exit to come back at a lower price ,? Or move to another asset class.

@Nairametrics You need to have clear cut goals in place. So you don't have exit remorse or invest carelessly.

@Nairametrics You could also decide to not exit if you believe the stock remains significantly remains undervalued.

@Nairametrics So for example you got into GT at 15/. At current prices you're up over a 100%.

@Nairametrics That's capital appreciation. To could however decide to hold the stock, because it pays good dividends.

@Nairametrics Third option is to cash out partly and then hold some units for dividends.

@Nairametrics So now you have a budget and have set goals. How do you pick a good stock.

@Nairametrics There's no one size fits all definition of a good stock. In Nigeria, a recession or devaluation or a govt policy. Can turn a good stock bad. Or vice versa.

@Nairametrics Two tips however. Pick the best in any sector you go for. Also pick companies with good management.

@Nairametrics So say you want to invest in s banking stock. Have a chat with your banker friends. What bank is everyone trying to copy or setting off wars with ?

@Nairametrics That's a stock you should dig into. On the flip side. Is there s bank shaking tables everywhere ?

@Nairametrics Next look at the numbers. Numbers faze people but there are ways around this.

@Nairametrics Well run companies have an investor relations page. When they release results or for any other reason, they have calls and investor presentations.

@Nairametrics The presentations are much simpler than the full reports and tell the story in a simple yet comprehensive manner.

@Nairametrics Calls also tend to be direct because all hard questions are asked and management can't dodge.

@Nairametrics You can also get access to these info over the past few years. So you can monitor.

@Nairametrics Lastly look at sectors. Don't put all your eggs in one basket. They will either break or you spend lots of time watching them.

@Nairametrics When you have either a new government or regime change or management change. Someone wins and someone loses.

@Nairametrics So look at the economy as a whole. What's happening ? What do you think will happen ? What has happened for and may repeat itself ,?

@Nairametrics These are often buy or sell signals.

@Nairametrics So let's say oil crashes. Devaluation then follows. Some bank's will gain. Some will lose.

@Nairametrics You listen and read enough, you can figure banks that are long the dollar. Or heavy on oil and gas.

@Nairametrics For companies that are into consumer goods. Oil and FX shocks are bad news, because costs go up. They can't pass that on in some cases to customers.

@Nairametrics Lastly observe trends. Before the guys in suits and ties adjust, the consumer has moved.

@Nairametrics The hottest stocks today may or may not be around in another 10/20 years. So review things from time to time.