Due to the lull in the capital market, there has been a significant drop in capital market activities, almost undoubtedly attributable to the popping of a bubble. This has created a situation where majority of investors flee the market at the same time and consequently incur massive losses.
While attempting to avoid more losses, most investors, during a crash, do panic selling, hoping to unload their declining stocks onto other investors. This panic selling contributes to the declining market, which eventually crashes and affects everyone. Typically, crashes in the stock market have been followed by depression.
However, this period of a weak capital market is the best time for any potential investor to invest, given that the prices of stock has fallen, making it easier and cheaper to buy so that when the market bounces back, one would have invested before the stock prices go up again. This way, it becomes a form of saving for the future. Experts have warned that investors should try to always separate their emotions from the investment decision-making process. What seems like a massive national catastrophe one day may be remembered as nothing more than a blip on the radar screen a few years down the road.
• Learn about various types of investments
• Invest in a broadly diversified portfolio of penny stocks
• Don’t try to beat the market; participate in it
• Use small per cent of fund
• Spread the risk
• Monitor your investments
Managing Partner, Delsic Capital, Mr. Dele Ejioye, advised discerning investors to buy stocks now that their values had dropped in order to make profit when the market rebounds.
He said, “At the end of the day, when you find the average, you will be better off. And for a starter in the stock market, this period is a thoughtful period to come in and be prepared to play long term. It is advisable for starters not to do short term, so that whatever happens to the market short term will not affect them.
“There is the hope of investing in the capital market, in case the market rebounds. There are important investment strategies and mindsets that one needs to take into cognizance, that can make one stay calm and play dead when the stock market takes a swipe at your returns. A bubble occurs when investors put so much demand on a stock that they drive the price beyond any accurate or rational reflection of its actual worth, which should be determined by the performance of the underlying company.”
Another stock analyst, Mr. Olufemi Timothy, said, “If you have a buoyant pocket and idle fund that has not been budgeted for, plough it into the capital market because the market judges the strength of an economy. So, if the economy bounces back, it will also help the capital market to wake up.
“If you can invest now and keep in your investment in the next two years, you will start smiling to the bank. A stock that you buy at N3 now, will still appreciate by 200 per cent or more in a matter of few years.”