By Babajide Komolafe

Don’t invest on sentiments and hearsay
In addition to investing for the long term, you should invest based on facts and figures you personally verified.

That is what wise investors do. I know someone who invested N100,000 in a banking stock during the banking capitalisation of 2004 because a former school mate marketed the shares to him. The bank no longer exists and his money is lost. This loss could have been avoided if he had done some research.

Don’t outsource investment decisions.
You can seek advice from your stockbroker or ask for recommendations on which company to invest in, but you should personally decide where your money is invested. This will protect your money from any risky or reckless behaviour or decision of the broker. It will also protect your money from manipulation and any fraudulent tendency from the stockbroker.

Acquire basic knowledge of financial statements of companies
This will help you make informed decisions on what companies to invest in. The financial statements show the health condition of the company and how well it is being managed. You can master the structure of the financial statement of a company within one hour of personal research. The three important documents are the Income Statement, Balance Sheet, and the Cashflow Statement. Each of these reveal certain things about the company and they are easy to understand. Take time to study them before you begin to choose the companies to invest in. Don’t just believe what the broker or anyone tells you. Do your research.

Know the company before you invest
On a personal level, rarely will anyone lend money to someone he/she does not know or put money into the business of someone you don’t know. That is, it is important to have first hand knowledge about a company before buying the stocks of the company. Get information about the business of the company and factors that affect demand or sales of its services and products. Also get some knowledge about the directors and management, their shareholding in the company. In addition, look at the company’s financial statements, debt level, profit and dividend payment history etc. Failure to get this information before you buy the stock of a company is like taking a leap into the dark.

Don’t put all your eggs in one basket
Do not invest most of your money in one company or in one sector. Concentration increases exposure to risk and loss. One policy or development can negatively affect the performance of one company or a sector. So as much as possible, allocate your money across sectors; Banking, Fast Moving Consumer Goods, Telecoms, Industrials etc.