Question: Sir, I am getting into stocks in Lagos. Since I bought the first set, I am unable to concentrate these days because I am constantly checking the movements. Last year, I sold my small bitcoin when it became hard to sleep as I would wake up at night to check how it was doing! Please for the stocks, is there a way I can protect my positions to ensure I do not lose money should the stocks go down?
My Response: Let me begin with an Igbo Nation axiom – “ndu ka ihe eji azu ya” [life is more than anything required to sustain it]. So, I will suggest you exit stocks and try other assets in your investment playbook. Why? If because you cannot concentrate at work and your productivity drops, you may not be in a good position.
Get me right: you cannot trade your professional career for the small stocks on exchanges! Your career is entwined with your personality and it is the stock of your professional existence.
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Let me digress with a small investment lesson for you. All investors fall under three categories:
- Value pickers: Focus on undervalued assets that could rise in value
- Income chasers: Focus on income, such as dividends
- Growth makers: Focus on high returns, even if it means taking a risk.
For you, with the concerns you are having, you have no investment philosophy, and that means you have not articulated what you want to achieve strategically. Your vision is to grow your money but the mission to that is blurred looking at how you are punishing your state of mind. Chill and exit.
And to the core of your question, what you are asking for is possible. Simply, you can buy and short a stock at the same time, which is often referred to as “hedging”. This means taking a long position (buying) in a stock while simultaneously taking a short position (selling borrowed shares) to mitigate potential losses if the stock price fluctuates significantly. Yet, you will need to open separate trades for each position and may need a margin account to short sell.
That said, I do not see how you can orchestrate that considering the level of your maturity on this. So, going to shorting stock could trigger infinite loss as your loss is theoretically unbounded unlike doing it the typical way of buying stocks since stock prices cannot practically fall below zero.
Pardon the jargons; but get the simple message: to improve your mental being, get out. You can consider real estate, trade financing, etc if you do not trust the pros to run this shop for you. Good luck.
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This one will develop health challenges soon, if he doesn’t get himself out of the fine mess he’s in. It’s like those who think they have made some money and then start buying busses and trucks and handing out to drivers, as a way of starting their own micro transportation business. Every other week, they are exchanging curses with their drivers, holding each other’s throats, and when they feel like they are losing their minds, they ask the drivers to hand in the keys. These things usually happen because you don’t want to pay professionals to help you make more money, only to realize that you are no longer yourself.
Whether it’s stocks, transportation or real estate investments, you are likely better off handing them over to professionals to manage. Some even draft their own contracts without an input from a trained lawyer, all in the name of saving money. You either pay to learn what you don’t understand, or pay those who know it to run it for you. Do not be unfortunate.