Many questions on the post on the recent market cap acceleration of banks traded in the Nigerian stock exchange. Yet, I am not saying that people should go and start buying bank stocks because of the optimistic exuberance in the market.
Simply, before you go into investing in companies (banks and others), determine where you are, and most especially how you plan to design your portfolio. In the world of stock market investing, there are three types of investors:
-Growth Maker: you buy low and wait for the value of the company to grow quickly. Say, you came in at N4 per share, and hope it rises to N20.
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-Value Picker: they focus on extremely beaten down equities. Think of people who bought some airline stocks at the peak of the covid-19 knowing that everything will be fine one day. Think of John Templeton who bought valueless stocks as World War 11 heated up, holding them, and then became the stock picker of the 20th century.
– Income Chaser: these people do not necessarily care if the value of the stocks they hold go up or not, their major focus is the company’s ability to pay dividends. Most are retired people and they focus on fixed income since they’re no longer working. So, getting dividends will be the only way to run their lives. To do that, they buy companies which pay dividends because they need cash once in a while to operate.
As an ex-banker (a really good one, trust me), my message is clear: before you buy shares of any company, take time to design what you expect your portfolio to look like. That portfolio management is important. Do not just buy A, B, C, etc without a coherent strategy. That also applies to broad investment. I see people put money in real estate and yet cannot pay school fees in 6 months, despite knowing that real estate may not be evidently liquid. The smartest investors have clear portfolio strategies in the assets mix equation. Good luck as you invest to secure the future.
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