|Investing In The
Global Equity Markets
An article by Shahid Naseem Akhtar
What are equity markets?
The equity markets provide the means for business owners to raise capital. They do this by selling a portion of their businesses to other interested parties. For anyone that has never invested in anything other than a bank deposit, equity investment promises to provide the thrill and excitement of a roller-coaster ride. The reason for this is that with equities, the value of the investments and any income accruing from them, may go down as well as up. Concept of risk
It is important to realise that all forms of investments carry a risk; sometimes, the full scope and nature of this risk is only visible to a trained eye. This is especially true with equity investments. As an overseas equity investor, you will encounter not only investment risk (associated specifically with the chosen investment e.g., the company whose shares you own goes bust), but also currency risk (unfavourable exchange rate movements that can serve to wipe out investment gains). Generally speaking, the greater the risk, the greater the potential gain. Investment strategy
Before embarking on any new investment programme, you must have an investment strategy. This is set based on your personal circumstances (e.g., age, marital status, family size), financial situation (e.g., income, savings, outstanding obligations), and the degree of risk you are prepared to undertake. If you are unable to formulate such a strategy yourself due to a lack of relevant knowledge, you should contact the "Investment Department" of any of the Kingdom-based banks; they can assist in this regard.Your investment strategy should also be revised periodically to take into account the change in your personal / financial circumstances. How and what to invest in?
How you proceed from here depends on whether you have the time, knowledge, and the inclination to select and manage your own investment portfolio. For the purposes of this exercise, potential investors may be grouped as follows:
Have some knowledge, but
unfamiliar with local conditions
Are knowledgeable and are
acquainted with local conditions
Dont trade- aim to buy a stock for the medium term (two to five years).
Unless you conciously wish to increase your risk (and hence your potential gain), spread your investments over many sectors and actual stocks - but beware of disporportionate trading costs involved in low-value transactions.
Research the company before you buy its stock dont buy on impulse.
Dont become emotionally attached to your shares if they are not meeting their objectives, get rid of them.
If the price of one of your shares changes dramatically over a short period of time, re-evaluate its inclusion in your portfolio.
Its generally not a good idea to buy a stock immediately after it has been tipped, as its price is marked higher before you can buy.
Unfortunately, this is a hit and miss affair. Your friends, colleagues, and associates should prove to be a good source of information concerning persons / companies that you can use as intermediaries. The magazines, mentioned above, should also prove to be a source of good information. Before you choose your intermediary, shop around, examine his track record, and then take the plunge. And finally
Most investors of the current generation have only really experienced "Bull Markets". These are periods where the share prices are consistently climbing. This is great because you invariably make profits, but you should be aware that a "Bear Market" (where prices are consistently falling) may be round the corner. Therefore, always act prudently.
Good luck in your endeavours and may the force be with you.