Penny penny makes many

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- Saroj Wagle, Kathmandu

Feb 8, 2019-

To highlight a quote by Warren Buffett, “Rule No. 1: Never lose money. Rule No 2: Never forget rule No 1.”At our fingertips are three important things for every human being: namely physical body, intelligence and time. Let’s profoundly use them in our life. While investing in the share market, we should use our intelligence too. For our securitiy, it  is important to think carefully when deciding when to buy and when to sell. Practically, one should know much about the share market while buying or selling shares. Rather, just simply believe in word of mouth. Needless to say, the value of any investment is a function of the price we pay for it.

A few years ago, I had the chance to invest in the share market at a time when share prices were pretty favourable for shareholders (in terms of good returns). Nowadays, when I look at the share market, I see that it is on an increasing trend. On September 15, 2017, market capitalisation of the companies listed on the Nepal Stock Exchange was $17.3 billion.

Time has really changed in terms of market volume, market factors, investor perceptions, listed companies and overall funds. Why do we only talk about investment in terms of foreign interests?

In the share market, fundamental and technical analyses play a very significant role when it comes to buying and selling shares. On the one hand, a fundamental analyst starts with the financial statements: by carefully  looking at the corporate balance sheets, cash flow statements and income statements. A fundamental analyst tries to determine a company’s value. Technical traders, on the other hand, believe there is no reason to analyse a company’s fundamentals because there are all accounted for in the stock price. Technicians believe that all the information they need about a stock can be found in its charts.

By researching and monitoring a dynamic mix of shares, mutual funds and bonds, one can create wealth, and it requires no further effort. However, Benjamin Graham writes in his book entitled The Intelligent Investor, ‘It takes lots of time and energy as we deeply understand market environments.’

No matter how defensive an investor, is, today’s value means that we must keep at least some of our money in the share market. Unfortunately, due to poor knowledge regarding the share market, people are not interested in investing.  Hence, we should change our mindsets. Lastly, I would like to say that we should make a

systematic investment plan when it comes to allocating small amounts periodically instead of lump sums. On top of that, I sincerely believe in this old saying while investing: Penny penny makes many.

Published: 08-02-2019 13:09

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