SETTING INVESTMENT OBJECTIVES

One of the reasons why people lose money on the stock market is that they do not set investment objectives.Myles Munroe once said:"if the purpose of a thing is not known ,abuse is inevitable".This is the same way with investing on the stock market.If you have not set an objective for investing then you are likely going to fall into error.One of the questions you must ask yourself before you buy any stock is : why am I buying this stock?This is because your objective of investing will determine the kind of stocks you buy and the time you buy it.Here are some of the investment objectives I believe you can set for yourself before you buy any stock.

Regular income(Dividend)If your reason for investing in the capital market is to get dividend and regular income then you should consider stocks of companies that pay dividends regularly to their shareholders .It is advisable to buy these stocks when they are selling at their all time lowest or when you feel the EPS of the company has increased considerably and the price of the company is still low.Another tip for picking stock for regular income is to buy stocks during bearish period i.e when the price of the stock is under priced.

Bonus issues:If your objective of investing is to get bonus issues then you should buy stocks of companies that give out bonus issues regularly.There are some "crazy" companies like Guinness,Guaranty trust ,First Bank ,etc that have demonstrated an unparalleled commitment to shareholders wealth.These companies have it as a policy to give out bonus issues regularly. First Bank and Union Bank have given bonus issues for over 5 years consistently.You should however, note that procreation of shares or additions to shares reduces the ability of the company to pay higher dividends except the company is able to increase the profit of the company significantly.

Capital Appreciation:An investor who has capital appreciation has his objective for investing will do well by investing in under priced stocks or in stocks that have growth prospects.By under priced I do not mean penny stocks only because some stocks are actually not worth more than a penny.The investor will also do well by investing during bearish period and wait for the market to pick up.The EPS and the P/E ratio is very important here .If you know that the EPS of a company is higher than the intrinsic value of the stock, then it might be advisable to buy the stock.I will dwell more on this under "investing with numbers".

Directorship/control:sometimes you find out that the price of a stock is very high and people are still buying into the company.The large volumes and demand might be as a result of the quest of some people to clinch a directorship seat on the board of the company or those whowant to take control of the company.These people are usually ready to buy the stock at a premium because of the prospects or the intrinsic benefits of control.