Nigeria's stock market: 5 Things Investors Shouldn’t Do Now

By Anchoria Investment

No doubt, the Nigerian capital markets also follow the bandwagon by reacting to pressures from global markets. The decline of our capital markets is a macro reaction to the Chinese sell off to global stock markets. Traders feared that slowing growth in China, the devaluation of the Chinese currency and the overhang of too much debt could stifle global economic recovery.

Here are five things you should know about how not to react.

Chief Dada, Anchoria Chairman

1 Don't fixate on the news.
The more often you update yourself on the market’s fluctuations, the more volatile and risky it will appear to you.
2 Don't panic.
While stocks are certainly not cheap, they aren’t wildly overpriced, given today’s levels of interest rates and inflation.
3 Don't be complacent.
You should use the latest turbulence as a pretext to ask yourself honestly whether you are prepared to withstand a much worse decline.
4 Don't get hung up on the talk of a "correction."
A correction is typically defined as a decline in price of 10 percent on a widely followed All share index. The term doesn’t have official status, however; until fairly recently, declines of 5 percent and even 15 percent or 20 percent were often called “corrections.” A market decline of 10 percent has no real significance in and of itself. What matters is the outlook for the future; that doesn’t depend on whether the market is down 10.2 percent rather than 9.8 percent.
5 Don't think you or anyone else knows what will happen next.
After a market drop, or at any other time, no one knows what the market will do next. The one thing you can be fairly sure of is that the louder and more forcefully a market pundit voices his certainty about what is going to happen next, the more likely it is that he will turn out to be wrong. Stocks could drop another 10 percent from here, or another 25 per or 50 percent; they could stay flat; or they could go right back up again. Diversification and patience — and, above all, self-knowledge — are your best weapons against this irreducible uncertainty.