The active investor
June 18th, 2007 Ogbuotobo Chuks || chuks@stockmarketnigeria.com
By Ogbuotobo Chuks
Investment in the stock market as most people know is all about using money to make more money through making sound decisions that reflect the mood of the market. Such decisions may be based on fundamentals sentiments as the case may be. However I believe that there are two categories of investors in the stock market that can be classified as ACTIVE and PASSIVE in nature. Active investors however characterize the Nigerian market, and this would be our little subject of discussion today.
Active investing is more of a high risk kind of investing. Here, an investor is trying to beat the market average index for any particular period. For example, assuming the increase in market index, which measures the general increase in price fro the 1st quarter of 2007 was 28%, the active investor would probably have made at least 50% on invested capital within the same period. These results would be made possible by critical decisions that were made during this period.
An active investor believes that information not reflected in the current price of a stock will have some positive impact on the stock in the future. This also means that the investor researches a particular sector or company, thereby gaining some knowledge and future growth plans. As such the investor goes ahead to buy more of that particular stock.
The main goal here is to buy shares that are undervalued and sell them when overvalued, thereby beating the market. So, the question goes back to, you-are you an active investor?
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