How to Choose Shares on the NGX

How to choose shares on the NGX revealed. We have conducted a comprehensive study into how traders may choose the finest NGX-listed shares for their investment portfolios.

This is a complete guide to How to choose shares on the NGX.

In this in-depth guide you’ll learn:

• What is the importance of fundamental and technical analysis?
• How to Choose Shares on the NGX
• How to choose the Right Broker in Nigeria
• The Best Share Brokers in Nigeria

What is the importance of fundamental and technical analysis?

Different schools of thought, known as fundamental analysis and technical analysis, respectively, may be referenced by investors to make well-informed choices.

Whether it is stocks, commodities, or anything else traded on a regulated market, fundamental and technical analysis will help investors in deciding to purchase, hold, or sell.

How to Choose Shares on the NGX

Create a Theme for your Investment

As a starting point, some investors look for a sector or topic that is presently unpopular but has intriguing growth drivers.

Others try to find sectors with solid long-term foundations and plenty of space for expansion. Because of the large and rapidly growing elderly population, healthcare has been a hot topic over the last decade.

Thus, selecting a theme is the first step in narrowing down a large pool of stock options.

Analyze any potential stocks by using statistics

The market capitalization of the business, which is derived by multiplying the number of outstanding shares by the current stock price, is a typical metric for measuring the size of a corporation.

Based on the outstanding value of their shares, businesses are often classified as micro, small, medium, or large capitalization.

Most Nigerian investors are acquainted with household-name large-cap businesses, such as Dangote Cement (NGX: DANGCEM), MTN Nigeria (NGX: MTNN), and Airtel Africa (NGX: AIRTELAFRI).

In the early phases of a company’s or industry’s business or product’s life cycle, investors often anticipate very rapid growth in sales, profitability, and other important metrics. The growth rate of established enterprises is anticipated to be slower, but constantly increasing.

Growth also influences dividend distributions. Younger or high-growth corporations often reinvest free cash flow back into the business, while older companies may opt to pay above-average dividends using cash flow.

Financial ratios, such as liquidity ratios, debt ratios, and profitability ratios, are used to evaluate the financial status of a corporation.

Develop a Stock Screen for your shares

There are a few different professional software programs available for screening, and there are also a lot of brokerage businesses and websites that are devoted to financial media that supply a lot of this information.

Investors must decide on their objective for investing and once this is determined, they are free to choose different criteria and characteristics that will be analysed in the screening process.

View the Quantitative Factors

Dividends

Dividends are payments made to shareholders out of a percentage of a business’s profits that the firm has decided to distribute. They are one of the ways a shareholder might profit from an investment without having to sell any of their shares to do so.

Ratios

Nigerians must evaluate the following ratios:

• Price to Earnings or P/E Ratio is a useful tool for analysing the relative worth of different stocks within the same industry. It may also be used as a benchmark against which to assess whether a firm is now overpriced or undervalued.
• Debt-to-equity Ratio – You can learn about a company’s standing in the market by comparing its debt to its assets, and if the ratio is low, this might indicate that most of the company’s resources come from its shareholders.
• Earnings per Share or Earnings Yield is another value indicator, with a greater number indicating that companies are under-priced.
• Return on Equity or ROE is a percentage indicator of a company’s profitability according to its equity. Indicating whether the firm is self-sustaining in terms of return on investment for shareholders.
• Price Earnings to Growth or PEG compares the P/E ratio to the percentage increase in yearly EPS. Stocks with a low PEG ratio may be undervalued, therefore it is important to keep that in mind while selecting investments.
• Price to Book or P/B Ratio – Market value as a percentage of a company’s book value; sometimes written as P/B. Overvalued stock is often indicated by a P/E ratio over 1.

Balance Sheets

On the balance sheet of a corporation, all its assets and liabilities will be listed. Because it indicates the company’s potential for future profits, a stronger balance sheet will mostly result in a higher stock price. Nigerians must remember that the earnings will directly influence the value of shares on the NGX.

Earnings Releases

As a component of their fundamental research, traders and investors must keep a careful check on changes in the profits of respective companies.

If a company’s profits go down but the share price does not move to reflect the new level of earnings, the stock price may not accurately represent the company’s genuine worth.

Keep an eye on the Qualitative Factors

• Company News – Stock prices might increase or fall in response to news about the firm you are considering investing in. This is because people tend to purchase stocks in response to positive news and sell stocks in response to negative news. This impacts the market’s supply and demand, which in turn impacts the price of the stock.
• Personnel Changes – Investors should pay close attention to management and staff shakeups as these events could have a significant impact on the stock price. Changes in the leadership of a company can have a considerable influence on its stock price because of the perception of instability in management.
• Financial Events – Because of the potential for unexpected financial developments to increase market volatility and uncertainty, investors would do well to keep current financial happenings in mind while making stock purchases. Changes in interest rates, managerial changes, and major events like Brexit all have an impact on the economy.

Narrow the Options and Carry out an in-depth analysis to finalize your choice

Even after using screens, there is still a good chance that many businesses will satisfy your requirements.

To narrow the list down, some more inspection of the individual firms is required. This might include one’s degree of comfort with the sector, as well as personal or societal considerations.

When the playing field has been narrowed enough, it is time to conduct an in-depth analysis of the remaining companies using all the information that is readily available to the public.

This includes filings with the Nigerian Securities and Exchange Commission as well as websites dedicated to company or investor information.

How to choose the Right Share Broker in Nigeria

Traders could not have picked a more favorable time to enter the investment market than the present. Competition among online brokers is high, which means costs are dropping down and features are being boosted.

Those interested in trading global financial instruments could choose from a wide variety of online forex and CFD brokers. However, there are several factors to consider when choosing a broker and we will go through them here.

Commission Charges

Individual stocks, options, mutual funds, exchange-traded funds, and bonds are the main investment types offered by brokers. Some will also provide exposure to the forex market, futures trading, and cryptocurrency exchanges.

Both the suitability of the broker’s offerings to your investment requirements and the fees you must pay is dependent on the investments the broker has available. You should pay close attention to the commissions that are involved with the investments you like.

Overall Reliability

There is a diverse selection of brokers available. Several have been popular for many years, while others have just recently emerged.

That does not imply they cannot be trusted, but if they are managing transactions for clients, they are members of a self-regulatory organization like the Financial Industry Regulatory Authority (FINRA), the Financial Conduct Authority (FCA), and other regulators, or subject to additional oversight.

Account Fees

While it could be impossible to eliminate account fees, they may be kept to a minimum. To withdraw funds or investments, or to close your account, most brokers will assess a fee.

If a broker does not charge them, or if you do not use their optional services, you could avoid paying most additional costs.

Pricing and Execution on Trades

Cost is less of a factor today, leading to commission-free transactions becoming the norm at most brokerages.

However, you should consider the brokerage’s position on the controversial practice of paying for order flow and how much it costs before making a final decision.

This is especially true if you are an active trader who wants their deal completed at the best price possible, even if it means a difference of a few cents.

Additional Tools, Educational Materials, and Features

Look for a brokerage that provides free educational tools like live webinars, detailed how-to instructions, video tutorials, glossaries, and more if you are just starting in the investment world.

You should also look at the broker’s commitment to educating its customers about the inherent hazards of more complex trading tactics like options.

The Best Share Brokers in Nigeria

In this article, we have listed the best brokers which offer share trading to traders. We have further identified the brokers that offer additional services and solutions to traders.

Best MetaTrader 4 / MT4 Share Broker in Nigeria

Overall, OANDA is the best MT4 Share Broker in Nigeria. OANDA, a prominent online trading platform and broker, provides clients with access to several markets and a broad variety of trading services.

Traders could use any of the three retail accounts they provide, in addition to MT4, the popular OANDA platform, and any market they provide access to.

Best MetaTrader 5 / MT5 Share Broker in Nigeria

Overall, AvaTrade is the best MetaTrader 5 Share Broker in Nigeria. MetaTrader 5 is one of the several trading platforms available to AvaTrade users.

More than 300,000 traders use AvaTrade as their broker of choice because of the wide variety of financial instruments they have access to.

Best Share Broker in Nigeria for beginners

Overall, IG is the best Share Broker in Nigeria for beginners. All Nigerian traders are welcome at IG, no matter their skill level or trading preferences.

IG’s 0.1-pip DMA spreads, a wide variety of trading instruments, and wealth of news, research, and educational items make it a top pick for traders of all skill levels.

Best Low Minimum Deposit Share Broker in Nigeria

Overall, Alpari is the best Low Minimum Deposit Share Broker in Nigeria. Over two million users use Alpari’s services from one of eight locations on three different continents. It is simple for Nigerian traders to register an account with Alpari and invest as little as 2,000 NGN.

Best ECN Share Broker in Nigeria

Overall, Admirals is the best ECN Share Broker in Nigeria. All types of traders can open one of Admirals’ six retail accounts, which provide access to Market and Exchange execution.

Because of the reliable liquidity, traders could count on a complete absence of spreads and absurdly low commission fees.

Best Islamic / Swap-Free Share Broker in Nigeria

Overall, InstaForex is the best Islamic / Swap-Free Share Broker in Nigeria. More than 7 million traders have signed up with InstaForex to take advantage of their dynamic trading accounts.

Muslim traders may take advantage of favorable market conditions and a wide range of financial goods

Best Forex Trading App

Overall, FXTM is the best forex trading app. Trading on the go has never been easier than with FXTM’s dedicated mobile trading app for Android and iOS.

The FXTM Trader makes it easy for traders to initiate and exit positions, see quotes, and perform a wide range of other tasks.

Best Lowest Spread Share Broker in Nigeria

Overall, XM is the best lowest spread Share Broker in Nigeria. With an XM account, you never have to worry about going into the red, and you may trade with a zero-pip spread.

Several types of accounts are available, and traders are not restricted in their choice of strategy by XM.

Best Naira Trading Account Share Broker in Nigeria

Overall, HFM is the best Naira trading account Share Broker in Nigeria. After 12 years in the company and 55 awards, HFM has earned a solid reputation as a premier CFD and Forex broker.

In a matter of minutes, Nigerian traders can open a trading account at HFM and begin trading using NGN as their base currency.

Best Nasdaq 100 Share Broker in Nigeria

Overall, Exness is the best Nasdaq 100 Share Broker in Nigeria. Even though Exness does not provide a wide selection of trading instruments, it does offer traders favourable terms on the goods it does offer. Traders should expect reasonable spreads from 0 pips and low commission fees from Exness.

Best NDD Share Broker in Nigeria

Overall, FP Markets is the best NDD Share Broker in Nigeria. Traders using FP Markets have access to a wide variety of goods as well as many trading platforms, including MT4 and MT5. Traders who sign up with FP Markets, a reputable NDD broker, get access to a wide range of share CFDs.

Best STP Share Broker in Nigeria

Overall, Markets.com is the best STP Share Broker in Nigeria. The STP and ECN broker Markets.com offers two retail accounts, both of which have access to market and instantaneous executions.

Markets.com does not charge any commission fees as the broker’s fee is included in the spread, with spreads from 0.8 pips on major instruments such as EUR/USD.

Best Sign-up Bonus Share Broker in Nigeria

Overall, FBS is the best sign-up bonus share broker in Nigeria. FBS is well-known for its many trading options and account types. FBS’s upgraded trading app and trading conditions are complemented by its no-deposit bonus and other sign-up bonuses.

Conclusion

When building a portfolio, investors should take their time and use caution when choosing stocks. One may increase their chances of success in the market by deciding what is most important to them in an investment, doing their research, and sticking to the regulations.

Consider signing up with a reliable online FX and CFD share broker, such as the ones described in this article, and making use of their demo trading and live trading services.

Frequently asked questions

How can first-time investors in Nigeria’s stock market get started?

The most straightforward route is to open a trading account with a stockbroker authorized to trade on the NGX on the traders’ behalf.

Could I buy a single share of stock in Nigeria?

This is possible, yes. Of course, if the share does not do well, this might result in a loss. For optimal portfolio diversification, it is best to buy stock in a wide variety of firms and industries.

How can I tell whether I should sell a share?

If you uncover a more lucrative investment opportunity elsewhere, or if you want to engage in a short-selling trading technique, selling your shares may be an option to explore.

Does Nigeria have its own stock exchange?

Nigeria indeed has its own stock market. Market capitalization-wise, the Nigerian Stock Exchange (NGX) is now the continent’s second largest.

If I live in Nigeria, can I invest in US stocks?

If you open an account with an international CFD broker like AvaTrade, Exness, or HFM, you could trade US equities from Nigeria.