Stockbrokers have called on investors to be cautious when they want to take investment decisions.
According to the General Manager/Chief Operating officer, Centrepoint Securities Limited, Mr. Jire Oyewale, investments in shares should not be based solely on profits declared by companies.
Oyewale, who spoke to our correspondent on Monday noted that it was the duty of stockbrokers to direct their clients not to put their funds in a stock because the price is high, or because the company declared huge amounts of profits.
According to him, “Any good broker would advise his client before he invests in any stock to compare the price of the particular stock that holds his interest, vis-a vis the price of other stocks in that sector, especially, the prices of the market leaders in the sector.”
Oyewale explained that in each sector of the capital market, there were some stocks which were the market leaders of such sectors, and was is left for the stockbroker and investors to study the behaviour of such stocks before decisions are made as to whether to invest in some other stocks in the sector.
“It does not make much sense for the price of a stock which is not a market leader in a sector to be higher than the price of the market leader in that sector. So, if an investor sees such a stock, it may be wise for him to take his time, before he invests in it.”
Oyewale said that it often happened that such stocks would not be stable in price, and their prices in the market would keep fluctuating, until it reached an equilibrium price, which would usually be in the range of the prices of the market leaders in that sector.
The Managing Director, Chief Executive Officer, Signet Securities and Investments Limited, Mr. Dipo Aina, also warned investors to act wisely when it came to investing their monies.
