Step-by-step guide on how to invest in the USA Stock Market from Nigeria. See the best US stock brokers that accept Nigerians here and how to get started.
Investment is one ticket that is best known for taking people to the world of wealth. Investment in its simplest form can be said to be the putting of one’s money into commercial endeavors, financial schemes, stocks, shares, bonds, properties, or any other form of the financially feasible process with the sole aim of making profits.
Investment has been around for years and has helped a lot of people to climb to the zenith of the financial ladder. In this article, we will be focusing solely on the form of investment called stock exchange with emphasis on how to invest in the US stock market from Nigeria.
Nigeria as a developing country with a currency that is always taking a dive against the dollar was not a country in which one can reside and still have access to the stocks of top companies located in the US. Before now, investing in the US stock market was a very difficult process not just for Nigerians alone but for Africans as a whole.
It involved the use of an international broker who on a minimum, will require a valid US visa or a green card before carrying out the transactions for a fee. This aspect of investment was thus limited to the rich people in the society, partly because of the high amount of money required to start the investment.
The advent and continuous progression in technology have dislodged this barrier which kept Nigerians from tapping into the US stock market. With the use of investment apps, anyone can trade with the US stock exchange from Nigeria completely at the comfort of one’s home, with just a mobile phone or laptop.
What is a Stock Market?
A stock market just like the local market where we go to buy our Garri, periwinkle, and other foodstuffs, is a market where people who buy stocks connect with people who sell the stocks. It is basically where the selling and buying of stocks take place.
The US stock market is known to be the biggest stock market worldwide. It accounts for over 50% of the stock market value in the entire world. The total market cap of the New York Stock Exchange (NYSE) and NASDAQ is about $40.2 trillion. This is very large compared to that of the Nigerian stock market which is capped at $38.3 billion in total.
Definition of Common Terminologies
To fully understand the stock market, it is important to know what the terms commonly associated with it means. Below is a list of the commonly used terms associated with the stock exchange.
Common Stock: according to the New York Stock Exchange, common stock is a stock that translates to the partial ownership of the company. It is issued by the company as a form of security and it remains the most frequently issued type of stock to date.
An owner of a common stock gets a variable return in profits along with the possibility of running at a loss should the stock lose value. He or she gains as the company’s revenue increases and vice versa. Common stock confers a voting right on the owner. This comes in handy when there are issues in the company that require voting.
Preferred Stock: In preferred stock, the owner gets paid a fixed dividend (profit) regardless of whether the company is making profits or running at a loss. Unlike common stocks, it does not confer the right to vote on company issues on owners. The disadvantage of buying a preferred stock is that if the company records a tremendous rise in revenue, the owner will still receive the fixed dividend rate.
Broker: a broker is an individual or firm who buys and sells stocks, shares, bonds, etc. on behalf of a client and gets paid a commission or a fee for it.
Blue Chip: A company that has a history of remaining profitable even in the presence of unfavorable economic conditions, is regarded as a ‘Blue Chip’. Stocks like this are offered by reputable companies with high-quality products.
Money Flow Index: this is a number that shows the demand for a given company’s stock. It ranges from 0 to 100. A value greater than 80 shows that money is flowing into the stock with the demand exceeding the supply whereas a value less than 20 shows that money is rapidly flowing out of the stocks and that the stocks are being oversold.
Bull Market: this term is used to describe the stock market when its value is rising.
Bear Market: this term is used to describe the stock market when its value is falling.
HOW TO INVEST IN US STOCK MARKET FROM NIGERIA
Investing in the US stock market requires the use of an investment app. An investment app is a mobile app that serves as a platform for people to buy and sell stocks as well as track their profits. It is through this app that one can access the US Stock market in Nigeria.
The most popular ones are discussed below:
Trove is an investment platform that helps Nigerians who are interested in creating wealth for themselves through the stock exchange, to buy and sell their stocks or shares. It is a digital investment platform that allows one to invest in stocks, bonds, exchange-traded funds (ETFs), and other securities simply with the help of a mobile phone.
To invest with Trove, you need to download the app, sign up and then fund your account. Android phone users can get the app from Playstore while iPhone users can get the app from the Apple app store.
To buy a share on Trove,
- Search and select your desired company.
- Click on the ‘Buy shares’
- Enter the number of shares you want to purchase
- Click the button that says ‘Proceed to payment’
- After reviewing your order on the confirmation screen, click ‘confirm transaction’ and agree to the terms of the transaction.
- Click continue and that’s all there is to it.
See Also: How to Become a Stockbroker in Nigeria
Bamboo is an Investment platform that grants Nigerians access to about 3,000 stocks listed in both Nigerian Stock Exchange and the United States Stock Exchange all through a mobile phone. If you’ve always wanted to buy shares from top companies like Nike, Apple, Facebook, Twitter, Tesla, Amazon, etc. all you need do is download the Bamboo app, sign up and then fund your account.
Android phone users can get the app from Playstore while iPhone users can get the app from the Apple app store .
After funding your account, you can proceed to buy stocks. To buy stock on Bamboo, do the following
- Decide on the company you want to buy your stocks from.
- Go to the details page of the stock and tap on ‘Buy’.
- Select your funding option of choice and input the details of your order
- Click on ‘Review Order’ and tap on ‘Buy’.
Passfolio is a San Francisco-based fintech company that provides a digital platform that enables people from over 170 countries of the world to have access to the US stock market. Passfolio can achieve this feat through the help of two of their fully owned subsidiaries – Passfolio Securities and Passfolio Financial.
To invest with Passfolio, you need to download the app, sign up and then fund your account. Android phone users can get the app from Playstore while iPhone users can get the app from the Apple app store.
After funding your account, you can proceed to buy stocks. To buy stock on Passfolio, do the following:
- Click the ‘Discover’ tab and search for your desired company. You must have done all your research on your chosen company before this process. The platform allows you to either input the number of shares you want to buy or input your desired investment amount in USD to get a stock equivalent.
- Select the stock you want to buy or sell and then click on ‘Trade’.
- Type in the amount you are willing to buy or sell either in shares or in dollars.
- Confirm your order and that’s all.
The risk involved in buying stocks
The stock exchange is not without some risk. Come of them can be so serious that a company ends up closing down. Below are the common risks associated with the stock exchange:
- Commodity Price Risk
Commodity price risk comes into play when there is a fluctuation in the price of the commodity thus affecting the stocks and business as a whole. When there is a drop in the price of commodities, companies that use such commodities as input will benefit. In the same vein, companies that sell commodities will benefit when there is a hike in price, but suffer some loss when the price drops.
- Headline Risk
This is the risk that comes with the company or its top executives getting involved in a nasty scandal. The kind of news circulating in the media about a company can drive down or shoot up its stock value. All companies are liable to headline risk as the world is now globalized by the internet. A typical example of headline risk is seen in the case of the Managing Director of First City Monument Bank who was accused of ethical misconduct at the workplace for getting a married co-worker pregnant twice. This news took a toll on the stocks of FCMB, thus prompting the bank management to announce the suspension of the MD till after investigation.
- Legislative Risk
Laws and policies made by the government can either favor or stand against the progress of a company. In the case of the latter, the company’s stock will suffer a fall in price.
- Returns are not guaranteed, you could lose all your money especially if you’re not planning for a long-term investment.
- Risk of inflation
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