Investing in The Kuwait Stock Exchange: Know the Ropes

Most people will shy away from the stock exchange under the false pretense that it is unsafe, and that you will end up losing more money than you initially invested.

There is one simple response to the above fear; pure, unadulterated poppycock.

The above may be true for traders, who’s sole purpose in life is to live by the mantra of buy low, sell high on a daily basis, earning their bread and butter through the difference between the purchase price and the selling price.

What I am suggesting is an investment, for however long you wish, from your savings, not your monthly earnings. You end up reaping a much higher reward than the interest rate on deposits offered by banks, which is pathetic compared to the return available in the stock market.

The beauty about stock is that you own it. The problem with people is that they are impatient, and those two factors mixed together can be toxic at times. Imagine a trader buying shares at one price, watching them steadily rise, then they take a dramatic dive. Frantic, the trader immediately sells off, incurring a huge loss to his original investment.

The one point people do not understand is that ownership does not change, price does. If you purchased those shares they are yours, in your name, and you can hold on to them for as long as you want (or until the company goes belly up but that is a different story all together). Whether the price falls, or rises, those shares are yours to do with as you please. You could enjoy the annual dividend distribution (or payout if you will) in the form of cash or extra shares, or you could immediately sell your shares to someone else when the price hits a certain high.

When I started investing I said to myself, once a stock reaches 100% return, i.e. the price doubles from my initial purchase price, I will sell it off. With that strategy in mind, I did just that. However, I have also seen investments I have made drop by half, the most important thing to remember at that time is that this loss is on paper, or as auditors like to call it, unrealised losses. Once you take the decision to sell these shares, the loss is realised.

Follow an investment strategy of hoarding, buy shares in big companies such as NBK and Zain (from my experience, they have a good dividend payout in cash and shares, so your investment increases automatically every year), sit back and watch the money roll in.

If you invest from your savings, you will never lose. Apportion a percentage of it, or a lumpsum, and enter the stock market. With the right brokerage firm, you can do so for relatively nothing.

Tomorrow we will discuss the paperwork required to become a stock trader in Kuwait.

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