Reaping the Reward – Kuwait Stock Exchange

Where there is a will, there is a way, definitely!

How often do we dig our hands deep into our pockets knowing that we have nothing in there, but desperately hoping to find something, anything?

I went through that phase, and was surprised where exactly I was able to find that extra bit of “loose change”.

The Stock Market.

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A while ago I had shared a few posts on the rules of engagement for trading on the Kuwait Stock Exchange (here & here).

Now, with all the economic fears in the world, and everyone crying “recession!” at each and every single problem, its hard to approach the idea of investing in the stock market with a sound mind.

Not if you apply this golden rule: invest your excess, a bit of your savings.

The beauty of investment is that it highlights the correlation between risk and reward. The more you invest, the more the pay off will be, especially if you are buying into “Blue Chip” companies such as banks etc.

Personal story, I bought a few shares in ALAFCO (Aviation Leasing and Financing Co) when I started for around 100fils each, a year or so later, I sold them all for around 200fils each. That is a 100% return, something that NO BANK OFFERS. Banks offer you a risk free interest rate, as you are not at risk of losing your initial investment (which can happen with stocks if the value falls below what you initially paid), but they offer something like 4% per annum, and that is for an ENTIRE year. You can buy stock and sell it the very next month for more than you paid. Its the market, its volatile.

There are two ways to make money off the stock exchange: value appreciation (you buy stock at 100fils and it reaches 200fils, you sell – the classic buy low, sell high), and dividends, which are the cheques shown above.

I had gone to Burj Ahmed a year or so ago and requested that all my earnings be deposited in my bank account directly. After reading that one of the companies I have invested in had declared dividend, and having waited over a year for that dividend to be deposited in my account, to no avail, I thought it best to pay them a visit once more.

The company in question was NBK, and my bank account is with NBK, so imagine my surprise when I’m informed that:

1) NBK does not transfer earnings directly, you have to go pick up the cheque yourself (i.e. NBK will not deposit its OWN earnings in your account in THEIR bank)

2) There was more than one cheque waiting for me!

People are under the impression that you need huge amounts of money to enter into the stock market. That is FALSE. You can easily start building a portfolio with 100KD and less, you would be buying odd-lot shares, true, but they would be in your name, and the dividends would be yours.

Think about it, the recession is the best time to buy and hoard shares for the future.

I will be resurrecting my Financial Column in 2012 to give people more accurate insight on the process of investment in Kuwait, how to start off. I will not be offering tips on when to buy and sell because I am not a stock analyst.

Onward with 2012.

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