Investing in the stock market is one of the smartest ways to grow your money over time. But for many beginners, it can also feel confusing. With so many companies out there, and lots of technical terms, how do you know which stock to buy?

This guide is written to help you understand how to pick strong, long-term stocks using clear steps. Whether you’re investing from Nigeria or anywhere else, these principles are simple and easy to apply.

1. Start with Your Goal

Before picking any stock, ask yourself: “Why am I investing?”

Your answer matters. Your goal affects the kind of stock you should buy and how long you’ll hold it.

Here are some examples:

• Long-term growth: You want your money to grow over the next 5–10 years.

• Dividends: You want regular income from your investment.

• Short-term gains: You want to make profit quickly (though this carries more risk).

📌 If you’re saving for something soon; like rent or school fees, stocks may not be ideal. Stocks can go up or down quickly. But if you’re planning for retirement or long-term wealth, they’re a great option.

2. Pick Companies You Understand

You don’t have to start with big international companies. Begin with what you know.

Think about:

• What products or services do you use daily?

• What Nigerian companies do people trust?

• What banks, telecoms, or food companies have been around for years?

Start researching companies like GTCO, MTN, Dangote Sugar, Nestlé Nigeria, or Zenith Bank. These are familiar brands, and it’s easier to understand what they do.

📌 The more you understand a business, the easier it is to judge whether it’s doing well or not.

3. Check the Company’s Health

Now that you’ve picked some companies you understand, it’s time to check if they are doing well.

Look at these three things:

Revenue and Profit: is the company selling more and making money? You want a company that earns more year after year—not one that’s struggling.

Debt: How much money does the company owe? If it has too much debt, that can be risky.

Track Record: Has the company been around for a while? Does it have stable leadership and a good reputation? You don’t need to be a finance expert. You can find company reports on sites like:

• Nigerian Exchange (NGX)

• Nairametrics

4. Understand the Industry: Even if a company looks strong, its industry might be in decline. So ask:

• Is this industry growing or shrinking?

• What’s the future demand for its products?

• Are there new technologies affecting this business?

For example:

• Telecoms are growing as more Nigerians use data.

• Oil companies may face challenges with the shift to clean energy.

• Fintech is booming with companies offering loans, payments, and savings via apps.

📌 Choosing a strong company in a growing industry increases your chances of success.

5. Avoid Overpaying

Even good companies can be bad investments if you buy their stocks at a high price.

Let’s say you want to buy suya. You know it usually costs ₦1,000, but someone wants to sell it for ₦4,500. Would you buy it? Probably not.

Stocks are similar. You want to pay a fair price.

To check if a stock is over- or underpriced, investors use simple tools like:

• P/E Ratio (Price to Earnings): This tells you how much you’re paying for every ₦1 the company earns.

• P/B Ratio (Price to Book Value): Compares a company’s price to the value of its assets.

Compare these ratios to similar companies in the same industry. If one is far higher, it might be overpriced.

📌 Cheap doesn’t always mean good. And expensive doesn’t always mean bad. You’re looking for value—what you get compared to what you pay.

6. Diversify Your Investments

The saying goes: Don’t put all your eggs in one basket.

If you put all your money into one company and it fails, you lose a lot. But if you invest in different companies across industries, one bad stock won’t ruin everything.

Here’s how to diversify:

• Invest in different sectors (e.g., telecom, food, banking).

• Consider mixing big and small companies.

• Spread your investment over time—not all at once.

📌 Diversification helps protect you from big losses and gives you a better chance at stable returns.

7. Keep Learning and Stay Updated

Buying a stock is not a one-time event. You have to keep watching it.

Things change:

• New government policies can affect industries.

• Currency changes, inflation, and elections can impact the stock market.

• A company might release good or bad results every quarter.

Stay informed by:

• Reading business news 

• Watching our stock recommendation updates

• Watching earnings reports and company updates

📌 An investor who keeps learning is more likely to make good decisions.

8. Be Patient and Consistent

Picking good stocks isn’t about luck. It’s about learning and making smart decisions over time.

To summarize:

1. Know your goal

2. Choose companies you understand

3. Check their finances

4. Look at the industry

5. Don’t overpay

6. Diversify your portfolio

7. Stay informed

Don’t rush. Start small. Ask questions. Read regularly. In time, you’ll become more confident, and your money will start working for you.

Ready to start investing? Download ARM ONE from Google Play Store or App Store to get started today. 

For further enquiries, visit; armseccustomerservice@arm.com.ng