If the readers of this book intend to invest in shares, they should first ask themselves the following questions:.
(a) Can I afford to have my savings tied up for a long period of time, maybe for years?
(b)) Am I willing to accept the great uncertainty of return that is inherent in share investment?
(c) Am I willing to forego the prospect of a reasonable regular income from my investment?
As you can see, these are not easy questions to answer “Yes” to. Some of us are naturally conservative. If you cannot answer an emphatic “Yes” to all three questions, then the stock market is probably not for you. There are alternative investments such as fixed deposit, National Savings Bank and life insurance. I am reminded of the story told of the investment advice from J.P. Morgan (the richest man of hlS time in the US). A friend of his who was heavily exposed to stock investments came to seek his advice because the latter could not sleep at night through worrying about his investments. J.P. Morgan advised him to sell his shares to “the sleeping point”. That is, he was advised to sell off as much of his shares and invest the proceeds in safer investments as necessary for him to be able to sleep soundly at night. For many of us, the “sleeping point” may be very high indeed (50 per cent? 80 per cent? 100 per cent?).
But if you are still interested in share investment after the previous warning, the rest of this article is designed to equip you with sufficient knowledge so that you can reduce the uncertainty and increase your return. It will not be short or easy but it certainly will be interesting and may even be rewarding.