The global markets present a rare opportunity for individuals to make returns from investing in forex, stocks, and ETFs. Kenyans looking to enter this space are attracted to it for a variety of reasons. Firstly, advancements in technology now mean that to invest in a foreign market, you don’t need a broker domiciled there. You can do it online. Secondly, it gives them a high-yield investment option compared to low yielding investments such as bonds. Thirdly, they get more control over the actual investment than they would in other investment classes. Lastly, they can scale it up or down as they wish. They can invest small amounts or large ones, depending on how much capital they have at their disposal.

This has opened up many possibilities for individuals who want to dabble in the global markets. Yet, promising though it may be, novice investors experience several challenges when entering this space. The most common one is lack of knowledge, which ultimately leads to negative returns. They also have to grapple with the proliferation of unregulated, oftentimes fraudulent, players in the industry, who make off with their capital and leave them with no means of redress. There is also the matter of risk, with stocks and ETFs being considered high-risk investments.

As a would-be investor, what should you consider in order to avoid the above issues and become a successful online investor:

1. Educate yourself

Going in blind is probably the mistake that hurts first-time global markets investors the most. Individuals go in with dreams of minting money from the trades they plan to execute but do very little homework. They might get lucky once or twice, but will inevitably make losses, ending up frustrated or disillusioned.

This can be prevented by learning from other experienced traders, taking an investment class, or studying global market dynamics before investing a shilling in it.

2. Pick a legitimate global markets vehicle

With so many firms purporting to give access to the global markets, Kenyans would be surprised to learn that only four are currently licensed by the Capital Markets Authority (CMA). Potential traders have two options: using a registered, non-dealing platform such as that provided by EGM Securities, Pepperstone Traders LTD and Scope Markets KE, or engaging a licensed online trading money manager, such as Standard Investment Bank.

Non-dealing firms simply provide a platform for you to trade. Through them, you can access forex, CFDs and commodities markets on a global scale. Once you create an account with them, you can trade as you wish. On the other hand, an online trading money manager is licensed to trade in these spaces on your behalf. They apply their expertise to make you a profit, and could be a great option for someone who doesn’t know much about investing.

Before joining any platform, check the CMA website to verify that it has been licensed to offer you such a service. If not, you should probably take your money and run; else you might lose it.

3. Trade while applying investment principles

Having taken the time to learn about the global markets and chosen an appropriate platform, the only thing that’s left to do is trade. Ensure you apply sound investment principles to protect your capital and maximize returns.

An important one is portfolio diversification, which basically means spreading out the capital across several assets so that a loss in one asset class is mitigated by gains in another. You should also consider opportunity cost and sunk cost bias, capitalize on compound interest and strive to manage risk.  

Having applied all the three, you are well on your way to being a seasoned global markets investor.

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