Monday, 28 November, 2022

Investors must be aware of risks before investing in stocks

BASM Director General Dr Toufic tells the Daily Sun

Investors should learn the rules of the game and be aware of the risk factors before investing in the capital market, Bangladesh Academy for Securities Markets (BASM) Director General Toufic Ahmad Choudhury has said.

The BASM Director General said that retail investors are the lifeline of the market only when they are fully aware of the risk factors.

“We sometimes have challenging experiences in the capital market. It happens due to lack of knowledge-sharing among investors as the regulations only are not sufficient for good governance in the market, which depends on the performance of individual companies,” Dr Toufic said during an interview with Daily Sun at his office in the city.

Prime Minister Sheikh Hasina inaugurated the BASM in 2019 as part of the government’s vision to promote financial literacy among retail and institutional investors in the capital market.

“We have provided free sessions for the investors to make them more aware of the latest development in the market. Financial issues are not getting priorities in our academic curriculum,” he said.

Dr Toufic believes that an investor should not focus on the capital gain in the short term as the securities market normally provides higher returns compared to the money market.

“The investors should be prepared for tackling the risks and financial education can contribute to such preparedness. They should control the greedy mindset,” he said.

Before leading the BASM, Dr Toufic was the director general of the Bangladesh Institute of Bank Management (BIBM), the top government academy for banking executives.

“There is a lack of integration among the banking, securities and insurance in the financial system of Bangladesh. The financial system has a natural process of integration. The money market should confine to short time finance. If anyone needs long-term finance, they should come to the securities market,” he said.

According to the expert, banks and insurance companies have an unknown fear to focus on the securities market.

He also said the investors should know about the annual reports of the companies he or she subscribes to in the capital market.

“The modality of banking finance and securities finance is different. In the securities market, all investors should have mental preparation for risk factors. However, banking finance is not risky at all,” added Dr Toufic.

Dr Toufic also expressed hope the securities market will be vibrant in the near future when retail investors will go for mutual funds rather than instant capital gain in open trading.

BASM provides training on economics for the capital market along with compliance, operations and financial instruments for authorized representatives, investors and directors of companies.