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Is it time to invest in Cyprus stocks?

StocksWith major Cyprus blue chips having lost more than 50% of their value during the last two years, it is not uncommon to encounter people asking around if the time is right to invest in Cyprus stocks.

As an authorized investment advisor employed at a regulated Cyprus Investment Firm, which among others also does forex white label solutions, naturally I refrain from expressing my views in public, since based on clearly defined rules, all regulated firms first make sure that the advise and service they intend to provide to their clients is suitable to their needs. In order to determine this before we offer any opinion to our clients, they need to pass a number of tests to determine their knowledge of markets, investment objectives, risk profile, expectations, degree of diversification and other details that are necessary before one can express an opinion.

But there are a number of general rules that one may follow which over the long term can protect and give good returns.

One of the first rules for investing is never invest with money that you cannot lose. It makes a huge difference if as an investor you shall need the money in two months time to pay for your child’s tuition fees or if the money you are investing is excess capital that will not be needed for a long time.

When investing in stocks, its best to invest in major, well known stocks that are likely to withstand the crisis and in some instances, even if they run into trouble, because of their size, the government of that nation rushes to their rescue.

Then comes the question of whether or not the company in which you wish to invest is operating in an environment where there is growth or economic stagnation. After hitting a bottom in 2008-09, major developed economies have been growing at very satisfactory paces helped by cheap money offered by various central banks around the globe.

It is true that in Cyprus, during the past two quarters, the country recorded above expectation growth, but major Cyprus blue chips also have extensive operations in Greece, which unfortunately is bleeding.

Perhaps the most important element for a long term investor is whether the company in which you are investing pays a dividend, and if that dividend is rising and generated from surplus cash flow.

The dividend factor is very important since if you buy stocks that are trading at 8 to 10 times earnings, or are trading close to book-value, then the chances of capital gains over the long term improves.

But the dividend growth element is very essential. Because if you know that the company has a track record of increasing its dividends, you can reinvest and collect more dividends.

This is the practice known as “compounding.” It’s the safest, surest, best way to build wealth in the stock market.

I believe every investor can answer if the time is right to invest in Cyprus blue chips if they subject the major Cyprus stocks to the above questionnaire.

Disclaimer:

Shavasb Bohdjalian is an approved Investment Advisor and CEO of Eurivex Ltd., a Cyprus Investment Firm, authorized and regulated by CySEC, license #114/10. The views expressed above are personal and do not bind the company and are subject to change without notice. Investing in markets and trading on leverage is highly risky and it may not be suitable to all investors since it carries a high degree of risk and you can lose more than your initial investment.