Woman, please invest!

I listened to Sade Adu’s ''sweetest taboo’’ recently and nodded my head in soothing appreciation to this old classic tune. What ever happened to fine music of the 80’s? They don’t make music like this anymore.

Sade has great talent backed with amazing vocals and wish she would release another inspirational album soon. Women are doing big things these days and more women are breaking barriers.

The world is fast changing, just like the investment world is rapidly changing but sometimes wonder why few women invest in the stock market. Seriously, the old days of putting money in a savings account and watching its slow interest growth drowned by a higher inflation rate is over.

We are in the age where technology keeps blowing the minds of many, and an artificial intelligence app can monitor all your investments and trigger when to hold or sell.

“I am afraid that I will lose my hard-earned cash”, is actually the most common answer I receive when I ask a woman why she keeps all her money in a savings account. Sometimes, she may continue by saying “I can’t be bothered really, I can just pile it up in my account, that way I know it is safe’’.

Others will say ''The market is unwelcoming, male dominated and full of jargon’’ while some even feel the investment services advertised all around are not aimed at them. This is why an investment service aimed solely at women to educate them about finance and investing will do well in Nigeria.

Some women think this is a risky thing to do and would rather remain in their comfort zones. A comfort zone is a beautiful place to be, but nothing ever grows there. In life, you have to grow and evolve, just as the world evolves around us. Do not remain static, else, the world leaves you behind.

The major reason why I invest my money in the stock market instead of leaving it in the equivalent of cash in my bank account is because I am so risk averse. Following my educational and experience, I believe a woman who doesn’t invest is actually taking on more risk than I do, because if she loses her job for example, she probably would have nothing else that would generate income for her. She then dips her hands into the savings till it probably dries up. What if her husband is facing a similar challenge and unable to sustain her? It becomes a battle.

Also, according to the National Bureau of Statistics, Nigeria’s inflation rate has been dropping consistently for the past four quarters. Inflation is an economic tax and if you put money in a savings account, the economic tax you pay exceeds the return from your savings account. To ensure that your return is higher than the economic tax you pay, it is wise to put your money in an investment that pays you more money with more favorable returns.

The first step is to make up your mind that investing in stocks is an area you would like to explore, and then take up steps to learn about it. With this mindset, you will be on your way to having a winning portfolio.

Here, we equip you with tutorials, recommendations and market news to help you become a seasoned investor. Fear not woman, take up the challenge.

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Don't entertain fear

I saw the movie ‘’Justice League” recently and it delivered just what it promised; excitement, adrenaline rush and the desire for more. I am not usually a movie fanatic, but this by far surpasses any fictional movie I have seen in a while. I hear Thor is good too, but I am yet to see that.

Justice League is basically about the formation of an unprecedented league of heroes who recruit a strategy to fight against a newly awakened enemy who has tried to instill fear and pain into citizens of that nation while stealing their mother boxes. The mother boxes are major sources of power and unity and the enemy stole this before they formed the rescue league to retrieve them back to their community.

Fear is healthy. It is an essential instinct that has kept humans alive. We all know that gut-level feeling of fear, followed by a reaction of fight or flight. When fear strikes in the investment world, we often see investors trip and stumble as the urge to flee takes over. A race for the exits can be costly, and with the benefit of hindsight, is often the wrong reaction.

When the market gets scary what other option can one employ rather than fleeing the scene? People new to investing in stocks associate it with intense feelings of fear and stress. Investing in anything, especially the stock market, when you don’t know anything can be scary and incomprehensible. Learning how to invest and understanding what you are investing in will give you the confidence you need over time to start putting your money into the stock market.

When a car is overheating for example, and suddenly goes up in flames, there is a natural instinct of fear and flight for safety and self-preservation, but not all unsettling situations require flight. If we immediately run from every loud or unfamiliar noise, we would probably be on the run all day long.

Imagine waking up on a Saturday morning and the first headline you read in the dailies is ‘’ Largest investment bomb, profits vanish’’, that would scare any investor and prompt irrational action. However, the thoughtful investor puts these scary events into perspective and processes the facts, before taking action.

There are a few tips you can use to eliminate fear, and subsequently become a successful investor in Nigeria and around the world. The first tip is to educate yourself. Having knowledge is an essential asset to becoming successful. When you are educated on the market, and learn what to watch for, you will gain an understanding of when to buy and sell and feel more comfortable making decisions.

You need to set reasonable goals. Ask yourself this question: Where do you see yourself in five years? Setting goals allows you to overpower fear with determination. Once your desired outcome is set, you put yourself in a compelling and motivational place to achieve those goals. You must also have an investment strategy to work with. When you have a plan, your strategy must be comprehensible enough to enable you execute it. Here, we equip you with tools and resources that will help you achieve your goals.

Sometimes not everything goes as planned, so don’t feel discouraged. There is always room for improvement and as long as you do not let fear cripple you, you become like the heroes in Justice League who didn’t allow fear cripple them. They fought back and retrieved the mother boxes which brought back hope and unity to their community. Kick against your fears for beyond them lies greatness!

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Strategy is Key, Even at the Bus Stop

I was at the very popular Obalende terminal, when a slim lady, probably in her mid- 20’s, walked past me in a jolting manner. She carried a rather heavy bag, almost resembling the size of a 25 liter jerry can and managed to lift the daunting weight through the crowd. Her movement was rhythmic, almost as though she was walking the runway at a fashion show, and the next minute the rhythm would stop and she would continue in that jolting manner. Again, she would drop the bag, sit on the luggage for a short while, and then continue with the journey.

I watched her from the entrance of the terminal to where she was, and observed in more detail how she carried the bag, looked around and continued in the same jolting manner. I almost could not predict what she was going to do next, as almost immediately, she screamed loudly at the bus driver who was beckoning at her to hurry up.

What actually caught my attention was the similarity her display had to the stock market. I almost could not predict what she would do next and this is typical of what you get when trying to forecast the stock market. Stocks are turbulent and unpredictable in nature and it would take careful research and analysis to understand some market trends.

I was with my colleague from work and as we made our way into the bus, I noticed how occupied the bus was, almost full, to its maximum capacity, and how everyone was trying to rush into it to get a seat. To give you a clearer understanding, this bus plied my daily travel routes, was notorious for having nearly damaged seats and the decent seats were the ones directly behind the bus driver. We had waited faithfully for thirty minutes for the bus to arrive and in that time had calculated our strategy on how to get the desired seat that was not damaged or broken.

This is where my investment management training comes to play. When the bus arrives, we don’t just board it. We must have calculated how to achieve our goal, which is similar to what an investment counselor would do when working with his clients. Short term goal is to get the seats behind the driver, so we can sit comfortably on the way home and talk about work. Our long term goal is to stay abreast with the industry working out strategies on how to dominate the market.

Why do we refer to dominating? Well, while we are both innovative, analytical, and risk tolerant we also have liabilities. Our liabilities? We are both short sighted and wear glasses and coincidentally we both need a change of lens, as it is not clear enough to spy out the bus at a far range to keep us on our marks. I also do not have a huge body frame to push people out of the way and neither does my colleague have a face to scare people away.

Since we are both constrained by this liability, we have come up with our own little plan to achieve our goal. What we have is our strategy and this is what would see us through. As with every investment, strategy is key. Yes we hear it all the time that ‘past performance is not an indicator of future success’. This quote shows up after any promo for investment advice, which means that the past really isn’t a good indicator for the future. This does not mean that you should not have a strategic plan. Remember, strategy remains the key!

Sometimes it’s not easy to analyze these things and some critics would say that sector rotation in the stock market is rigorous. They say some stocks would win in one week and lose the next week and consumer staples would win in another week. Truth is it’s a vicious cycle but then again, it’s probably because they haven’t really been to the bus stops to see the number of people with hungry and tired bellies waiting to get home. The traffic to get through is a topic for another day, and the random nature of buses that arrive at the terminal daily is another thing to reckon.

Sometimes I feel the bus that I have placed my stake on doesn’t come often enough. The buses pull in at random but cannot leave the terminal till their seats get filled up, maybe because they came in too early. This is the same as stocks, they cannot rise without a catalyst, so also the bus drivers cannot leave the terminal until their buses are filled up.

Sometimes there are erratic drivers who would pick up a few passengers and then leave the terminal to pass through strange routes to avoid traffic. Just as an upgrade or tip of from an influential analyst can spark a run off in the stock market.

Other times , there would be fairly sane drivers who would remain calm until their buses get filled up and would pass the mapped out routes, thereby making the bus’ destination obvious. Just when I think that I have perfected my analytical and prediction skills, the bus develops a flat tire and the driver does not have a spare one.

Haha, there goes my prediction skills, I didn’t see that one coming!

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Passionate about football?? You'd make a Great investor!

The thought of investing in the stock market scares away lots of people. Many get nervous thinking about it like it’s some alien concept. This need not be the case. Chances are that you are already making investments in other areas of your life with a deep sense of commitment. The fundamentals are the same.

Following a football club is one of such areas. Have you ever encountered a circle of friends discussing the performance of their favourite team? They discuss with zeal. They spend a lot of time researching players, deciding which player will fit the team’s philosophy and recommending who the club should buy or sell in the next transfer window.

Some go as far as betting their lives on the outcome of games based on the confidence they have in their analytical skills.

If you find yourself deeply involved in football in this way, with the patience to follow through season after season then you already have what it takes to be a good investor.

Investing in stocks is not much different from investing your time following a football club. In following stocks, however your analysis and recommendations actually count - you’d no longer be frustrated with Arsene Wenger for not listening to you! More importantly you stand a chance of making money investing your time in analysing stocks.

A real football fan understands that football requires diversification and depth. While football is ultimately about scoring more goals than your opponent, a team with only good strikers but no strong midfield or defence has no good chance of winning trophies.

In the same way, a good stock portfolio needs to be diversified. It should have different stocks playing different roles to help achieve the ultimate goal of net gains. It should consist of different types of stocks - growth stocks as well as income stocks - in different industries.

You can think of the growth stocks as the strikers in football. These are stocks have a promise of high capital gains for your portfolio. They would typically be stocks with high price earning (P/E) ratio.

While it is good for a team to have high quality strikers, the team must be prepared to handle a counter-attack successfully so it doesn’t suffer a sudden loss while focused on trying to score lots of goals.

For this the team needs a reliable midfield and defence to fall back on. In the same way, your portfolio needs a fine selection of reliable stocks to fall back on when things get tough. These will usually be blue chip companies. They don’t necessarily promise high capital gains but their stability means your overall portfolio can stay sane when the market goes crazy. Also, stocks like this usually pay dividends regularly to give you a steady stream of income.

From time to time there is a need to strengthen the team by buying one or more new players. Each player is chosen after assessing the needs of the team, the players strengths, past performance etc. Sometimes the new player brings the expected change and fresh energy needed to improve the team, at other times the new player turns out to be a disappointment.

You have probably heard this quote many times: “Past performance is not an indication of future performance”. This is true in football as well as the stock market. One good example is a striker called Fernando Torres. He had an excellent scoring record one season at Liverpool FC, and was bought by Chelsea FC for a record fee the following season. Unfortunately, he failed to live up to the hype at Chelsea and hardly scored goals. He eventually had to be let go by Chelsea to make room for other strikers.

Some stocks may behave the same way when they are added to your portfolio. When this happens, you have to take the decisive step of cutting your losses and getting rid of them. This might be an important step to improve the overall health of your portfolio.

Although you can do a lot of planning, analysis and preparation, when it’s game time, chance becomes an important player. Some games are charged with more emotion than the norm, the referee can be in a mood to dish out cards for almost no reason and these factors can change to outcome of the game in unpredictable ways.

The stock market is not much different in this regard. There are times when unfounded rumours, panic and speculation drive things crazy and the script fails to go according to plan.

Fortunately, each season consists of very many games and there are a few trophies up for grabs. A few bad days are inevitable. The teams that are balanced and smart enough to consistently improve and adapt their game to changing circumstances will have a better chance of winning trophies.

Perhaps you have invested a lot of time and emotion in following your favourite football club simply for bragging rights. Why not channel that energy and enthusiasm to investing in stocks? You have what it takes to be a great investor!

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Tips for Nigeria investors

For those heavy on stocks, below are some of my opinions on current happenings and what I think you should be aware of (be prepared for, be not caught in a surprise about).

1. Global financial markets have been awash with cheap money and government funded assets purchase pushing assets value (bonds, equities, derivatives etc except a few commodities).

The result is that very many assets are selling at prices above their usual long term average

2. Frontier markets, where we fall in, have been somewhat insulated from these global assets over-valuation due to our uncorrelated risks factors -- political, commodity, currency etc.

However, due to the low activity levels of our financial markets, how much impact the foreign money movements (that are actually small in global relative scale) have in our markets and how little those movements correlate with actual fundamental values of our assets, our markets can be affected by these global markets issues.

3. Currently our stocks are fairly priced (not over priced as those in the developed markets) but still carry a considerable risk of going down due to the global assets sales US, EU and Japan central banks are embarking on.

These activities will jolt the market and most likely bring a price correction (a sort of painful reversal to mean) that often leads to foreign investors pulling money from emerging and frontier markets to "safe" assets like Gold, Bonds (especially as the US rates are rising).

Also, factor in the usual outflow around our election period.

4. If you are stocks heavy and might need to meet some financial obligations that may mean using some of your stocks money soon (technically speaking, less accommodating of volatility), you should rethink your portfolio now and do an optimal mix of assets type.

I am putting money I may need this year and next year in low volatile (actually, high-yield savings type) assets.

5. If you have foreign investment assets, then you need to take these current happenings really seriously. Think through the impact of a likely market correction to your investment assets and your ability to handle the outcome (losing or not losing your sleep).

Also, think about the opportunities that a market correction will present. That's my favourite part, the opportunity to buy cents on a dollar value.

6. We are fortunate in Nigeria. High ranking hedge fund managers, Vanguard fund managers and celebrity status investment managers in the developed countries seldom do as well as our money market returns.

Even, academic and research publications extolling the superior returns of stocks investing over other investing vehicles (real estate, bonds etc) always state that the S&P 500 has a long term returns of 9% annual rate.

To grow your money in Nigeria, you just need to have a good savings habit!

Yet we get way more than that in our money market. And with the magic of compounding that means your money doubles every 7 years for a 10% return rate and every 5 years for a 15% return rate. That is a very big thing that turns to pure magic if you save/invest periodically (monthly or quarterly). It is called the magic of compound interest.

So, to grow your money in Nigeria, you mostly just need to have a good savings habit.

And about the effect of inflation, in reality, it is not as terrible for an individual as it is often painted.

Beyond a few multiples of your autonomous consumption (living expenses), the effect is very muted for an individual. If you have N25 million growing at 10% yearly and your yearly living expenses are N1.5 million, even if inflation rate is 15%, it will take decade(s) before it will ever affect you.

The problem is if you borrow money, then the effect is greatly accelerated as you must pay positive real interest rate on the loans taken.

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How to teach your children to be investors rather than spenders

During my interaction with students in high school, I discovered that most teenagers are clueless about investing. They get an “A” for knowing how to spend money, and many work hard for income, but few know how or why they should invest in stocks, mutual funds, or index funds. Typically, most teenagers haven’t thought about building wealth by paying themselves first. This is a consequence of the wrong orientation about money.
Sometimes the biggest obstacle to making money is our perception. We believe investing is rocket science, or something that only professionals can do. By giving your children the confidence to manage and invest their own money, they can learn to be financially independent with the freedom to do what they want in life.
Do you want your children to be spenders or investors? In reality, they can be both. Before your children get their first credit card, show them how to make money work for them by investing.
Here are some actions you can take if you want your children to build wealth:
1. Teach them how to save: You can channel their cravings for material things like toys into an opportunity to learn how to save. You can provide piggy bank for them and encourage them to put out some amount of money periodically until the piggy bank is full. Then, they can go ahead to acquire whatever they want. I can remember vividly how we used to construct wooden containers popularly known as "save" mostly at the onset of the ember months. Then we save all the monies given to us by our generous uncles. During Christmas, we break open the "save" to know how much we were able to accumulate. Often we were astonished by the amount we saved. That singular act thought me the importance of savings. It equally increased my craving for investment. Kiddies find such ventures exiting.
2. Teach them with stories and pictures: Have you ever wondered why kiddies texts are filled with stories and pictures? The answer is not far fetched. They learn more when you tell them stories. To make the learning process more fun, you can use diagrams to illustrate the connection between savings, investment and financial prosperity.
3. Teach them the principle of compounding: the concept of money making more money was once regarded (by Albert Einstein) as the eighth wonder of the world. Kiddies should be taught how money "grows" through compound interest.
4. Keep it simple: It'll not make any sense to them if you start by  telling them about stocks, bonds, mutual funds etc. Rather, you can start by teaching them how they can save money and how to use the savings to have ownership stake in the company that produces their favourite toys.
4. Practice what you preach: Children learn a lot by observation. So, you can't be teaching them how to save and invest when you're financially irresponsible. You can't teach them how to be prudent when your spending and indulgence is out of control. Your lifestyle should be a lesson to them.
Indeed, the confidence and knowledge to invest is a critical gift to your children.

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If you can't save, please read this!

Ordinarily, savings means regularly putting aside a portion of the money you are given or earn in a safe place that pays interest.

We live in a society enmeshed in consumerism. Everyone crave for societal recognition by indulging in mindless acquisition. The importance of savings had been so relegated, especially among the youths. I keep wondering how far this generation can go in wealth creation with this poor attitude towards savings and investment. 

It is high time the young ones stopped believing that savings and investment are meant for parents alone. It is time to key into the financial system by adopting savings culture and other financial management techniques that would help secure our future. Imbibing sound financial principles at an early age would go a long way to help students and young ones manage their resources effectively, appreciate how money works and how it can be channeled to productive ventures now and in the future.

Saving money from early age guarantees financial independence, prudent management, planning and overall success of individuals and society.

The money saved should be placed in a financial institution for safekeeping and to earn interest on your money. But remember that the interest on your savings should be above inflation rate. This reduces the risk of spending, theft and gives your money the chance to grow. Savings is a precursor to investment. 

Conceptually, investment is the acquisition of assets (real or financial) for income generation and capital appreciation. I also consider intellectual property an asset. The economic growth of any society is hinged on the depth of investment of the people. On the other hand, the depth of investment is determined by the people's propensity to save. Any society with poor savings culture is doomed to remain in economic stagnation. Sadly, this is the situation in Nigeria. Our propensity to consume is on a stratospheric increase while our propensity to save is cascading rapidly. 

There is need for the young ones to change this tide. It's time we realize that economic growth is not determined by how much we make but how much we save. We can only invest when we have robust savings. It is impossible for a society without savings culture to grow. 

Fortunately, there are institutions with great commitment to drive and deepen prudent and effective management of resources among the populace, especially youths. Prominent among them is Investment One Financial Services. 

Investment One is a financial power house in Nigeria, a former investment arm of Guarany Trust Bank. They're registered with Securities and Exchange Commission as Fund managers and stock brokers. They have a number of financial products tailored for different category of investors. This investment bank is involved in securities brokerage, fixed income and mutual funds investment. These funds are invested in stocks and other money market instruments like government treasury bills, company commercial papers, FGN bonds, state development bonds etc. 

The following funds are professionally tailored to meet the needs of young Nigerians who are keen on preserving and stealthily growing their capital;

Abacus Money Market Fund is an open-ended Investment Scheme with competitive returns. A diversified portfolio with investments in quality money market instruments, short term debt securities, such as banker’s acceptances, Commercial papaers, and treasury bills.

The Investment One Vantage Balanced Fund (VBFUND) is a balanced mutual fund that was created to maximize long term capital growth and maintain regular income.These funds are invested in Equities, Fixed Income, Money Market and Real Estate.

In 2017 alone Abacus money market fund and Vantage Balance Funds  both managed by Investment One Funds Management returned 17 and 25 percent per annum respectively to their investors as interest income. Interest are paid on quarterly basis. There's also provision to reinvest earned interest.  No commercial bank can beat that. Most commercial banks pay between 3 and 4 percent per annum on savings account. 

 I enjoin everyone to key into this avenue provided by Investment One financial services to invest in our financial market and reap the benefits therefrom. Being a participant in our financial system provides an amazing opportunity to fully understand how the principle of compound interest works. It enables us to earn a decent income while learning financial management from a practical perspective. 

I want our youths, who are the hope and future drivers of Nigeria, to understand and appreciate the importance of prudent management of resources and other initiatives that have the capacity to positively impact lives and by extension, the society. This is to ensure their financial security and independence in future.

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