MAW INVESTMENT THURSDAY

MAW INVESTMENT THURSDAY: The Chronicles of an Investor

Picture this: You put aside ₦1,000 every month for a whole year.

At the end of the year, you have ₦12,000. This is the savings culture most of us were brought up with. Unfortunately, it is not the wisest decision to take economically. Think about it, assuming annual inflation is 10% (it’s currently close to 12%). That means for that year the value of your ₦12,000 has lost 10% of its value ( ₦1,200). Your 12k is now worth ₦10,800 today.

If you’re wondering how? Think of it this way. Assuming a bag of rice was ₦12,000 last year. Due to food inflation, that same bag of rice would be worth ₦13,200 today. This is where investments come in. It’s good and all to build a savings culture, but what investing does is to grow your savings (wealth).

There are many ways to think of investing but before you do, consider the following:

1. Your risk tolerance (High, Medium or Low)

2. Your investment time horizon (short [1–3 months], medium [ 6–9 months], long [1 year +]

3. How much you want to invest (Small [0–100k], medium [100k — 500k], Large [500k+]

I personally use Wealth.ng and investnow.com for my investment needs as it allows me to track my overall portfolio.

Areas You can Invest In

Treasury Bills: These are government backed debt securities. The only way they default is if Nigeria should one day disappear from the face of the earth. Or if we go into war. So they’re the safest and deemed risk free. I recommend this for early investment starters.

Minimum investment: ₦10,000

Minimum Tenor: 30 days

Nigerian Treasury Bills Rate as at 20/01/2020

Agriculture: These products were developed to promote the agricultural investment landscape in Nigeria. They’re guaranteed by NIRSAL (Nigeria Incentive-Based Risk-Sharing System).This product is currently sold out. It attracts higher yields than treasury bills so would definitely recommend for people with low risk appetite.

Minimum Investment: ₦50,000

Minimum Tenor: 270 days

Equities: To understand equities, I need to explain how the stock market works. This is the riskiest of all the asset classes and should only be ventured into if you’ve done extensive research or with the help of a financial adviser. A has 1000 shares and the shares are trading at ₦100 each. Company A has a market cap of ₦100,000 (number of shares multiplied by share price). At the end of the financial year, Company A declares profit and issues a dividend of ₦10 per share. Your Dividend yield here is 10% (Dividend divided by Share price 10/100). After dividend is paid the new share price also known as your ex div price is now 90 (100-10 or share price - dividend). The dividend would be paid into your cash account. This is just one way of looking at stocks. The dividend yield investors.

Scenario 2. Company A during the course of the year announced its half year results and profit after tax grew by 20% year on year. People do their analysis and believe that ₦100 is an undervalued share price for Company A. They decide to buy the stock. A few days later the stock begins to rally and in no time Company A shares are now worth ₦130. That’s a 30% increase. Depending on what your strategy is, you can decide to sell or hold to see if the share price would rally more.

NOTE that it could also have dropped or Company A could have declared a loss so it’s a risk either way.

The Nigerian Stock Exchange has a rule that prevents the share price of a stock from going above or below 10% in a single day.

Minimum Investment: N/A

Minimum Tenor: N/A

You can also invest in; Real Estate Investments, Federal Government of Nigeria Bonds and EuroBonds ($).

You can access these investment products on www.investnow.ng or www.wealth.ng

Would you want to know more on how to make wise investments, log on to www.mawroyalmedia.blogspot.com or like our Facebook page facebook.com/mawroyalmedia.