OPTING FOR AN INVESTMENT STRATEGY.
Few years ago, precisely in the mid 80’s and early 90’s a popular TV soap opera in Nigeria BASSEY and CO, has a household phrase accredited to one of its dramatis personae named Mr. B, he was fond of saying, “if you want to be a millionaire, think like a millionaire!” should that be true, the mantra that success has a pattern stands tall.
Thus for any one aspiring to be anything, he must have an idea or someone he or she is looking up to as a guide. The field of investment is not left alone in this quest.
Not long ago, the Nigerian stock market experienced a boom with such frenzy as never before. Short term investments gave returns at an unbelievable positive rates. Even the foreign media joined in the hype as the market become the toast of all and sundry. Many financial tabloids were given birth to, many become stock analyst in both print and broadcast media. Stock marketers, promoters and stockbrokers had a field day even selling moribund company shares and private placements at premium price. Business was good.
When the ovation was loudest, the burble burst. That many lost money is to say the least. Crisis of confidence went on the prowl. Even new listings and good co-operate results could not lift the market. Calculations failed woefully.
Talking of investment and taking the stock market option, we will look at the investing strategies of the gurus in the arena. I will like us to look at the most successful stock investor. Utilizing the slogan, if you want to be a millionaire, think like a millionaire, lets look at a part, just a part of investment strategies of the Sage of OMAHA and the richest entity on planet earth, Warren Buffet.
Two major characteristics are found in his kitty.
buy and hold for a long term period
buying a fundamentally good stock below its real value.
Added to these two points are buying and going to sleep and even buying more if the prices were still on a downward trend.
The above mentioned formulae of investing has been mentioned more often but only a negligible few understands and uses it as it is required. Let’s take these two points one on one. What period is a long term? 6 months, 2,5,10 or 20 years? Any could be for an individual but an average gestation period is between 3 to 5 years.
Then, how and when can one buy a stock below its nominal value?
Option A, could easily be addressed, but option B is technically configured though on a common sense level. Warren Buffet is an American and trades in American, let’s take on his investment in BUDWEISER.
According to him, he only invests in companies he, himself understand their business. BUDWEISER brews a fine quality beer, has long established history, has a good market fellowership and remains innovative in its existence. Thus when their stock price was not attractive to the general public and all the good fundamentals were intact, it was the best time to move in.
Why did he move in? Once a good company is re-engineering, its stocks can be unattractive to the untrained eyes. Do we see when we can buy a stock at discount?
Let’s localize all these analogies.
Is there any replica of such in our dear country Nigeria?
Yes, Nigeria Breweries!
They have all the attributes of BUDWEISER. About five years ago, when the company was re-engineering, most people were not interested in their stocks. Just last year, it was selling at about N25.00 but now, it has moved above N50.00 returning above 100% less than two years.
As soon as the ground work is done, the stock has been fine and moving forward. Bearing in mind the above given analysis and our remarks at the beginning “wanna be a millionaire think like a millionaire”, Can we play the market here in Nigeria like Buffet? If he, the stock billionaire is about to invest in Nigeria which stocks will he buy?
Using the following guides:-
long sustained history
known and understood business
good network of distribution
excellent services
Urge to remain on top.
I can confidently say that he will invest in companies like FIRST BANK OF NIGERIA PLC, NIGERIAN BREWRIES PLS, DANGOTE SUGAR REFINARY PLC, COSTAIN WEST AFRICA PLC to mention but a few.
May I give you reasons why FBN must be in his portfolio, ten years of unbroken reward to investors in both bonus and dividends, slow yet steady service, a branch is always in your neighborhood, and an unalloyed urge to remain the big elephant.
Now coming home more, one out of every three fund managers have at least one of the five mentioned stock in its portfolio. Also, one out of every two fundamental investor has one of the five in his kitty. Children educational investments and that of retirement also have them in a good quantity.
Most stocks may have fast price appreciation, but many of them as history has it have not stood the test of time. They crashed and are swept away.
As Mr. B will always say, wanna be a millionaire, think like one.
The slogan slow and steady wins the race is still a golden rule.
Invest with the mind of millionaires and join the millionaires.
Send your comments to:- kings75a@hotmail.com
Tuesday, July 29, 2008
Monday, July 28, 2008
A CASE FOR THREE CLASSES
The Rich, Middle Class, Poor And Shares Investment.
“Most people struggle financially because they do not know the difference between an asset and a liability… Rich people acquire assets. The poor and middle class acquire liabilities but they think they are assets.” Robert Kiyosaki.
Let me start this edition with a categorization of the three financial classes we have in any society and why and how we will end up in any of these classes. The three classes are:
i) The Rich
ii) The Middle
iii) The Poor
The Rich: They have sustainable streams of income and can afford to meet every financial need of theirs and always have more than they need.
The Middle Class: This class can afford some few good things of life, but are limited by their income. They may not afford some luxuries and may never achieve FINANCIAL FREEDOM. Even though they may seem to be wealthy and comfortable, their income is limited, unsustainable and their net worth is not high. Most “big men” in our society pretend to be rich, but they actually belong to the middle class. Two factors that determine financial class are NET WORTH and INCOME SUSTAINABILITY. In other words, to distinguish between these two classes; calculate your worth after all your expenses and liabilities are deducted and also calculate how long your current worth will carry your current expenses and liabilities without you going broke. A lot of “big men’ do not have enough net worth to carry them for more than six months if anything happens to their current income.
The Poor: They are those who do not have any sustainable income and lack the capacity to meet their basic financial needs. United Nation actually categorise them as people who live below an income of $1 (#120) a day but I know that someone can have an income of #1,000 a day and still remain poor.
The difference between these three classes is what they do with their income. In other words, what we do with every kobo that comes to us today will quality us into any of these three classes.
THE SPENDING PROFILE OF THE THREE CLASSES.
The Rich: You will become rich if you spend more or most of your income acquiring assets. The rich acquire assets with their income. Assets like lands, commercially viable houses (not ones built in your village), shares, savings and fixed deposits, buying of shops whose value will grow overtime.
The Middleclass: You will be middle class if you spend your income on liabilities. The middle class acquire liabilities and think these are assets. Liabilities like cars, houses in the village, expensive clothes and lifestyle etc. We mistake these as signs of being rich, but they make us remain middle class. This is why we work or trade for over 20 years and cannot afford to retire as guaranteed multi millionaires.
The Poor: You will remain poor if you spend your income on expenses, trying to meet up with basic things of life like feeding, transportation, clothing etc.
ASSETS ARE THINGS YOU SPEND MONEY ON WHICH GROWS IN FINANCIAL VALUE AND ALSO GENERATE REGULAR, INCOME WHILE LIABILITES ARE THINGS YOU BUY WITH YOUR MONEY WHICH REDUCES IN FINANCIAL VALUE AND DO NOT GENERATE INCOME FOR YOU.
When you buy a car for #500,000, drive it for one year and decide to sell. You would have spent thousands in repairs and maintenance and will not sell the car up to the amount you paid for it. In contrast, #500,000 invested in shares for one year will gain some thousands of naira in dividend and grow in value by 20%, 30% or even 100%.
The Thrust of this article is to bring us to the realization that we can aspire to any financial class irrespective of which we are born into. Through deliberately choosing to pursue a goal of financial freedom, drawing up a realistic plan and executing it, we can achieve our aspiration to belong to the rich class.
In June 1980, in a village in this vicinity, Okeke Ezeuche, a Youngman of 30years had his wedding. After all the fun and merriment, he deducted his expenses from the monetary gifts he received and had a meager balance of #89.On his search for what to commit this little money into as a memorial, an Uncle advised him to buy shares of Nigerian Breweries. Few months later, he received a little sum as dividend and was told that the initial was still intact and has grown in value. He thought deeply and took a decision to form a habit of saving and investing a reasonable amount in shares yearly but his income as a village farmer was meager. He took care of his family’s need from his produce on the farm, while he harvests his palm trees and give the proceeds from that to his uncle who was quite knowledgeable in stock investments. Currently he receives nearly #1m in dividend every year and has a net worth of over #30million. This net worth will give him a return of not less than #3m annually without fresh investment, just sitting down in the village and having companies in Lagos and other parts of the country working and growing his wealth on his behalf. At age grade meetings and events, his peers who used to be “big men”, those so-called successful businessmen who drove the best cars in those days and built the best houses in the village are now a shadow of their old self and find it difficult to fuel and maintain the cars, houses and train their children in the university. But Okeke Ezeuche has sent one of his children to university overseas and has set up one of his graduate sons who decided to start a business with #2m start up capital. He settles his married daughters with #1m worth of shares at their weddings and changes his car every 3 years with dividend paid him by companies where he has shares investment.
To think that a villager could achieve this with palm nut proceeds is awesome and a pointer that anyone, anywhere can make it no matter how little our income. Civil servants, workers and businessmen and women are better positioned to achieve even greater things than this man with their higher and regular income. You must decide today to put a part of your income into shares investment on a regular basis. This is a sure way to join the rich class and bid goodbye to poverty or a middle class life
“Most people struggle financially because they do not know the difference between an asset and a liability… Rich people acquire assets. The poor and middle class acquire liabilities but they think they are assets.” Robert Kiyosaki.
Let me start this edition with a categorization of the three financial classes we have in any society and why and how we will end up in any of these classes. The three classes are:
i) The Rich
ii) The Middle
iii) The Poor
The Rich: They have sustainable streams of income and can afford to meet every financial need of theirs and always have more than they need.
The Middle Class: This class can afford some few good things of life, but are limited by their income. They may not afford some luxuries and may never achieve FINANCIAL FREEDOM. Even though they may seem to be wealthy and comfortable, their income is limited, unsustainable and their net worth is not high. Most “big men” in our society pretend to be rich, but they actually belong to the middle class. Two factors that determine financial class are NET WORTH and INCOME SUSTAINABILITY. In other words, to distinguish between these two classes; calculate your worth after all your expenses and liabilities are deducted and also calculate how long your current worth will carry your current expenses and liabilities without you going broke. A lot of “big men’ do not have enough net worth to carry them for more than six months if anything happens to their current income.
The Poor: They are those who do not have any sustainable income and lack the capacity to meet their basic financial needs. United Nation actually categorise them as people who live below an income of $1 (#120) a day but I know that someone can have an income of #1,000 a day and still remain poor.
The difference between these three classes is what they do with their income. In other words, what we do with every kobo that comes to us today will quality us into any of these three classes.
THE SPENDING PROFILE OF THE THREE CLASSES.
The Rich: You will become rich if you spend more or most of your income acquiring assets. The rich acquire assets with their income. Assets like lands, commercially viable houses (not ones built in your village), shares, savings and fixed deposits, buying of shops whose value will grow overtime.
The Middleclass: You will be middle class if you spend your income on liabilities. The middle class acquire liabilities and think these are assets. Liabilities like cars, houses in the village, expensive clothes and lifestyle etc. We mistake these as signs of being rich, but they make us remain middle class. This is why we work or trade for over 20 years and cannot afford to retire as guaranteed multi millionaires.
The Poor: You will remain poor if you spend your income on expenses, trying to meet up with basic things of life like feeding, transportation, clothing etc.
ASSETS ARE THINGS YOU SPEND MONEY ON WHICH GROWS IN FINANCIAL VALUE AND ALSO GENERATE REGULAR, INCOME WHILE LIABILITES ARE THINGS YOU BUY WITH YOUR MONEY WHICH REDUCES IN FINANCIAL VALUE AND DO NOT GENERATE INCOME FOR YOU.
When you buy a car for #500,000, drive it for one year and decide to sell. You would have spent thousands in repairs and maintenance and will not sell the car up to the amount you paid for it. In contrast, #500,000 invested in shares for one year will gain some thousands of naira in dividend and grow in value by 20%, 30% or even 100%.
The Thrust of this article is to bring us to the realization that we can aspire to any financial class irrespective of which we are born into. Through deliberately choosing to pursue a goal of financial freedom, drawing up a realistic plan and executing it, we can achieve our aspiration to belong to the rich class.
In June 1980, in a village in this vicinity, Okeke Ezeuche, a Youngman of 30years had his wedding. After all the fun and merriment, he deducted his expenses from the monetary gifts he received and had a meager balance of #89.On his search for what to commit this little money into as a memorial, an Uncle advised him to buy shares of Nigerian Breweries. Few months later, he received a little sum as dividend and was told that the initial was still intact and has grown in value. He thought deeply and took a decision to form a habit of saving and investing a reasonable amount in shares yearly but his income as a village farmer was meager. He took care of his family’s need from his produce on the farm, while he harvests his palm trees and give the proceeds from that to his uncle who was quite knowledgeable in stock investments. Currently he receives nearly #1m in dividend every year and has a net worth of over #30million. This net worth will give him a return of not less than #3m annually without fresh investment, just sitting down in the village and having companies in Lagos and other parts of the country working and growing his wealth on his behalf. At age grade meetings and events, his peers who used to be “big men”, those so-called successful businessmen who drove the best cars in those days and built the best houses in the village are now a shadow of their old self and find it difficult to fuel and maintain the cars, houses and train their children in the university. But Okeke Ezeuche has sent one of his children to university overseas and has set up one of his graduate sons who decided to start a business with #2m start up capital. He settles his married daughters with #1m worth of shares at their weddings and changes his car every 3 years with dividend paid him by companies where he has shares investment.
To think that a villager could achieve this with palm nut proceeds is awesome and a pointer that anyone, anywhere can make it no matter how little our income. Civil servants, workers and businessmen and women are better positioned to achieve even greater things than this man with their higher and regular income. You must decide today to put a part of your income into shares investment on a regular basis. This is a sure way to join the rich class and bid goodbye to poverty or a middle class life
LETS TALK OF TOMORROW
LETS TALK OF TOMORROW
Can you remember some years ago when your hands were waving on air in the class for an opportunity to tell your class teacher what you would like to be when you grow up.
Have you grown up?
So?
Have you become that?
That question was raised up in a group discussion. Guess what the answers were?
Baggage of excuses why many never did.
QUO VADIS?
That’s a Latin phrase which means “where are you going?”
Individually and collectively, where are you going?
If you do not know where you are going, then any road is most appropriate for you. Eventually, a nice circular motion is inevitable.
I recalled an exercise we were asked to carry out several years ago. Our only task was to draw up a list of our plans for the next six months, then upwards to one full calendar year and drag it down to the next five years. We were demanded to say exactly where we want to be specifically at the end of each of those periods. It was a moment of sober reflection as most of us saw it as a simple task yet unable to actually proffer answers to the challenge. My ability then to say for real what I will be in six months or one year then was strange talk less of the next five years.
How times flies with mortal men! Months ran into years, down the line, I came to realize that the question then was not where I was just going to be for the fun of it all but what I want to be. So it boils down to one thing, my VISION.
If I know what I want to be, then I can determine what I need to do to get there. This set of exercise was simply set to help us determine our goals, put plans in place to achieve them and to set our priorities right.
Having a vision of what you want to be is not as twisted as it sounds. Yet it remains elusive to a greater percentage of humans, only those who thinks and dreams can make it. It starts with having an idea that you personally consider to worth your pursuit. When this is done, it becomes your own personal goal. The next step is to put plans in place to hit your goals. Here lies the hardest of all the steps, the doing aspect of it all.
Attaining a single vision in ones life time may entail having several goals and therefore several plans. Setting the plans in motion may lead into taking unexpected turns. The road to success is never free of obstacles. To scale these obstacles naturally leads to taking unexpected turns. Events do crop up whereby ones plans are constantly aligned with that of other individuals or institutions which necessitates unexpected changes. However, with a clear vision of what you want to be, you will slowly and surely get to the destination point. Singleness of purpose and power of focus is all that you need.
Over time, the characteristic of an individual in pursuit of a given vision differs. Some start and maintain a slow tempo, achieving their tasks bit by bit. With this system it does not appear too daunting to move on. On the other side, many do take on theirs bullish. Whichever route you may have opted, time remains your only limited resource.
Whatever the mind can conceive, it can achieve. The ability to believe it and live it solely hinges on our constant reinforcing and reaffirming of those our lofty visions.
THINK DREAM DO.
Can you remember some years ago when your hands were waving on air in the class for an opportunity to tell your class teacher what you would like to be when you grow up.
Have you grown up?
So?
Have you become that?
That question was raised up in a group discussion. Guess what the answers were?
Baggage of excuses why many never did.
QUO VADIS?
That’s a Latin phrase which means “where are you going?”
Individually and collectively, where are you going?
If you do not know where you are going, then any road is most appropriate for you. Eventually, a nice circular motion is inevitable.
I recalled an exercise we were asked to carry out several years ago. Our only task was to draw up a list of our plans for the next six months, then upwards to one full calendar year and drag it down to the next five years. We were demanded to say exactly where we want to be specifically at the end of each of those periods. It was a moment of sober reflection as most of us saw it as a simple task yet unable to actually proffer answers to the challenge. My ability then to say for real what I will be in six months or one year then was strange talk less of the next five years.
How times flies with mortal men! Months ran into years, down the line, I came to realize that the question then was not where I was just going to be for the fun of it all but what I want to be. So it boils down to one thing, my VISION.
If I know what I want to be, then I can determine what I need to do to get there. This set of exercise was simply set to help us determine our goals, put plans in place to achieve them and to set our priorities right.
Having a vision of what you want to be is not as twisted as it sounds. Yet it remains elusive to a greater percentage of humans, only those who thinks and dreams can make it. It starts with having an idea that you personally consider to worth your pursuit. When this is done, it becomes your own personal goal. The next step is to put plans in place to hit your goals. Here lies the hardest of all the steps, the doing aspect of it all.
Attaining a single vision in ones life time may entail having several goals and therefore several plans. Setting the plans in motion may lead into taking unexpected turns. The road to success is never free of obstacles. To scale these obstacles naturally leads to taking unexpected turns. Events do crop up whereby ones plans are constantly aligned with that of other individuals or institutions which necessitates unexpected changes. However, with a clear vision of what you want to be, you will slowly and surely get to the destination point. Singleness of purpose and power of focus is all that you need.
Over time, the characteristic of an individual in pursuit of a given vision differs. Some start and maintain a slow tempo, achieving their tasks bit by bit. With this system it does not appear too daunting to move on. On the other side, many do take on theirs bullish. Whichever route you may have opted, time remains your only limited resource.
Whatever the mind can conceive, it can achieve. The ability to believe it and live it solely hinges on our constant reinforcing and reaffirming of those our lofty visions.
THINK DREAM DO.
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