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Michael Olafusi

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  1. Michael Olafusi

    Why I Invest In Stocks

    I invest in stocks because I thoroughly understand them. I do my own stock analysis (I even built this tool and this one too to help others with their own stock analysis); I teach financial modelling; I do projects for investment houses (currently working on a VaR, value at risk, model for a foreign investment corporate client); I have made enough mistakes over the last ten years that I now recognize the common pitfalls and what works. Most importantly, investing in stocks is a vital component of any very sound personal financial investment plan. Many of us work hard daily. Even after spending the first two decades of our lives in school and are now working full-time, many of us still do Masters, Ph.D and professional courses. We are constantly developing ourselves in order to increase our earning power. And some of us succeed very well. You now earn enough to cater for all your needs and those of your dependants with still some money left. And this is where many of us fail to do things right. When you don't have a sound financial investment plan, other people's plans look good to you. You will easily fall for the real estate salesman's talk about buying properties. You will feel left out when your friends are doubling their money in the latest investment scheme. Even the FGN savings bond will look heaven-sent to you. No matter how strong-willed you are, you will always be facing immense pressure as no financial investment plan is like a vacuum and difficult to keep that way. One day, you will break and go for one of the investment schemes you see your friends doing. And more often than not, you will get burnt and swear off any form of investment. Then the vacuum-struggle cycle restarts. I would advice that you rather fix the issue properly and permanently. Learn about proper financial investment. Take baby steps to practice doing the right thing. You will make mistakes but when you start the right way your mistakes won't be of the sorts that bring you down. I started with mutual funds, having professional investment managers do the bulk of my financial investment for me. Then I slowly started investing directly in stocks myself, the proper way. Before then, I got burned in the 2008 crash when there were radio jingles, billboards and TV adverts on buying stocks and every listed company was doing a public offer. I still remember the First Bank advert of their public offer at N31/share. My dad got charcoals from it, everything he put in completely burnt. I lost all I put in Mutual Benefits Assurance (minus the dividends they gave me in 2008) and Finbank. So I was much more careful to do things right and learn the proper way of investing. From 2011 to now, I have gained a lot of practical experience in managing my own financial investments. I have seen my money go up and down over the years. At first, I used to feel sick when I see it go down (especially just after I put in my money) but now I am very much used to it and see buying opportunities during market downs. I am following the get rich slowly mantra. I have my own investment plan and it excludes any get rich quickly scheme. All the double your money in two months or in one year schemes have no appeal to me. No amount of real world evidence of how well your real estate or bitcoin or XYZ scheme is doing can entice me. Not that I don't believe they work but because I have my own solid plans that I am executing religiously. If they work for you, great. Mine also works for me, though less impressively but I am contented. I simply work hard at my profession (data analysis) and invest the excess funds I have in the stock and bonds market. I also keep enough to cover my four months living expense in a high yield cash account (savings account) for emergency needs. I do both Nigerian stocks and US stocks. Same with bonds. I totally understand them. I don't panic. I have more peace of mind seeing my money work for me in those investments than having them lay temptingly in my bank account.
  2. (Originally posted: 5/10/2013) image: sporadicpieces.wordpress.com I hope you like the picture above. Well, I love it! It depicts the exact state I'm in: surfing the Nigerian Stock Market wave. Since 2008, the Nigerian Stock Market has been a tumultuous wave, wiping out investors and crashing portfolios. I lost all my savings too in 2008, but mine was a sadder case. I bought into the First Inland Bank public offer at N9.50 and they didn't send me a share certificate, I went to the Registrars and they couldn't locate my name in the records. My investment was gone forever, even if the market goes bullish again and the share prices double the pre-crash period, I stand to gain nothing. I was better off falling for those ponzi scams, the very ones I diligently avoided by buying shares myself. But I took it as a challenge and armed myself with finance and investment knowledge, reading over 10 books by finance professors and investment gurus. I came back, I saw and I won back all my loses. And now I'm just surfing the waves. So how do I pick winning stocks?In Nigeria, with the desert like state of the NSE; picking the right stock is extremely easy. And I will show you how. 1. Get a Punch Newspaper.Yeah, you heard me right. Get a Punch Newspaper. Turn to the NSE price list page, and write out all the stocks that traded over a 100,000 units that day. Then get 4 other Punch Newspapers, each for an entirely different month. Do the same thing for each. Now write out all the stocks that appeared in all your lists.The reason for this is you wouldn't want to be the big guy, the one moving the stock prices by your quotes. You would want to buy into companies that are very active on the NSE, companies with very liquid stocks, companies you can buy into or sell out of within a day and without causing a tsunami.2. Get their 5 years Annual ReportsIf you've been reading investment books or foreign blogs, you'll think 10 years is the ideal number. Well, you'll need to contact an Investment firm to get the 10 years annual reports of any Nigerian company, you won't find them online. So that's why I use 5 years. You can get recent Annual reports on my Slideshare Account 3. Do some AnalysesNow that you have the Annual Reports, you have to do some quick analysis to vet the list you have. You'll be crossing out all companies that have not grown Revenue year on year by at least 15%. Then you'll proceed to crossing out companies that have not grown profit year on year by at least 15% You'll also cross out companies that have not grown Earning per Share year on year by at least 10%You'll also cross out companies that have Return on equity of less than 10% Why? You might ask.Nigerian economy has been growing at over 6% Even terribly run companies in Nigeria have benefited greatly from this growth and manage to produce good looking annual reports.The Money Market will provide you about 12% rate of return on your money, and sort of risk free too.And if you are the patient type, you can get 15% buying Nigerian Government bonds (well, if you are not like me, I avoid any dealings with the government and wouldn't even rent my house to a government official). The only way the trouble of investing in NSE can be worth it is if you stick with my recommendations. There will be companies that will meet the strict requirements, Nigeria's economy is booming. 4. Vet the Income Statement, Balance Sheet Statement, Cash Flow Statements and Notes.By now you'll be down to a couple of companies, usually less than 10. For this process, you will need some knowledge of corporate finance and accounting.I use the data in the Balance sheet to rewrite the Income statement, the Profit and Loss statement. Then I use the data in the cash flow and notes to determine if there was any creative accounting done, the type of accounting I hate. This stage is the most critical, I have lost money in Oando because I didn't do this stage then. I simply swallowed the numbers in the annual report, I didn't know how to vet them. I later went for an online accounting and finance course, read all the books I could find/afford. Now I don't fall for creative accounting anymore, if you're feeding your growth with loans I will cross you out (I sold my shares in a company recently because they were doing so). In the end, the few stocks that will make it through will be just the ones worth your investment. 5. Buy at the right price.Now that you've identified the stocks to invest in, what's left is to buy now or wait for the right time. And in the current state of the NSE, this is one decision you'll find very hard to get wrong. I use a crude DCF calculation to determine the intrinsic price of the stocks that made it this far, and I apply a margin of safety that is very flexible. I will be explaining more on this part of stock investment later on in my Investment series. But a quick check is to not buy a stock that is selling at about 20 P/E ratio in Nigeria. You'll be paying an exorbitant price for the growth component.
  3. You can access the Excel file here: NSE Daily Trade Data The Market Highlights: The market was bullish today. The NSE rose by a whooping 2.10% (it has risen this high only five times this year and three of which were this month!). The market capitalization rose to N10.05 trillion and the index rose to 2,9064.52 The last time it got this high was on 1st of July, 2016 (almost a year ago!). Many stocks got to their 52 weeks high today: First Bank, Guaranty Trust Bank, Nestle, Pharma Deko, Presco, Tourist and Zenith Bank. The top gainers were: First Bank (10.14%), Oando (7.66%), Guaranty Trust Bank (5.00%), Ecobank (5.00%), Zenith Bank (4.99%), Flour Mills (4.98%), AXA Mansard (4.97%), Airservice (4.48%), Eterna (4.87%), PZ (4.76%), Jaiz Bank (4.40%), Fidelity Bank (4.12%) and Okomu Oil (4.11%). The top losers were: Mobil (-5.00%), Learn Africa formerly Longman Nigeria (-4.94%), NAHCO (-4.93%), Vitafoam (-4.92%), AFRPAINTS (-4.86%), Cadbury (-4.85%), NEM (-4.67%) and NPF Microfinance Bank (-3.82%). What do I think? I think this is just the beginning. Over the last 10 years, the economy has roared on and inflation has been double digits and company profits have been growing impressively but the stock market has been doing the opposite. Most companies are selling at huge discounts.
  4. You can access the Excel file here: NSE Daily Trade Data
  5. You can access the Excel file here: NSE Daily Trade Data
  6. I have problem with saving money. If I have more than N300,000 in my regular savings account, in 24 hours I will have a dozen different ideas of what to do with the money. Trying to permanently solve this problem was what motivated me to become a professional stocks investor some years ago. The only account I allow more than N300,000 in is my emergency account which I don't touch except there is an emergency. And my regular savings account? One good side of being a data geek is that I am excellent at budgeting. I have my expenses perfectly modeled and I always keep just what is sufficient for three weeks in my savings account. My income cycle is two to three weeks, being an entrepreneur in the consulting space. From what is due me, every extra above what is sufficient for four weeks, I put in my investment accounts which house a mix of Nigerian stocks, Nigerian bonds, US stocks, US bonds, Gold and two Nigerian equity mutual funds. So what stocks am I invested in? Nestle Nigeria: Over my investing years, I have analysed intensely the financial records of all the investment worthy companies on the Nigerian Stock Exchange from as far back as 2005 and none has an impressive one as Nestle Nigeria. Excellent cash flow management, lovely mix of debt and equity funding, satisfactory revenue growth rates and strategic positioning in their industry. Every year, I go through their annual reports and as long as the story has not changed for bad, I close my eyes to all the price fluctuations it is forced through on the stock market. Total Nigeria: Last month I sold Mobil and bought Total. I had made a good profit off the price surge in Mobil shares after the NIPCO acquisition and Total looked like a bargain in comparison. Total is the largest downstream oil company by revenue in Nigeria. Now they are trading at a deep discount compared to Mobil. So I saw more potential returns in deploying to Total the money tied in Mobil. Dangote Cement: It can be very difficult to love Aliko Dangote after hearing all the special perks he got from government to build the Dangote empire but one thing I can't deny is that he is a result-generating business man. I read the annual reports of many listed companies but none is as interesting and less generic as Dangote Cement's. I have learned some business strategies from reading the chairman's report while other companies' tend to have the usual soul-less talk about the macro economy and vague talk of their impressive performance (even when they make a loss). Reading last year's and the intelligent analysis of the African cement market with the company's detailed big strategy, it was like Dangote Cement is just getting started. He is the quintessential owner-manager who goes all length to make his business successful. Zenith Bank: I bought it after I panicked and sold my First Bank shares when they were taking too long to publish their last year annual reports. Now I am planning to buy First Bank shares again and try not to panic anymore. But I don't intend selling my Zenith shares either. Zenith Bank is doing impressively well, like GTBank but without the terrible customer experience GTBank is sharing. One almost sure way of ruining my day is having to do anything in a GTBank branch and if you ever need to get an issue resolved you can be sure that you'll get more inhuman policies thrown at you than the feeling of having another human being helping you. They've got solid walls between the employees and customers. See how easily I veer into giving damaging remarks about GTBank. That's how powerful the negative effect their lack of good customer relations leave on me. So I won't touch their stocks even with free money. My non-stock owning US Bonds: I sold off my S&P 500 ETF last year December and put half the fund into US Bonds. I believe the US stocks are close to experiencing a market correction. Vanguard Total International Bond Index Fund ETF: This is where I put the other half. It is a collection of non-U.S. dollar-denominated investment-grade bonds. Gold ETF: Two months ago I panicked and sold my Emerging Market Stocks ETF, putting the fund into Gold ETF. The Emerging Market Stocks were getting too positively correlated with the US equities market this year. So I decided to put it in the negatively correlated (to US equities) Gold ETF. Nigerian Bonds: Through Stanbic IBTC Bond mutual fund, I have some money invested in Nigerian bonds. I avoid the Money Market funds as I believe I will get better long term returns elsewhere. And how is my strategy of not saving but investing working out? I think very well. At least, I am more prudent in managing my income and immune to binge spending. Also, I have made some good gains in the stock market. What tools do I use in my Stocks analysis? Well, the annual reports of thelisted companies which I have nicely archived here; this lovely Power BI stocks analysis dashboard and the Nigerian Market Data office app.
  7. You can access the Excel file here: NSE Daily Trade Data
  8. You can access the Excel file here: NSE Daily Trade Data
  9. You can access the Excel file here: NSE Daily Trade Data
  10. You can access the Excel file here: NSE Daily Trade Data
  11. You can access the Excel file here: NSE Daily Trade Data
  12. You can access the Excel file here: NSE Daily Trade Data
  13. You can access the Excel file here: NSE Daily Trade Data
  14. You can access the Excel file here: NSE Daily Trade Data Board Security Day's Volume Open Price Close Price Price Change Change % 52 Week Low 52 Week High EQTY 7UP 12,445 99.75 99.75 -5.25 -5 74 159.9 EQTY ABBEYBDS 1.19 1.19 -0.06 -4.8 EQTY ABCTRANS 0.5 0.5 0.5 0.5 EQTY ACADEMY 100 0.5 0.5 0.5 0.69 EQTY ACCESS 25,728,054 7.58 7.21 -0.37 -4.88 4.3 7.69 EQTY AFRINSURE 0.5 0.5 0.5 0.5 EQTY AFRIPRUD 1,356,718 2.8 2.76 -0.14 -4.83 2.2 3.31 EQTY AFROIL 20.71 20.71 EQTY AFROMEDIA 0.5 0.5 0.5 0.5 EQTY AFRPAINTS 2.47 2.47 2.47 2.47 EQTY AGLEVENT 60,000 0.69 0.69 -0.03 -4.17 0.68 1.17 EQTY AIICO 898,150 0.56 0.54 -0.02 -3.57 0.5 0.85 EQTY AIRSERVICE 101,751 4.46 4.46 -0.23 -4.9 1.7 4.97 EQTY ALEX 9.27 9.27 -0.48 -4.92 EQTY ARBICO 4.56 4.56 -0.23 -4.8 4.79 4.79 EQTY ASHAKACEM 110,020 11.4 11.4 0.44 4.01 9.03 21.03 EQTY ASOSAVINGS 2,000,000 0.5 0.5 0.5 0.5 EQTY AUSTINLAZ 2.19 2.19 0.1 4.78 EQTY AVONCROWN 4,330 1.09 1.09 0.05 4.81 1.04 1.38 EQTY BECOPETRO 0.5 0.5 0.5 0.5 EQTY BERGER 3,426 6.17 6.17 0.29 4.93 6.08 8.3 EQTY BETAGLAS 5,200 45.88 45.88 -2.41 -4.99 28.88 48.29 EQTY BIGTREAT 0.5 0.5 EQTY BOCGAS 2,000 3.35 3.35 3.35 3.89 EQTY CADBURY 1,949,797 11.09 10.65 -0.44 -3.97 7.04 20.5 EQTY CAP 32,070 34.7 34.7 1.65 4.99 27.3 40 EQTY CAPALBETO 95.49 95.49 EQTY CAPHOTEL 3.65 3.65 3.31 3.7 EQTY CAVERTON 0.92 0.92 0.64 1.65 EQTY CCNN 886,450 5.02 5.01 -0.11 -2.15 4.04 8 EQTY CHAMPION 855,405 2.11 2.15 0.04 1.9 1.94 5.13 EQTY CHAMS 2,000 0.5 0.5 0.5 0.5 EQTY CHELLARAM 3.5 3.5 0.09 2.64 EQTY CILEASING 10,000 0.73 0.73 -0.03 -3.95 0.5 0.76 EQTY CONOIL 22,860 31.59 31.59 -1.66 -4.99 18.1 42.6 EQTY CONTINSURE 892,690 1.21 1.2 -0.04 -3.23 0.9 1.34 EQTY CORNERST 150 0.5 0.5 0.5 0.52 EQTY COURTVILLE 0.5 0.5 0.5 0.5 EQTY CUSTODYINS 263,818 3.41 3.41 0.16 4.92 3 4.11 EQTY CUTIX 59,367 2 2 -0.04 -1.96 1.35 2.13 EQTY CWG 2.54 2.54 2.54 2.54 EQTY DAARCOMM 0.5 0.5 0.5 0.5 EQTY DANGCEM 2,097,390 173.3 165.01 -8.29 -4.78 149.26 203.96 EQTY DANGFLOUR 2,678,495 4.3 4.19 -0.22 -4.99 3.38 6.12 EQTY DANGSUGAR 1,047,225 7 6.76 -0.35 -4.92 5.71 7.2 EQTY DEAPCAP 0.5 0.5 0.5 0.52 EQTY DIAMONDBNK 59,198,975 1.05 1 -0.05 -4.76 0.78 2.47 EQTY DNMEYER 0.87 0.87 -0.04 -4.4 0.67 0.99 EQTY DUNLOP 0.5 0.5 0.5 0.5 EQTY EKOCORP 2,000 3.05 3.05 -0.16 -4.98 3.21 3.37 EQTY ELLAHLAKES 4.26 4.26 EQTY ENAMELWA 27.87 27.87 -1.46 -4.98 EQTY EQUITYASUR 0.5 0.5 0.5 0.5 EQTY ETERNA 493,238 4.09 3.89 -0.2 -4.89 2.13 4.09 EQTY ETI 15,318,219 9.78 9.5 -0.28 -2.86 7.02 18.42 EQTY ETRANZACT 5 5 4 6 EQTY EVANSMED 0.5 0.5 0.5 0.5 EQTY FBNH 538,320,869 4.15 4.01 -0.14 -3.37 2.95 4.69 EQTY FCMB 45,459,401 1.11 1.1 -0.01 -0.9 0.92 1.87 EQTY FIDELITYBK 38,099,853 1.03 0.98 -0.05 -4.85 0.76 1.47 EQTY FIDSON 2,194,918 1.92 1.92 -0.1 -4.95 0.89 2.67 EQTY FIRSTALUM 2,100 0.5 0.5 0.5 0.5 EQTY FLOURMILL 3,655,384 20.34 19.33 -1.01 -4.97 16.2 24.54 EQTY FO 1,622,252 52.93 50.29 -2.64 -4.99 42.66 231.51 EQTY FORTISMFB 2.7 2.7 0.12 4.65 EQTY FTNCOCOA 0.5 0.5 0.5 0.5 EQTY GLAXOSMITH 260,355 14.7 16.03 0.76 4.98 13.54 23.22 EQTY GNI 0.5 0.5 0.5 0.5 EQTY GOLDBREW 0.81 0.81 -0.04 -4.71 0.85 0.85 EQTY GOLDINSURE 0.53 0.53 -0.53 -100 EQTY GUARANTY 75,154,022 31.02 30 -1.02 -3.29 16.91 32 EQTY GUINEAINS 5,000 0.5 0.5 0.5 0.5 EQTY GUINNESS 176,490 69 69 2.94 4.45 59.51 115.58 EQTY HMARKINS 0.5 0.5 0.5 0.5 EQTY HONYFLOUR 845,118 1.28 1.27 -0.01 -0.78 0.91 2.15 EQTY IHS 3.8 3.8 3.8 3.8 EQTY IHSNGPREF 2.25 2.25 EQTY IHSPREF 3.08 3.08 EQTY IKEJAHOTEL 1.8 1.8 0.02 1.12 1.63 2.69 EQTY INFINITY 1.47 1.47 0.03 2.08 1.47 1.47 EQTY INTBKPREF 13.5 13.5 EQTY INTBREW 2,695,444 20 20 14.92 20.25 EQTY INTENEGINS 0.5 0.5 0.5 0.5 EQTY INTERLINK 3.61 3.61 -0.19 -5 3.8 3.8 EQTY JAIZBANK 110,900 1 1 -0.05 -4.76 1 1.47 EQTY JAPAULOIL 0.5 0.5 0.5 0.5 EQTY JBERGER 13,038 37.87 37.87 -1.99 -4.99 34.83 50.93 EQTY JOHNHOLT 0.6 0.6 -0.03 -4.76 0.61 0.82 EQTY LASACO 10,000 0.5 0.5 0.5 0.5 EQTY LAWUNION 166,941 0.8 0.8 0.01 1.27 0.5 0.8 EQTY LEARNAFRCA 0.88 0.88 0.03 3.53 0.58 0.89 EQTY LINKASSURE 1,468,100 0.52 0.52 0.5 0.54 EQTY LIVESTOCK 503,550 0.89 0.89 -0.04 -4.3 0.58 1.26 EQTY MANSARD 20,431,156 1.64 1.55 -0.02 -1.27 1.45 2.6 EQTY MAYBAKER 1,358,056 1.34 1.28 -0.06 -4.48 0.8 1.34 EQTY MBENEFIT 0.5 0.5 0.5 0.5 EQTY MEDVIEWAIR 59,600 1.54 1.54 0.07 4.76 1.43 1.57 EQTY MOBIL 340 315.4 315.4 -16.6 -5 155.96 385 EQTY MORISON 1.65 1.65 EQTY MRS 865 37.08 37.08 -1.95 -5 31.93 45.51 EQTY MTECH 0.91 0.91 EQTY MTI 0.5 0.5 0.5 0.5 EQTY MULTITREX 5,000 0.5 0.5 EQTY MULTIVERSE 3,100 0.5 0.5 0.5 0.5 EQTY NAHCO 994,152 3.1 3.09 -0.16 -4.92 2 5.95 EQTY NASCON 779,604 8.4 8.3 -0.1 -1.19 6.33 8.7 EQTY NB 6,494,405 149.95 145.03 -4.92 -3.28 112 164 EQTY NCR 7.89 7.89 0.18 2.33 7.71 9.46 EQTY NEIMETH 1,041,024 0.55 0.53 -0.02 -3.64 0.53 1.13 EQTY NEM 2,204,366 1.02 1.03 0.01 0.98 0.7 1.26 EQTY NESF 524.59 524.59 -27.61 -5 EQTY NESTLE 62,514 834.99 834.99 34.99 4.37 570 855 EQTY NIG-GERMAN 3.44 3.44 -0.18 -4.97 EQTY NIGERINS 0.5 0.5 0.5 0.5 EQTY NIWICABLE 100 100 99.5 19,900.00 0.5 0.5 EQTY NNFM 5.8 5.8 -0.21 -3.49 6.01 6.32 EQTY NPFMCRFBK 5,500 1.37 1.37 0.89 1.44 EQTY NSEASEM 1,195.56 1,195.56 1,136.56 1,218.38 EQTY NSECNSMRGDS 23,344,495 696.97 719.26 22.29 3.2 560.83 774.04 EQTY NSEI EQTY NSEINDUSTR 6,775,559 1,739.79 1,696.76 -43.03 -2.47 1,430.17 2,228.54 EQTY NSELOTUSISLM 10,732,895 1,832.17 1,820.93 -11.24 -0.61 1,561.86 1,988.33 EQTY NSLTECH 0.5 0.5 0.5 0.5 EQTY OANDO 8,942,933 9.07 8.62 -0.45 -4.96 3.54 10.5 EQTY OASISINS 0.5 0.5 0.5 0.71 EQTY OKOMUOIL 273,081 51.9 50.05 -1.85 -3.56 29 52.51 EQTY OMATEK 0.5 0.5 0.5 0.5 EQTY PAINTCOM 0.62 0.62 -0.03 -4.62 0.62 0.99 EQTY PHARMDEKO 9,245 2.05 2.05 -0.03 -1.44 1.62 2.08 EQTY PNG 7.28 7.28 EQTY PORTPAINT 2.01 2.01 0.01 0.5 1.38 2.5 EQTY PREMPAINTS 9.88 9.88 -0.51 -4.91 EQTY PRESCO 711,001 47 47.25 0.25 0.53 35.02 48 EQTY PRESTIGE 0.5 0.5 0.5 0.5 EQTY PZ 920,160 17.3 18.16 0.86 4.97 11.04 23 EQTY REDSTAREX 5,000 4.41 4.41 0.21 5 3.9 4.8 EQTY REGALINS 0.5 0.5 0.5 0.5 EQTY RESORTSAL 0.5 0.5 0.5 0.5 EQTY ROADS 6.93 6.93 0.33 5 6.6 6.6 EQTY ROYALEX 100 0.5 0.5 0.5 0.5 EQTY RTBRISCOE 8,208 0.5 0.5 0.5 0.5 EQTY SCOA 3.59 3.59 -0.18 -4.77 3.77 3.77 EQTY SEPLAT 42,195 402.74 400 -2.74 -0.68 240 425 EQTY SIMCAPVAL 103.24 103.24 -103.24 -100 EQTY SKYEBANK 9,150,838 0.51 0.51 -0.01 -1.92 0.5 1.42 EQTY SKYESHELT 100 100 EQTY SOVRENINS 0.5 0.5 0.5 0.5 EQTY STACO 0.5 0.5 0.5 0.5 EQTY STANBIC 1,905,542 26 25.65 -1.35 -5 12.82 27.56 EQTY STARCOMMS 0.5 0.5 EQTY STDINSURE 0.5 0.5 0.5 0.5 EQTY STERLNBANK 3,177,032 0.71 0.75 0.02 2.74 0.67 1.75 EQTY STERLNRIGHT 57.49 57.49 EQTY STOKVIS 0.14 0.14 EQTY STUDPRESS 2.09 2.09 -0.1 -4.57 EQTY TANTALIZER 100 0.5 0.5 0.5 0.5 EQTY TEXACO 0.5 0.5 EQTY THOMASWY 0.52 0.52 -0.02 -3.7 0.54 0.58 EQTY TOTAL 40,155 269.98 268.9 5.9 2.24 150.41 345 EQTY TOURIST 3.8 3.8 0.15 4.11 3.5 3.68 EQTY TRANSCOHOT 800 5.29 5.29 0.25 4.96 4.77 5.56 EQTY TRANSCORP 29,708,840 1.19 1.14 -0.05 -4.2 0.66 2.13 EQTY TRANSEXPR 100,950 0.79 0.83 0.79 1.82 EQTY TRIPPLEG 1.18 1.18 -0.06 -4.84 1.24 1.53 EQTY UAC-PROP 741,359 1.84 1.84 -0.05 -2.65 1.62 4.51 EQTY UACN 2,209,018 15.51 15.05 -0.46 -2.97 12.02 22 EQTY UBA 10,825,400 7 6.65 -0.35 -5 3.4 7.5 EQTY UBCAPRIGHTS 0.01 0.01 EQTY UBN 60,873 5.19 5.19 0.04 0.78 3.7 5.78 EQTY UCAP 3,128,358 3 2.92 -0.08 -2.67 1.74 4.06 EQTY UHOMREIT 42.96 42.96 -2.26 -5 EQTY UNHOMES 2.87 2.87 -0.15 -4.97 3.02 3.17 EQTY UNIC 0.5 0.5 0.5 0.52 EQTY UNILEVER 334,554 36.21 36 -1.45 -3.87 27.81 50.01 EQTY UNIONDAC 0.5 0.5 0.5 0.5 EQTY UNIONDICON 13.45 13.45 -0.7 -4.95 11.31 17.35 EQTY UNITYBNK 13,355,767 0.58 0.6 0.02 3.45 0.5 1.26 EQTY UNITYKAP 0.5 0.5 0.5 0.5 EQTY UNIVINSURE 0.5 0.5 0.5 0.5 EQTY UPDCREIT 10 10 10 10 EQTY UPL 3.83 3.83 -0.2 -4.96 3.61 5.15 EQTY UTC 0.5 0.5 0.5 0.5 EQTY VANLEER 9 9 -0.09 -0.99 9.69 9.69 EQTY VITAFOAM 1,157,890 2.34 2.3 -0.04 -1.71 1.64 4.9 EQTY WAPCO 3,969,578 49.49 48.1 -1.39 -2.81 34.47 77.96 EQTY WAPIC 6,272,120 0.5 0.5 -0.02 -3.85 0.5 0.56 EQTY WEMABANK 3,559,818 0.51 0.5 0.5 0.88 EQTY ZENITHBANK 106,355,062 19.08 18.13 -0.95 -4.98 13.1 19.08
  15. Michael Olafusi

    Exchange Traded Funds (ETFs) on The Nigerian Stock Exchange

    Hi Methodman, You are welcome! To buy the New Gold ETF, you will need to have a stock trading/brokerage account and make a purchase order through that account. Below is a screenshot of what the process looks like from both my Meristerm stock brokerage account and ARM stock brokerage account.
  16. image: nigeriamessageboard.com Currently, there are seven ETFs on the Nigerian Stock Exchange. Unlike the foreign ETFs, they don't make easily available the details of the underlying companies -- percentage holding, number of stocks, value of each stock position and other useful details I easily get for the foreign ETFs. And I don't know why. 1. Vetiva Banking ETF Fund Value: NGN 398,898,000.00 Holdings: ACCESS DIAMONDBNK ETI FIDELITYBK GUARANTY STERLNBANK UBA UBN WEMABANK ZENITHBANK 2. STANBIC IBTC ETF 30 (Couldn't find website link for the fund) Fund Value: Couldn't find Top 10 Holdings (as at December 2014): DANGCEM 19.49% NB 16.68% GUARANTY 9.74% NESTLE 8.57% ZENITHBANK 6.82% WAPCO 3.59% FO 3.01% ETI 2.91% SEPLAT 2.73% STANBIC 2.40% 3. Lotus Halal Equity Exchange Traded Fund (LHE ETF) Fund Value: NGN 425,124,000.00 Holdings: NASCON NESTLE OKOMU OIL PZ PRESCO UNILEVER MOBIL 7UP DANGSUGAR CADBURY CAP GSK CCNN DANGCEM LAFARGE AFRICA 4. NEWGOLD ETF (Tracks the Rand price of gold and originally an SA ETF before listing also on NSE in 2011) Fund Value: NGN 408,275,941,378.33 Holding: Gold bullion 5. Vetiva Consumer Goods ETF Fund Value: NGN 1,044,306,000.00 Holding: 7UP CADBURY CHAMPION DANGFLOUR DANGSUGAR FLOURMILL GUINNESS HONYFLOUR INTBREW NASCON NB NESTLE PZ UNILEVER VITAFOAM 6. Vetiva Griffin 30 ETF Fund Value: NGN 1,807,740,000.00 Holding: 7UP ACCESS DANGCEM DANGSUGAR DIAMOND ETI FBNH FIDELITY FLOURMILLS FO GUARANTY GUINNESS INTBREW JBERGER MOBIL NB NESTLE OANDO PZ SEPLAT STANBIC STERLING TOTAL TRANSCORP UACN UBA UBN UNILEVER WAPCO ZENITH 7. Vetiva Industrial ETF Fund Value: NGN 2,379,942,000.00 Holding: BERGER BETAGLAS CAP CCNN CUTIX DANGCEM MEYER PAINTCO PORTPAINT WAPCO
  17. (Originally posted: 02/09/2013) Have you ever tried googling Personal Finance in Nigeria?Here is a screenshot of what you'll likely get - Nothing very useful or relevant. The seemingly relevant results Involve Your Spouse In Your Personal Finance by PM News and What You Need To Know About Personal Finance by Nigeria Village Square are ramblings. Nothing wholesome. So I decided make the ultimate Personal Finance guide for Nigerians living in Nigeria, like me. What is Personal Finance?Though I nearly always go with Investopedia's definitions, this time around I think Wikipedia is more on point. But we can always combine the two to get a more illustrative definition. And here it is -Personal Finance is the sum total of all financial decisions and activities of an individual (or family) in managing his financial resources, with a view of both the present and the future. It will include budgeting, savings, investment and provision for emergencies. The truth is we all do personal finance, one way or the other. We make money and we spend the money. But we are all faced with the challenge of making the most of every Naira we earn. We seek advice from friends, colleagues and strangers. We try everything we consider reasonable. And all we ever get is an improvement, not a solution. But I have found the solution, studied it and practiced it. And in this post, I'll be sharing it with you. The sure way to make your money work for you just as hard as you did for it. Know ThyselfMy favorite quote is by Socrates and it's - The unexamined life is not worth living.It's true not just for the entirety of our lives, but also for every endeavor we embark on. If you want to manage your finances well, the first step is examining your finances. Know all about it. Know how much you make and know how you spend over a convenient period. The period could be monthly if your main income is a monthly salary, and it could be quarterly if you run your own biz. What matters is knowing yourself, financially. In 2011, I had serious money issues. I got a dream job. I lost the dream job. I made over N12,000 per day + regular salary (~ N500,000/month) for over 2 months. I got robbed. I traveled for French language immersion. I got a new job. My living expenses were eating my salary. I was working and my bank account balance was de-growing month on month. I thought I needed deliverance, a special all night deliverance session preferably at Redemption City or Prayer City. I was working hard and had no money to show for it. I had been reading investment and personal finance books for a long time then, but I never thought anybody would experience what I experienced that year. That year I learned that experience is truly the best teacher. I had to translate all my book knowledge to working knowledge. I started tracking my expenses daily for months to get a good idea of my average monthly expenses; since I had just one income source, my monthly salary, figuring out how much extra I have left at month end was extremely easy. I proceeded to drawing up a budget, a monthly one. Be Your Own AccountantHere is another popular saying. N100 income, N99 expense; result is happiness. N1,000,000 income, N1,000,001 expense; result is misery.If you've ever been cash-strapped, you will better understand that quote. It doesn't matter how expensive your car or mansion is, if you bump into an egg seller and ruin a crate of egg, only cash can save you.While managing your finance, forget about your assets - how much you are worth, how much your car is worth or that project you're going to win. What matters most is what you have in cash now and making sure you don't spend beyond that. You have to be your own accountant. Make your own budget. Now that you know the average amount (you can never know the exact) you spend monthly and how much you earn monthly, note the extra, your real disposable income. I call this your free cash. If yours is in the negative (your monthly expenses are more than your monthly income) then get a new job or downgrade your lifestyle or do both. And if your run your own business and your income comes once in 3 months or more, make your budget period a quarter (3 months), so you don't get emotionally overworked when you see all the payments owed you monthly.Now that you have calculated your monthly free cash (income - expense). You will need to learn how to max out that free cash, reduce your expenses to a convenient minimum (I don't recommend cutting down on feeding expense or personal care, except you want to save for your grand-kids or the bank) and work on increasing your income. Growing your IncomeLet's start with the easiest way to accumulate wealth: Grow your Income.There are two ways of doing this and they are not mutually exclusive, you can do both. The first is to write your boss for a pay raise or get a better paying job. And trust me, asking your boss for a pay raise is much easier than you think. It starts with letting your boss know that you need a pay raise or more performance bonus in very subtle ways. In my second job, I was always making jokes about how broke I was and made sure my boss noticed. Later, he got sick of it and called me aside and gave me a very touching finance advice, how he started like me and had similar money troubles and steps I could take to better my situation. Though I didn't get a pay raise, I got a performance rating of 110% because he knew I seriously needed the performance bonus. Then I changed job. The second way is to get multiple sources of income. For some time, my only income source was my monthly salary. When I lost my job in 2011, I lost my only source of income. It was devastating. Since then, I made up my mind to have multiple income sources. I searched within me for skills I could monetize, then looked around for needs I could meet and charge for. It was extremely difficult. At first, instead of making more money to supplement my salary, I was losing money and getting broke. Somehow, this difficult period brought out the genius in me. I became the CEO of a startup, me. I started 4 businesses in less than 2 years and lost money printing biz cards and looking for clients. But my 4th business became the ONE. I found my ideal part-time biz, something I would gladly do for fun but I now charge for. Here is the story of my journey to this discovery. And like they say, fortune favors the dogged. After some time, I started getting paying clients and began earning a little here and a little there. You too can start a part-time biz, and increase your sources of income. Shrinking your ExpenseThis is the trickiest part. You can never feel you've done enough. But this is what I suggest you do. Look at your daily expense list (the one you made to get an idea of your average monthly expense) and strike out those recurring expenses you can do without or you are better off without. Try hard to avoid making such expenses again. Look at the expenses you can optimize, maybe stop drycleaning all your clothes and eat out less. And if you are the scavenger type (no offence intended) you could stop driving your car to work and hike, take your lunch to work and use your friend's call bonuses. You can get more tips from the NSD, LSD & HSD section of my Working your way to wealth post. Maxing out your Free CashNow you're working on growing your Income and shrinking your expenses, and want to know how to max out your Free Cash.This is the heart of Personal Finance, the making your money work for you part. This is how you max out your Free Cash, step-wise: Have an Emergency Fund. Investopedia is on point on this. This is a savings account that is used to set aside funds to be used in an emergency, such as the loss of a job, an illness or a major expense. The purpose of the fund is to improve financial security by creating a safety net of funds that can be used to meet emergency expenses as well as reduce the need to use high interest debt, such as credit cards or loans. It's recommended that you put 3 to 6 months living expenses in it. Now that you know your average monthly expense, half the job is done. In mine, I have my 4 months living expense. And I use Diamond bank's High Interest Deposit Account (HIDA) due to their above peer interest rate. You could use Standard Chartered too. Just make sure you use a bank, not an investment account or cooperative; easy accessibility to the fund is key. That's why it's called an emergency fund. I have had to draw from mine thrice -- when I changed job again, a serious family need and a sudden business expense. Each time I draw from the account, I pause all my other monthly investments and replenish the account. This is very important. Don't break the rule. Your emergency fund before any other, except debt servicing. Depreciation, Depletion and Amortization. You've always been the CEO of your life but from now on, you will also be the CFO. There will be some expenses that are not monthly, e.g. yearly house rent, wardrobe uplift every 6 months... You get the idea. You have to spread their cost over your budget period, monthly. Don't forget services you're enjoying that you will start paying for in the future, and plan for future one time expenses like buying/building a house. You can open a high interest savings account or money market account and save towards those expenses every month. Monthly Savings or Investment. Once your Emergency Fund is set up and impending future expenses are being saved towards. You can set up a direct debit or standing order to transfer a portion of your remaining free cash to a fixed deposit account, money market account, mutual fund account or brokerage account monthly. This will make saving/investing automatic for you, and in the finance world it is called Paying Yourself First. This is the crux of making your money work for you. And the investment vehicle you choose will be based on your risk tolerance and knowledge. I transfer money monthly to a Mutual Fund account and my brokerage Account. Don't Ever Run Out Of Cash (DEROOC). Definitely, there will months unexpected expenses will pop up or a financial emergency. Thankfully, you have an emergency fund. But the point is, those emergencies shouldn't be monthly. Don't put all your money, after building up the emergency fund and saving towards future expenses, in an investment account. Always have about 30% of your living expense as a reserve on top of the actual monthly expense budget. So if you earn 250k monthly, spend 100k monthly and you have 150k left, and assuming your emergency fund is already set up (500k); you may want to put all the 150k left in your special savings account and investment account, but that will be very bad. Because an increase in food price will become an emergency and you will have to start touching accounts you shouldn't. So have at least 30k out of the 150k left in your salary or regular account. Life will be easier, at least financially. And that's how to max out your free cash. We have come to the end.
  18. Michael Olafusi

    Always Be In For The Long-term

    Today, I watched the movie Rush. image: uphe.com It is one of the most brilliant films I have watched this year. And surprisingly, it is a true life story. It is about two race car drivers who were Formula One rivals. They both were world champions but one was world champion longer. The reason? That one was in it for the long-term, he never let a single win get too much to his head while the other celebrated his only win as if it was everything. I was greatly touched by lessons in that movie -- from being focused and in for the long run to having a good grasp of your field. It taught me to stop envying the people whose success are quicker and bigger than mine. Rather I should never stop improving. Not that my aim should be to beat them or make every more successful young person a rival, but that it is all unnecessary sadness to envy people who will soon flame out. Not all young very successful people flame out, but most do. And as you can't know the seven out of the ten who will flame out, it's in your best interest and motivation to assume everyone will, including you if you don't put in extra-ordinary effort forever. I learned to also never let the voice of passion override that of logic. What ever is logically better is better regardless of the emotions around. Never let your lifestyle balloon because of fashion or trend or what people will say. Finally, it reinforced my belief that in the end what will separate us all is consistent results. There will be two camps: those who keep talking about the good old days and those who keeping making history. I want to be in the later camp. What about you?
  19. I have a few Whatsapp contacts who flood me with regular broadcast messages, from how BBNaija was making millions from SMS voting to the new tactics armed robbers use. The latest I have been getting is about how in the 1960s and 1970s the people at the helm of affairs in Nigeria were youths in their 20s and 30s but now people of that age group are still stuck in their father's house living off their parents. There are many ways people come into wealth and most of them can be classified into two main categories: Rent (being a gatekeeper or by inheritance) and Being innovative (ahead of your time) Our political system is a clear example of how people become wealthy by rent. They use their office to extract value from others; they collect rent like the Agbero at the bus-stop. It is a no brainer system. Just get yourself into a position where you can abuse your office to get others to drop something for you. I hear some police officers and LASTMA officials make their entire monthly salary in one day of extracting money from people. If you are born into a rich family where your parents have left you income generating properties and assets, you benefit from rent. Earning money from something you did not sweat for. It is not a bad thing and it is the very dream we all have for our children. If you are close to government and can get juicy deals that give you nice cuts, like supply the state government ministries diesel, you are again benefiting from rent. Using a closed advantage to get be the gatekeeper/middleman between the diesel sellers and government houses. The unique thing about rent wealth is that it is limited and often non-merit based. So it is not the type you expect everyone to pursue. There can only be one President of Nigeria, only few people are born into a wealthy family, only few people can work themselves into every government contract and, hopefully, not everyone should try to abuse their office for illicit gain. The other main path to wealth is by pure merit and being very innovative, I call it being ahead of your time. It is when you position yourself above the competition and create avenues to wealth that is purely merit based. Like growing your professional career, starting a genuine business (not a shell one to launder money) and selling, without any undue advantage, services and products. This is the path available to everyone and also a much tougher path. You will have to do what other people are not willing to do -- either because it is too difficult or too risky. And that is why I call it being ahead of your time. You have to make moves that position you for the future, things not obvious to other people in the present time. The second path is what many of the bank billionaires followed in the 1990s when they saw the future others weren't seeing and took the risk of starting a bank. Many of the banks flourishing now were founded in the late 1980s and early 1990s. Access bank, 1989. Diamond bank, 1990, Ecobank, 1986. Fidelity bank, 1988. FCMB, 1982. GTBank, 1990. Heritage bank, 1989. Stanbic IBTC, 1989. Zenith Bank, 1990. The exceptions are First Bank, Union bank, Standard Chartered Bank and UBA. Other notable example of the second path is the Nigerian musicians of the late 1990s and early 2000s. They positioned themselves for the Nigerian market shift from both foreign music and live band music. The rise of the Plantashun Boiz, Daddy Showkey, Baba Fryo, Idris Abdulkareem, Tony Tetuila, Sound Sultan and the Kennis Music label. The hallmark of the second path is that you see people doing what is difficult and doesn't look very rewarding, but they keep at and then they encounter a breakthrough -- either they create a product that captures the market or their industry explodes skyrocketing the incumbents. And that is the type of wealth accumulation you would want everyone to pursue -- one gotten from pure merit and diligence. So when you compare people who suddenly went from being soldiers to political leaders because of exceptional circumstances, many of whom never planned or expected the uplift, with people who are on the hard labour path to wealth, you are doing an apple to coconut comparison. All the people who were suddenly thrust into political power due to the 1960s and 1970s turmoil cannot replicate the same if they were reborn today. If one takes out the unplanned (chance events) they will just be regular soldiers like the they should have been. But if you take a proper business man who worked hard for his money and strip him of everything, he can replicate his success. If you take 2face and those other musicians who worked their own ways to stardom and have them reborn in another generation penniless, they will blossom again. Which path is better? It is the path more easily accessible to you. If I have a billionaire father or very politically connected parents I won't disown them and try to start my wealth building from scratch. I will gladly use the rent income/access they afford me and try to multiply it. But if I have no one to leech on then I better roll up my sleeves and get to work, it would be a hard uphill task and the earlier the better.
  20. image: rd.com In 2011, I became very serious about being financially prudent. I had just gotten a new job after being laid off from one. The pay was split into a monthly fixed salary and a quarterly performance pay, the total broken down monthly was slightly more than that of my previous job and the guaranteed monthly portion was slightly less than that of my previous job. But the major difference was that in the previous job I was getting a handsome N12,000/day when sent for projects outside Lagos. Somehow, in 2011, that extra N12,000 per day ballooned my lifestyle. So when I lost the job an got another, despite having similar base pay, I was spending more than my monthly salary and having to dip into my savings from the previous job. I felt extremely bad about it and decided to fix it. I got a expense tracking and budgeting phone app. I began tracking all my expenses daily for a couple of months. The visibility into how I spent money instantly helped me cut out obvious frivolous expenses and with deliberate planning I began cutting down my monthly living expense. In a few months, I was able to bring down my living expense below my salary and now have something to put away monthly. In 2012, I opened a High Interest Deposit Account with Diamond Bank and put in it, over time, my four months living expense. Luckily, in 2011 I had opened an investment mutual fund with ARM and set up a direct debit mandate to automatically invest monthly. During my financial crisis period I was not able to keep enough in the account to execute the direct debit but from 2012 forward I was able to conveniently save monthly into that investment account and even have something left to put into my stocks brokerage account for directly buying stocks. I used to get my salary within the last three working days of the month and the first two working days of the new month. Once the direct debit executes, I take out whatever I need to pay for any professional training I am undergoing. And the rest, I take out any amount above my budgeted living expense and put it away into my investment account. So having just what I need for the month (gotten from tracking my monthly expenses for over six months) forced me into being very financially prudent. And that was how I developed a savings habit. Today, it is a lot difficult to budget monthly as my business expenses are unpredictable and often affect my personal expenses. However, that financial prudence I gained then is still with me and helps me to avoid frivolous spending. It practically turned me into a miser. Whenever I get a large amount of money, I immediately put a large chunk of it away in my investment account. Just that now I have to increase my emergency fund with Diamond bank from four times monthly living expense to six times monthly expense as I get bigger emergency expense spilling from my business into my private life. This year, on three occasions I had to draw from my emergency account -- one was to settle my company account auditing expense, the second was to secure the new rented house and the third was to settle the tax advisory expense. I am still yet to replenish the emergency fund and technically broke. If I have my savings/investments in a savings account I would be rich and not broke. Having them in not easy to access investment accounts forces me to be more hardworking and never having too much money to squander. My strategy in one sentence is: I put away upfront the money that is in excess of my living expense into a savings/investment account. In the investing world, it is called paying yourself first.
  21. Not to ruin it with a long commentary. I came across the advice in 2013. I have extracted as images and displayed below. Enjoy! Hope you enjoyed it!
  22. Michael Olafusi

    Investment 101

    image: quizzle.com This post is a summary of what I would tell anyone new to the world of investment, from a practical standpoint. So let's start from what we all know and hear a lot. "Anyone who bought land in Lekki 25 years ago when the world's eyes hadn't opened to it are now multi-millionaires". "Those who bought land in Ikorodu in as little as six years ago are now making over 10 times return." We all know how lucrative and wealth building buying land cheap and selling after a few years can be if one chooses reasonably. What most of us don't pay attention to is that it is not only land (real estate) that generate such generous long-term returns. There are many other types of genuine investments with proven excellent returns other than flipping land and houses. Investment should be looked at through two lenses of the same spectacle. One is long-term investment and the other is short-term investment. Short-term investments are the ones that guaranty the original capital invested. More like a better alternative to putting your money in the bank. Long-term investments are like building a house to rent out. You first have to spend the money, tying it down for years, before thinking of getting back the capital. The trouble I see most people make is that they want what is not realistic. Like expecting a short-term investment to yield returns only possible in a long-term investment. In the real world, the guy who puts his N50 million in a fixed deposit account should not expect to make as much gains as the guy who used his to build a house in Ikeja for rent and ultimately sell. Why? The real estate guy had to tie his N50 million for the number of years it took him to buy a land, build the house and patiently collect yearly rent before he could get back the N50 million naira while the other guy could walk into the bank any day to demand his N50 million. In 20 years time, the real estate guy's property would have fetched him his original capital, an income flow of N2 million per year and the property would be worth N200 million; while the fixed deposit guy would be permanently hooked to a 10% interest rate. Whenever I see someone who is looking for an amazing return on his investment without wanting anything to happen to the capital, I shake my head. We all know that setting up your own business is the ultimate investment, the one with the highest potential returns. But have you seen someone who wants to start a business without first burying the capital? Who wants to be able withdraw the startup capital any day, anytime from the day one? If you are serious about building real wealth then you have to think long-term investment. You have to be comfortable with burying the original capital invested for months and years. If real estate is your thing, then good luck. If you are wanting to start small then consider long-term focused mutual funds. But if you understand stocks and can put in the due diligence, then we are comrades. I do stocks. I understand it and have almost all my investment money in it. I do it for the long-term. Not that I buy a company's stock and go sleep for 5 years but that I am okay with leaving my money there without the intention of cashing out for the next 5, 10 years. I buy and sell shares like a thorough real estate investor will sell low potential properties to fund buying of higher potential properties with an eye for a bumper harvest 10 years down the road. And that's my Investment 101 for anyone just starting out.
  23. image: marvingermo.com One question I get asked a lot is: "Michael, that your stock investment, what is the rate of return?" They are always disappointed with my answer. I have been invested in the stocks market consistently for the last six years and I can't really say I have gained more than I put in, money-wise. My investment knowledge has skyrocketed but the money has stayed flat. I made some losses, made some gains; in the end they evened out. It is appropriate to compare one savings account to another by the interest rate they give you. It is even appropriate to compare bonds and money market investment account based on the monthly increase you see on top of your original investment amount. But with stocks, it is not appropriate. And in a country like Nigeria, things are even much worse for the person seeking a stable return rate for his stocks investment. For the last ten years the market has lost more than it had gained for investors. I remember in 2007 when I was an ardent reader of the stocks report page of Punch newspaper. I used to see market capitalization at 12 trillion naira. Today, Ten years later, it is less than 9 trillion naira. A whooping 3 trillion naira plus have been wiped off. A gigantic loss for investors; that's like 25% loss. That's the equivalent of putting 1 million naira in an investment account in 2007 and today you find that it has just 750,000 naira. 250,000 naira wiped off. And to make matters worse, every other thing has been rising in price. From price of house to price of car to price of bread and to price of coca-cola. In fact, I have been lucky to have evened out. On the contrary, if you had put your money in Federal Government T-Bills or a money market fund that accurately tracks it, you would have seen you money more than doubled within that same time period. Your 1 million naira in 2007 will now be more than 2 million naira. And that is some scary anomaly, T-Bills are called risk free and expected to deliver the lowest rate of return over a long time period especially compared to stocks. But in our dear Nigeria, logic is a laggard. Yet the reality is that stocks will always outperform the other investments -- real estate, savings and bonds. I know that not many people will agree with the real estate part. But here is the abridged logic behind it. The very land that is growing in value is also owned by the companies you buy on the stock exchange, and they don't just sit and wait for it to double in price. They make more productive use of it to generate ongoing income/profit than even the real estate guy. Imagine comparing the profits of an estate agent with that of a bank. For sure the banks make more from their land assets than the guy who rents house to people. The big trouble here is that the reality doesn't have a time tag. It is like the quote about a lie going round the world before the truth is able to get his trouser on. Here, reality can take, as we have seen, more than a decade to surface. In summary, the stock market is more for people who can have the patience to wait out the years of anomaly. And it starts with forgetting about a guaranteed rate of return or even yearly return. You just have to trust that logic will catch up and the reality we all read in the books will come to pass. If it is too much of a work, then please stay off the Nigerian Stock Market.
  24. I have been reading up on the frontier markets, which Nigeria falls under, and came across a worrying fact. There are three categories of equity market to the global investor: Developed Markets, Emerging Markets and Frontier Markets. According to S&P Dow Jones Indexes Country Classification System: Developed markets are the most accessible to and supportive of foreign investors. Generally, there is high degree of consistency across these markets. Emerging markets generally have less accessibility relative to developed markets, but demonstrate some level of openness. Frontier markets are typically much less accessible to foreign investors, exhibit notable limitations in their regulatory and operational environments, and support a smaller investment landscape. Markets tend to be much less robust and in the earlier stages of development. According to CNBC Africa, there are about $500 million foreign investors money in our stock market and a large portion of them are from index funds like the MSCI Frontier Markets ETF, Guggenheim Frontier Markets ETF and Global X Next Emerging & Frontier ETF. And the non-index ones often rely on the market classifications in allocating their investment funds. The bad news is that many of the global bodies that create these market classifications are reviewing Nigeria's inclusion in the Frontier Markets category. The most popular bodies are the MSCI, FTSE and S&P Dow Jones Indices. And one of them, MSCI, is set to make its final verdict in two months. MSCI and FTSE, last year, cited the foreign exchange market restriction as the main worry, making it difficult for investors to repatriate their capital. And as the situation hasn't improved since they placed Nigeria on the watchlist last year, there is a high likelihood that we will be evicted from the Frontier Markets into what they term a Standalone Market (the equivalent of no classification). If they kick us out then things are going to get worse for our stock market. The sell-off will cause a big drop in the market value/capitalization. Bank shares will probably be the hardest hit as most foreign investors target our financial sector first and then the consumer goods industry. If you are trying to get into the stock market you might want to wait out this period of uncertainty about our status in the global investment community.