OLA EMMANUEL
Trainer and Public Speaker on Business Planning, Leadership, Wealth Creation, Peak Performance, Capacity Building
OLA EMMANUEL
Checklist For Money Habit
By Ola Emmanuel
Having already devoted two weeks to the money habit issue, we shall treat the issues already raised by readers in the question and answer column so that we can go straight to the checklist that is germane to financial security. To locate your spending habits, carry out the following personal checks.
• Do I make up to the money I spend? Anyone who spends above his or her income is clearly operating a bad money habit.
• With the way I spend money at present, can I sincerely say that my financial future is safe and guaranteed?
• Can I really say that I really need the product I am about to buy? If your answer is ‘no’, you are about to spend money on a product that you not really need.
• If the amount of money I want to spend on a product is significant enough to contribute to giving me a better and secured future and I can do away with the product at the moment, will I be willing to suspend the buying of the product till later date? If it is difficult to delay the immediate pleasure you may derive by not spending a particular amount of money today, it may be a tough call to meaningfully build savings to achieve a higher goal in future.
• Is the product necessary, so urgent and so important to your immediate well being or it can wait till other time? The basic needs of life such as food qualify as necessary and important. You need this spending for your present well being and to enable you have a better future but if it becomes without measure and uncontrollable it can lead to gluttony and make you become wasteful.
• Do I always think of the product I want to buy and make a list before I make my purchases or I just buy as the products catch my attention? If you have the habit of buying products without first planning and budgeting for it, you are not only an impulse buyer, you also operate bad money spending habit. Any product you can buy immediately it catches your attention should be one that you had planned for before but which you haven’t procured. List out what you spend money on. Study your list for a while and determine whether you are actually spending well. Remove not so important things from your list.
• What do I need to put in place before I can conveniently embark on acquiring certain products? It is important you know the level you should have attained in life before you should go after certain products; otherwise you may find yourself putting the cart before your horse of life.
• Is the product I want to buy too expensive and can I really say I get value for the money I want to pay? It is your duty to be on top of the market to know what competition is doing. You are not doing anybody any favour by paying exorbitantly for products, rather you may be celebrating your ignorance and lack of entrepreneurial instinct. Are there substitute products that can give good value at fair prices?
• Are you paying higher for the avoidable goods and services?
• What exactly do you need? Is what you want to buy a need or a want?
Some Useful Steps to Take:
After you might have seriously considered above issues, you can go further by considering the following steps.
• Make it a habit to always classify products you want to buy into necessary, important and urgent categories. Move the money earmarked for not-so-necessary, not-so-important and not-so-urgent products to your savings and investments.
• Do market surveys to find more competitive prices of products. Paying more as status symbol has a way of depleting your treasury at the expense of wealth creation. Consider your purse and your future goal very well when taking buying decisions.
• It may not be proper to consider changing taste and lifestyle when additional expenses cannot be conveniently accommodated by your incomes. It is your responsibility to tackle and overcome peer pressures.
• Plan your purchases before setting out to spend. It is a bad habit for one to walk on the street and be pricing products you have not predetermined to buy.
• Budget properly for food, education, your personal development and knowledge acquisition, your wards, social engagements, home front, your recreation, utility bills, wear and tear of properties, etc. Check your food consumption habit. Occasional indulgence for a change is not bad but it shouldn’t become an uncontrollable habit.
• Learn to close your eyes to products of no real value. If you don’t buy it, it will not take anything away from you and it will not impair your life when you do so.
Overhaul Your Money Habit
Are you someone who can own a business or can build enduring wealth, a fundamental sign is ability to save some amount of money even when you are confronted by too many things to spend money on. If you have the habit of spending all or above the money that comes into your hand, it will be difficult to move yourself to the realm where you can think about having a financial legacy.
Let’s refresh our minds with this assertion: Financial responsibilities will always increase to meet the amount of money one may have. Or naturally, there are too many things to spend money on therefore whatever money that may come into someone’s hand already has myriad of needs waiting for it to take it away. To some, they are quick to borrow money to clothe themselves, to keep up with peer pressures, to satisfy some other needs or meet certain financial responsibilities. They find it difficult to keep their spending within their income. In these people, the will to discipline their desires to fit into their means is lacking. Not only are they not thrifty, they are actually in debt in order to satisfy personal desires.
To become an achiever, the starting point is ability and discipline to spend less than you earn. Not that the income may be sufficient to meet your needs in the first place, but it is a duty to discipline yourself to spend below your income. It is a sacrifice to make; that is why it is called delayed gratification. It is wrong to gratify all your desires as soon as they show up. Some desires should be delayed today so that a better tomorrow can be established when the desires satisfied in the midst of surplus.
In the face of rising costs of basic necessities, it calls for special ingenuity from anyone who wants to achieve something meaningful to properly manage whatever money that comes into his or her hand. But some people deliberately live lives that cannot be supported by their incomes. Not a few of this group of people have worked themselves into troubles by their false lifestyles. Before they realise themselves, it would have been too late to start anything meaningful that is longer lasting and life-sustaining. Many in their pride would have gone too far on the wrong lane that it becomes so difficult for them to adjust and bring themselves back on the right track. They fail to realise that the real strength in human being is ability to own up and be humble enough to make correction when it is certain that the way one understands life is not really what one thinks it is.
To overhaul your money habit, you need to identify all your financial needs and responsibilities, understand the needs that are necessary, the ones that are luxuries, the needs that are important and urgent, the ones that are important but not urgent, and the ones that are neither important nor urgent (i.e. ability to prioritise personal financial obligations and responsibilities).
Also, not a few believe that when they finish the money in their pockets today, they can always ask another person to give them more. Their attitudes and mentality is like the person they are asking money from doesn’t know how to spend money or he has too much that he cannot spend therefore he should transfer it to them to help spend it. Many people desire to own properties or have their own businesses but their present consumption habit may be the bane of their financial success and the obstacle before them that will not allow attainment of their targets.
It is natural for human being to pick up consumption habits. When some of these habits is indulged unchecked, it will lead to what can hardly be managed or controlled. This is what makes some pick up untoward behaviours and they become huge problem to the society. When you choose a lifestyle that cannot be supported by your income, sooner you will be tempted to seek means of gratifying the lifestyle in noxious ways.
Conduct a check on how you spend money and what you spend money on. Do you spend money without plan? Are you an impulse buyer or do you buy things that afterward you begin to ask yourself why you buy it? To emphasise Robert Kiyosaki’s submission, clearly some products or properties are actually liabilities, not assets. Some people run frantically to acquire liabilities that they think are assets.
In exploring this money habit issue, we are going to examine some challenges and give a checklist to help.
Factors Influencing Stocks Price Movement
- Ola Emmanuel
In this series on investment opportunities and wealth creation in 2008, let us examine about 20 factors that influence stocks market price movements so that those who are ready to play in the market can get to understand or refresh their minds on issues that determine the directions (yields or losses) on investments in the capital market.
To explain this issue, I will draw your attention to the market performances of some stocks in the recent past. In 2006, Okomu Oil (Agric/Agro Allied Sector) ended the year on a market price of N34.05. However, the stock recorded the highest price of N40 while the lowest was N16.80. Dunlop ended the year 2006 on all-time high price of N4.16 but not after the stock price had dipped to as low as N1.94 during the year. Cadbury stock price hit the peak at N70 while it ended the year 2006 at N32.46. In year 2007, a stock like Afroil was as low as 33k but rose to peak at N9.19; while in Printing and Publishing sub-sector, Academy Press was N1.56 at a point in year 2007 but also rallied to record N6.82 high. All these price flagellations are as a result of several factors which are clearly understood by few investors but with greater percentage of the market investors – especially budding ones – are at the dark of.
Pre-AGM & Post-AGM Surges: the general behaviour of the price of a stock is that it embarks on upward swing (rising) when the annual general meeting of the company approaches. Information would have reached the market about what the company wants to give as rewards (bonus/dividend) to its shareholders. Therefore before the close of the company register, many investors may want to partake of the supposed good rewards. With increased demand, the price goes up. In this wise, it is often the case that the market price of a stock attains its highest in the year by the date the company register is closed few days before the AGM.
The marking down of the market price for value of the dividend (and/or bonus) given makes the price to take the first plunge. Closely following this is the possible supplies of the stock to the market for sale after the AGM by those investors who believe they need to divest to enable them reposition their stock holding. This glut will further make the stock price to fall.
Influence of Core Investors: a savvy investor will be interested in who the core investors are in the company he wants to put his money. For instance, investors may be favourably disposed to taking positions in such companies where foreign and local investors are core investors compared to companies where about 80% of the total shareholding is in the hands of an individual investor or are in the hands of members of a single family. Therefore, it is not unlikely that a company perceived to be in the grip of one or two individuals may not enjoy investor confidence – more so if the core investors lack good track record. I shall continue treating the factors in the week to come.
Don’t Waste This Year:
The excuse of majority is that they don’t know anything about investment in stocks therefore they are not interested in the market. What a great money-making opportunity escaping them! You don’t need to master the market before you can begin to enjoy the wealth the platform offers. While learning about the market, you can get someone to serve as your investment advisor or portfolio manager to handle your investments on your behalf (and in your name, please). Such an appointed portfolio manager will take off your shoulders the troubles of investment decisions or stocks analyses by handling this for you. Also, the person can serve you as personal investment coach. If you are able to adopt this approach, though you may not yet become savvy player in the market, yet you are able to get best returns on your investments.
Pre-Public Offer Price Rally: Success is about how intelligence is put to use. Because some people are privileged to know what is about to happen, they make use of this intelligence to their advantage. This is what happen in the stock market when the market insiders get to know ahead of the public that certain company ‘will soon come to the primary market’ to raise money. In a bid to take full advantage of the discounts such the public offers will offer and the good returns such stocks will give, investors’ demand for such stocks will increase thereby making the market price to go up appreciably before technical suspension is imposed on the stock price. Such investors with privileged information would have good capital appreciation by the reason that a public offer is on the way.
Sector Viability: Why are investors falling over themselves to invest in banking sector stocks and such sector that deal in everyday basic need is closing down due to lack of patronage? I am talking about the textile sector. Why is it that investors are not keen on the textile sector and the companies in the industry are closing down despite the fact that they are so important to the economy of a nation? What makes Japaul stock riding so high to record over 100 per cent capital appreciation within few weeks? The fact that companies operating in viable sectors are trusted to make good profits is a key factor in getting investors’ confidence and patronage. Japaul is a lone player in the maritime sector and inasmuch as oil exploration has not stopped in Nigeria’s onshore and offshore, Japaul will continue to be in business, making good returns and enjoying investors’ confidence. So also will be the most-active sector (banking) who, notwithstanding how high the average market price in the sector is, the stocks with lowest market prices in the sector will be regarded as penny stocks – and continue to give benefits penny stocks offer to investors.
Institutional Investors:
Call them the market catalysts, the Institutional investors have the funds to change the course of action on a particular stock. We have seen the impact of this on the Nigerian Stock Exchange growth when the Pension Reform Act brought much fund into the market. Institutional investors are group of shareholders with big fund to play with (pension funds, mutual funds, investment clubs, fund management firms). Like I wrote earlier, their interests in particular stocks are weighty enough to make stock prices rise – or fall. Institutional investors’ preference for a particular stock can transform the fortune of a stock to make it become a hotcake in the market. Likewise, divesting from a stock is significant enough to make a once-viable and performing stock to nose-dive in price movements. Therefore, institutional investors’ level of ownership is a key factor investors cannot and should not overlook.
The Company Financials:
As the case usually is, investors respond to the results released by quoted companies. Thus, a 3-month result, half-year result or 9-month result is sufficient to convince savvy investors what will be the fortune of such a company at the end of the financial period. Therefore, it is not unlikely that a stock will record high volumes of trading activities when these results (gross income, profit before tax and profit after tax) hit the market.
Share of Ownership Held By Employees:
A move could be made by a company to directly ask its members of staff to buy the company shares – especially if such a company is newly coming to the stock market. This is a way to motivate the staff members to work harder and better with the consciousness that they are all owners of the said company. This can be in form of private placement, initial public offer subscription or staff association investing in the name of the association on behalf of all members. Where the above is the case, the commitment of such employee-shareholders will be different from that of employees working to earn salary alone.
An investor therefore, needs to find out as much as possible a company policy on employee shareholding, the percentage of employees that respond positively to the gesture, and what their level of shareholding is. An investor needs to ask: are the company employees eager to buy into the company or they are less enthusiastic about it?
Knowing fully well that the middle level and senior management team of a company have access to privileged information about a company, and they own shares of the company reveals a lot that can be considered good intelligence for investors to take positions in such a stock. This information goes a long way to attest to confidence level the stock enjoys.
W
hen on a particular day a stock emerged as the most active in terms of volume traded, a savvy investor would want to know the number of deals that gave rise to such performance, and the direction of the stock’s market price – whether it appreciates or it drops. This information is so important to an experienced investor so that he can take a well-informed decision. The position of an investor on a supposedly-active stock will be different where, for instance, the high volume occurs in just one or two deals and it passed from one major investor to another (while the market price remain constant); or it is an institutional investor that divest from the stock by supplying the market with a huge volume and the market price ended up dropping. This is a different scenario compared to a supposedly-active stock where quite a higher number of deals and volume was recorded and the price shoots up. The described three (3) scenarios above convey varied information to a savvy investor which enables him apply his investible funds in such a way to attract maximum yield. But there are ways even new investors too can enjoy this scarce information.
Increased Primary Market Activities:
If there are increased activities in the primary market, the secondary market activities will slow down. For several companies to embark on private placements (usually done by yet-to-quoted companies) or initial public offers (done by companies who are newly listed on the Stock Exchange) or public offers (a way in which quoted companies approach the public to raise more money as occasion demands), many investors are forced to sell their secondary market holdings to enable them realign their investment portfolios by taking advantage the primary market offers. One of the privileges the primary market offers to investors is the relatively lower pricing of stocks. A public offers (POs) is usually sold at a discount while initial public offers (IPOs) or private placements (PPs) are often sold below the real market value of such stocks. The willingness of secondary market investors, in this instance, to sell their stocks brings about much supply that enforces the slowing down of the secondary market or a flat or downward trend in price direction. A case in mind is the general lull the stock market went through in the middle of 2007.
Public Bias:
There is an adage that says, “a man greatly loved by the masses never do any wrong”. So it is with a quoted stock or handful of stocks that are enjoying market stakeholders’ goodwill. This goodwill may be as a result of likeness for a personality or two that are owners in the company. Who can remember where Afroil was two years ago? Compare this information with the market value of Afroil today and you will perfectly understand my gist. I try to reflect on the performance of Afroil in the Petroleum Marketing sub-sector prior to the taking-over by the new investors. In those years, one was pressed hard to declare: “Can anything good come out of this Bethlehem?” But look at Afroil today: a beautiful bride in the petroleum marketing sector that brings much delight to its investors. Afroil market price was 43 kobo as at December 31, 2005; but as at last week Friday (February 1, 2008), Afroil market price opened at N17.05 and closed at N17.74 thus gaining 84 kobo that day. What a marvellous goodwill and a way to reward investors with good price appreciation.
Influence of Company’s Management – AP Plc as a Case Study:
The most visible here is the managing director. Who is he or she? What is his or her track record in business management? Who is the chairman of the company? Is he or she a savvy business manager? Is he or she so respected in the business circle? How influential? These information form part of what savvy investors are always looking for before they put their money in any equity. A case so fundamental to this is that of AP Plc stock, one of the stocks in the petroleum marketing company. We all know the fortune of AP Plc prior to the taking over by new investors that brought in Otedola into the helm of affairs. December 31, 2004, AP Plc market price was N69. In that year 2004, the stock recorded all-time year high of N84.50 and all time low price of N42.87 with Earning per Share of 4.11. In 2005, AP Plc was among the top losers in market price with the price dropping to N35.82 (December 31, 2005). This is 33% loss compared to the N69 recorded in 2004. The year 2006 ended for AP Plc with the stock recording marginal price appreciation by rising to N46.29 (29 per cent price increase over that of 2005 year-end).
The year 2006 brought a new life into AP Plc when new core investor bought in thus paving way for new management team. As at the time of writing, AP Plc stock market price is N260 as at Friday last week. If a chart is plotted to show the performance of this stock for the period 2004 to date, it will undoubtedly be an interesting one.
Creation Of Artificial Scarcity:
A deliberate attempt can be made to mop up supplies to the market of a particular stock. Inasmuch as the stock is hard to come by, demand will continue to drive up market price. There are several reasons that can motivate this. An investor who wants to become a core investor may position himself to be acquiring shares of a particular company. In this wise, the instruction the broker or group of brokers are working on is to daily buy every unit of the stock that comes up for sale. Also an investor may want to increase his shareholding in a company to enable him become a significant factor. Let us say the investor’s shareholding is less than one per cent of the total shares, he may come up with a goal to increase his shareholding over a period (say 3 years) either direct holding or an indirect holding.
Keep enjoying investing with calculated risk taking. If you are not yet well-grounded in this aspect, then you need an investment advisor.
Festival-Induced Market Glut:
Because of needs for money to celebrate special seasons, investors do supply the part of their stock holdings to the market in order to raise money to celebrate with. Thus market prices of stock may stagnate or fall during these major festive seasons (Christmas, Ileya, Easter, etc). Also when students are going back to school especially at the beginning of a season when school fees are to be paid, investors do push much stocks into the market for sale.
Closely related to this is the effect of summer holidays abroad which many investors in Nigeria are presently embracing. This may largely explain the market behaviours for some seasons now when the market tends to dip between July and September. A glut in the market generates low pricing and when demands cannot match supplies, there is a lull which may lead to a plunge in prices of stocks if left unchecked through increased demands.
Government Trade Policies & Toothless Enforcement:
How viable a sector will be will be determined largely by the government economic policies since there is no investor who would want his money to be tied down in an unprofitable business. Why is the banking sector (and of late, insurance) the most active sub-sector in the capital market? It is due to the fact that investors had come to realize that all Nigerian banks are churning out profits and every year they are paying dividends. Since investors know that these finance institutions are good money – whether real or imaginary – and that dividends are assured, the confidence to invest in these finance institutions will generate higher demand (above supply) that will bring about capital appreciation (market price increase).
For some weeks now, I have being a guest on one of the TV stations in Lagos to look at the 2008 budget. Last week Monday’s edition was dedicated to the Textile Industry; with a view to unraveling the mystery surrounding the total collapse of the sector dedicated to meeting a basic human need. The questions is, “why are Nigerian textile companies dying despite the fact that we have over 140 million people that are daily putting on wears?” Our attempt to proffer answers led to analysis of influx of foreign materials; and how China has literally taken over the global textile market. In 2005, China embarked on aggressive exportation of textile materials. In that year alone, 5,284 Chinese firms bided to start exporting textile materials to Europe. The exercise produced 3,000 firms as winners. With the American and European countries turning them back by responding decisively to the Chinese aggression, the next destination, of course, is Africa. No wonder we have foreign textile materials all over the Nigerian markets despite the ban placed on them.
Lack of enforcement of policies and the inability of Nigerian textile companies to compete with these foreign influxes has led to the comatose of the industry and, in effect, the bad performance of the textile stocks in the Nigerian capital market. I have to stop here today.
Public Sector Money Supply:
Release of funds by the governments significantly affects the activities in the stock market. Where there is much money supply, avenue for expression is found in the market for the fund to re-create. Where this is the case, the higher demand for stocks that is not matched by corresponding supply will result in upward swing of stocks prices. Much money supply by governments into the system gives birth to more institutional investors and/or enables the existing ones to have more money to play with. Example here is the pension money paid by the government few years back which led to establishment of many pension fund administrators. The effect of this move on the activities on the floor of the Nigerian stock exchange was not lost on the watchers of the market. The stock market activities received significant boost which that enables the market grow in bounds in the past three years. When there is much money supply, investment activities in the stock market increases too.
Investors’ Reward History:
Before an investor will put his money in any stock, he is interested in how the company has been rewarding its shareholders. Is the company paying dividend every year? How much and what percentage increase? Is the company giving bonus issues? What is the record the record of the scrip issue over a period. These are some of the questions a savvy investor would want to know to enable him decide whether he should invest in the company, or not.
This series we have been considering for the past seven weeks is perched today. Continuation of issues being treated under the series will have to wait till future date.
Enjoy my Pen and stay financially fit.
In this series on investment opportunities and wealth creation in 2008, let us examine about 20 factors that influence stocks market price movements so that those who are ready to play in the market can get to understand or refresh their minds on issues that determine the directions (yields or losses) on investments in the capital market.
To explain this issue, I will draw your attention to the market performances of some stocks in the recent past. In 2006, Okomu Oil (Agric/Agro Allied Sector) ended the year on a market price of N34.05. However, the stock recorded the highest price of N40 while the lowest was N16.80. Dunlop ended the year 2006 on all-time high price of N4.16 but not after the stock price had dipped to as low as N1.94 during the year. Cadbury stock price hit the peak at N70 while it ended the year 2006 at N32.46. In year 2007, a stock like Afroil was as low as 33k but rose to peak at N9.19; while in Printing and Publishing sub-sector, Academy Press was N1.56 at a point in year 2007 but also rallied to record N6.82 high. All these price flagellations are as a result of several factors which are clearly understood by few investors but with greater percentage of the market investors – especially budding ones – are at the dark of.
Pre-AGM & Post-AGM Surges: the general behaviour of the price of a stock is that it embarks on upward swing (rising) when the annual general meeting of the company approaches. Information would have reached the market about what the company wants to give as rewards (bonus/dividend) to its shareholders. Therefore before the close of the company register, many investors may want to partake of the supposed good rewards. With increased demand, the price goes up. In this wise, it is often the case that the market price of a stock attains its highest in the year by the date the company register is closed few days before the AGM.
The marking down of the market price for value of the dividend (and/or bonus) given makes the price to take the first plunge. Closely following this is the possible supplies of the stock to the market for sale after the AGM by those investors who believe they need to divest to enable them reposition their stock holding. This glut will further make the stock price to fall.
Influence of Core Investors: a savvy investor will be interested in who the core investors are in the company he wants to put his money. For instance, investors may be favourably disposed to taking positions in such companies where foreign and local investors are core investors compared to companies where about 80% of the total shareholding is in the hands of an individual investor or are in the hands of members of a single family. Therefore, it is not unlikely that a company perceived to be in the grip of one or two individuals may not enjoy investor confidence – more so if the core investors lack good track record. I shall continue treating the factors in the week to come.
Don’t Waste This Year:
The excuse of majority is that they don’t know anything about investment in stocks therefore they are not interested in the market. What a great money-making opportunity escaping them! You don’t need to master the market before you can begin to enjoy the wealth the platform offers. While learning about the market, you can get someone to serve as your investment advisor or portfolio manager to handle your investments on your behalf (and in your name, please). Such an appointed portfolio manager will take off your shoulders the troubles of investment decisions or stocks analyses by handling this for you. Also, the person can serve you as personal investment coach. If you are able to adopt this approach, though you may not yet become savvy player in the market, yet you are able to get best returns on your investments.
Pre-Public Offer Price Rally: Success is about how intelligence is put to use. Because some people are privileged to know what is about to happen, they make use of this intelligence to their advantage. This is what happen in the stock market when the market insiders get to know ahead of the public that certain company ‘will soon come to the primary market’ to raise money. In a bid to take full advantage of the discounts such the public offers will offer and the good returns such stocks will give, investors’ demand for such stocks will increase thereby making the market price to go up appreciably before technical suspension is imposed on the stock price. Such investors with privileged information would have good capital appreciation by the reason that a public offer is on the way.
Sector Viability: Why are investors falling over themselves to invest in banking sector stocks and such sector that deal in everyday basic need is closing down due to lack of patronage? I am talking about the textile sector. Why is it that investors are not keen on the textile sector and the companies in the industry are closing down despite the fact that they are so important to the economy of a nation? What makes Japaul stock riding so high to record over 100 per cent capital appreciation within few weeks? The fact that companies operating in viable sectors are trusted to make good profits is a key factor in getting investors’ confidence and patronage. Japaul is a lone player in the maritime sector and inasmuch as oil exploration has not stopped in Nigeria’s onshore and offshore, Japaul will continue to be in business, making good returns and enjoying investors’ confidence. So also will be the most-active sector (banking) who, notwithstanding how high the average market price in the sector is, the stocks with lowest market prices in the sector will be regarded as penny stocks – and continue to give benefits penny stocks offer to investors.
Institutional Investors:
Call them the market catalysts, the Institutional investors have the funds to change the course of action on a particular stock. We have seen the impact of this on the Nigerian Stock Exchange growth when the Pension Reform Act brought much fund into the market. Institutional investors are group of shareholders with big fund to play with (pension funds, mutual funds, investment clubs, fund management firms). Like I wrote earlier, their interests in particular stocks are weighty enough to make stock prices rise – or fall. Institutional investors’ preference for a particular stock can transform the fortune of a stock to make it become a hotcake in the market. Likewise, divesting from a stock is significant enough to make a once-viable and performing stock to nose-dive in price movements. Therefore, institutional investors’ level of ownership is a key factor investors cannot and should not overlook.
The Company Financials:
As the case usually is, investors respond to the results released by quoted companies. Thus, a 3-month result, half-year result or 9-month result is sufficient to convince savvy investors what will be the fortune of such a company at the end of the financial period. Therefore, it is not unlikely that a stock will record high volumes of trading activities when these results (gross income, profit before tax and profit after tax) hit the market.
Share of Ownership Held By Employees:
A move could be made by a company to directly ask its members of staff to buy the company shares – especially if such a company is newly coming to the stock market. This is a way to motivate the staff members to work harder and better with the consciousness that they are all owners of the said company. This can be in form of private placement, initial public offer subscription or staff association investing in the name of the association on behalf of all members. Where the above is the case, the commitment of such employee-shareholders will be different from that of employees working to earn salary alone.
An investor therefore, needs to find out as much as possible a company policy on employee shareholding, the percentage of employees that respond positively to the gesture, and what their level of shareholding is. An investor needs to ask: are the company employees eager to buy into the company or they are less enthusiastic about it?
Knowing fully well that the middle level and senior management team of a company have access to privileged information about a company, and they own shares of the company reveals a lot that can be considered good intelligence for investors to take positions in such a stock. This information goes a long way to attest to confidence level the stock enjoys.
W
hen on a particular day a stock emerged as the most active in terms of volume traded, a savvy investor would want to know the number of deals that gave rise to such performance, and the direction of the stock’s market price – whether it appreciates or it drops. This information is so important to an experienced investor so that he can take a well-informed decision. The position of an investor on a supposedly-active stock will be different where, for instance, the high volume occurs in just one or two deals and it passed from one major investor to another (while the market price remain constant); or it is an institutional investor that divest from the stock by supplying the market with a huge volume and the market price ended up dropping. This is a different scenario compared to a supposedly-active stock where quite a higher number of deals and volume was recorded and the price shoots up. The described three (3) scenarios above convey varied information to a savvy investor which enables him apply his investible funds in such a way to attract maximum yield. But there are ways even new investors too can enjoy this scarce information.
Increased Primary Market Activities:
If there are increased activities in the primary market, the secondary market activities will slow down. For several companies to embark on private placements (usually done by yet-to-quoted companies) or initial public offers (done by companies who are newly listed on the Stock Exchange) or public offers (a way in which quoted companies approach the public to raise more money as occasion demands), many investors are forced to sell their secondary market holdings to enable them realign their investment portfolios by taking advantage the primary market offers. One of the privileges the primary market offers to investors is the relatively lower pricing of stocks. A public offers (POs) is usually sold at a discount while initial public offers (IPOs) or private placements (PPs) are often sold below the real market value of such stocks. The willingness of secondary market investors, in this instance, to sell their stocks brings about much supply that enforces the slowing down of the secondary market or a flat or downward trend in price direction. A case in mind is the general lull the stock market went through in the middle of 2007.
Public Bias:
There is an adage that says, “a man greatly loved by the masses never do any wrong”. So it is with a quoted stock or handful of stocks that are enjoying market stakeholders’ goodwill. This goodwill may be as a result of likeness for a personality or two that are owners in the company. Who can remember where Afroil was two years ago? Compare this information with the market value of Afroil today and you will perfectly understand my gist. I try to reflect on the performance of Afroil in the Petroleum Marketing sub-sector prior to the taking-over by the new investors. In those years, one was pressed hard to declare: “Can anything good come out of this Bethlehem?” But look at Afroil today: a beautiful bride in the petroleum marketing sector that brings much delight to its investors. Afroil market price was 43 kobo as at December 31, 2005; but as at last week Friday (February 1, 2008), Afroil market price opened at N17.05 and closed at N17.74 thus gaining 84 kobo that day. What a marvellous goodwill and a way to reward investors with good price appreciation.
Influence of Company’s Management – AP Plc as a Case Study:
The most visible here is the managing director. Who is he or she? What is his or her track record in business management? Who is the chairman of the company? Is he or she a savvy business manager? Is he or she so respected in the business circle? How influential? These information form part of what savvy investors are always looking for before they put their money in any equity. A case so fundamental to this is that of AP Plc stock, one of the stocks in the petroleum marketing company. We all know the fortune of AP Plc prior to the taking over by new investors that brought in Otedola into the helm of affairs. December 31, 2004, AP Plc market price was N69. In that year 2004, the stock recorded all-time year high of N84.50 and all time low price of N42.87 with Earning per Share of 4.11. In 2005, AP Plc was among the top losers in market price with the price dropping to N35.82 (December 31, 2005). This is 33% loss compared to the N69 recorded in 2004. The year 2006 ended for AP Plc with the stock recording marginal price appreciation by rising to N46.29 (29 per cent price increase over that of 2005 year-end).
The year 2006 brought a new life into AP Plc when new core investor bought in thus paving way for new management team. As at the time of writing, AP Plc stock market price is N260 as at Friday last week. If a chart is plotted to show the performance of this stock for the period 2004 to date, it will undoubtedly be an interesting one.
Creation Of Artificial Scarcity:
A deliberate attempt can be made to mop up supplies to the market of a particular stock. Inasmuch as the stock is hard to come by, demand will continue to drive up market price. There are several reasons that can motivate this. An investor who wants to become a core investor may position himself to be acquiring shares of a particular company. In this wise, the instruction the broker or group of brokers are working on is to daily buy every unit of the stock that comes up for sale. Also an investor may want to increase his shareholding in a company to enable him become a significant factor. Let us say the investor’s shareholding is less than one per cent of the total shares, he may come up with a goal to increase his shareholding over a period (say 3 years) either direct holding or an indirect holding.
Keep enjoying investing with calculated risk taking. If you are not yet well-grounded in this aspect, then you need an investment advisor.
Festival-Induced Market Glut:
Because of needs for money to celebrate special seasons, investors do supply the part of their stock holdings to the market in order to raise money to celebrate with. Thus market prices of stock may stagnate or fall during these major festive seasons (Christmas, Ileya, Easter, etc). Also when students are going back to school especially at the beginning of a season when school fees are to be paid, investors do push much stocks into the market for sale.
Closely related to this is the effect of summer holidays abroad which many investors in Nigeria are presently embracing. This may largely explain the market behaviours for some seasons now when the market tends to dip between July and September. A glut in the market generates low pricing and when demands cannot match supplies, there is a lull which may lead to a plunge in prices of stocks if left unchecked through increased demands.
Government Trade Policies & Toothless Enforcement:
How viable a sector will be will be determined largely by the government economic policies since there is no investor who would want his money to be tied down in an unprofitable business. Why is the banking sector (and of late, insurance) the most active sub-sector in the capital market? It is due to the fact that investors had come to realize that all Nigerian banks are churning out profits and every year they are paying dividends. Since investors know that these finance institutions are good money – whether real or imaginary – and that dividends are assured, the confidence to invest in these finance institutions will generate higher demand (above supply) that will bring about capital appreciation (market price increase).
For some weeks now, I have being a guest on one of the TV stations in Lagos to look at the 2008 budget. Last week Monday’s edition was dedicated to the Textile Industry; with a view to unraveling the mystery surrounding the total collapse of the sector dedicated to meeting a basic human need. The questions is, “why are Nigerian textile companies dying despite the fact that we have over 140 million people that are daily putting on wears?” Our attempt to proffer answers led to analysis of influx of foreign materials; and how China has literally taken over the global textile market. In 2005, China embarked on aggressive exportation of textile materials. In that year alone, 5,284 Chinese firms bided to start exporting textile materials to Europe. The exercise produced 3,000 firms as winners. With the American and European countries turning them back by responding decisively to the Chinese aggression, the next destination, of course, is Africa. No wonder we have foreign textile materials all over the Nigerian markets despite the ban placed on them.
Lack of enforcement of policies and the inability of Nigerian textile companies to compete with these foreign influxes has led to the comatose of the industry and, in effect, the bad performance of the textile stocks in the Nigerian capital market. I have to stop here today.
Public Sector Money Supply:
Release of funds by the governments significantly affects the activities in the stock market. Where there is much money supply, avenue for expression is found in the market for the fund to re-create. Where this is the case, the higher demand for stocks that is not matched by corresponding supply will result in upward swing of stocks prices. Much money supply by governments into the system gives birth to more institutional investors and/or enables the existing ones to have more money to play with. Example here is the pension money paid by the government few years back which led to establishment of many pension fund administrators. The effect of this move on the activities on the floor of the Nigerian stock exchange was not lost on the watchers of the market. The stock market activities received significant boost which that enables the market grow in bounds in the past three years. When there is much money supply, investment activities in the stock market increases too.
Investors’ Reward History:
Before an investor will put his money in any stock, he is interested in how the company has been rewarding its shareholders. Is the company paying dividend every year? How much and what percentage increase? Is the company giving bonus issues? What is the record the record of the scrip issue over a period. These are some of the questions a savvy investor would want to know to enable him decide whether he should invest in the company, or not.
This series we have been considering for the past seven weeks is perched today. Continuation of issues being treated under the series will have to wait till future date.
Enjoy my Pen and stay financially fit.
INVESTMENT CLUB FAQs
Frequently Asked Questions About Investment Club:
Several people have been asking questions on Investment Club, some Frequently Asked Questions here.
Q: What is an Investment Club?
Ans: As implied by the nomenclature, it is a club – the coming together of like-minds for the purpose of wealth creation.
Q: Is Investment Club a Finance Company or Stockbroking Firm?
Ans: An investment club is not a finance company; neither is it a stockbroking firm. Investment club employs the services of a stockbroking or finance company to realise its goal of creating wealth.
Q: Why an Investment Club?
Ans: Investment club stands in the gap to assist as many as possible save regularly and invest their savings.
Q: How does an Investment Club work?
Ans: Members regular savings through the club are spread over several investment options (shares, bonds, money-market instruments, properties, etc).
Q: How many people can form an Investment Club?
Ans: It depends. It can be formed by local friends. Also it can have a national spread. Oak Magazine Investment Club is ICT-driven and national in spread.
Q: Can individual members choose the type of investments they want?
Ans: Investment decisions are guided by the club’s rules and regulations which will have taken into account the high-yielding investment platforms. It may be set out that 50% of the available money be invested in shares, 20% in money market instruments, 15% in properties, etc. No individual member can influence this.
Q: Who does the investments on behalf of club members?
Ans: A structure is usually put in place. Such structures as Investment Research Committee, Executive Officers, Board of Trustees, and Admin office are put in place. These structures work hand in hand to ensure smooth activities of an investment club.
Q: What is the duration of participation in an Investment Club?
Ans: Individual Members of an investment club are advised to attach their savings and investment activities through the club to projects they may want to carry out in a future date of about 3 or 5 years time. This will enable them reap the time benefit the platform club.
Q: How easy is it for a member to quit the Club?
Ans: Rules and regulation of the club usually takes care of this.
Q: Do members contribute equal amount of money?
Ans: This depends on the structure of the club. A club of not more than 20 members may agree on a regular amount to be contributed by members. Also, a club may be established for several classes of people (students, workers, business practitioners). This type may have different amounts club members can choose from since members are not of same status.
Q: Is Investment Club better than if I invest directly on my own?
Ans: As you know if you invest on your own, you bear the risk of investment alone. Also your money may be small which will not allow you to spread it over several investments. Investment club allows your little money to be spread over several investment platforms because it comes into a pool of money (that may run into millions of naira). Also no individual member bears the risk of investment alone. If any quoted stock goes bad, those that are doing well will not allow members lose money.
Q: How can you convince me that Investment Returns are high and I can make it?
Ans: For instance Intercontinental Bank was as low as N4.42 in 2003; today it is N13.50, Ashaka Cement was N12.95 but today N53; Total Plc was N72.50 but now N187.00. These are yields that are more than 200%. However, you only get this on good investments – the structures of the club will ensure.
Q: How do I monitor my contributions to through the club?
Ans: The club’s admin office and admin officers prepare financial positions of the club activities at regular intervals. A club like Oak Magazine Investment Club is to employ the use of the internet to enable members monitor the club’s activities.
Q: How easily can members make their monthly contributions?
Ans: For example Oak Magazine Investment Club will work with partner banks where members will have their individual accounts. 21st century banking has removed all bottlenecks in fund remittances.
Enjoy my Pen, and stay Financially Fit.
Several people have been asking questions on Investment Club, some Frequently Asked Questions here.
Q: What is an Investment Club?
Ans: As implied by the nomenclature, it is a club – the coming together of like-minds for the purpose of wealth creation.
Q: Is Investment Club a Finance Company or Stockbroking Firm?
Ans: An investment club is not a finance company; neither is it a stockbroking firm. Investment club employs the services of a stockbroking or finance company to realise its goal of creating wealth.
Q: Why an Investment Club?
Ans: Investment club stands in the gap to assist as many as possible save regularly and invest their savings.
Q: How does an Investment Club work?
Ans: Members regular savings through the club are spread over several investment options (shares, bonds, money-market instruments, properties, etc).
Q: How many people can form an Investment Club?
Ans: It depends. It can be formed by local friends. Also it can have a national spread. Oak Magazine Investment Club is ICT-driven and national in spread.
Q: Can individual members choose the type of investments they want?
Ans: Investment decisions are guided by the club’s rules and regulations which will have taken into account the high-yielding investment platforms. It may be set out that 50% of the available money be invested in shares, 20% in money market instruments, 15% in properties, etc. No individual member can influence this.
Q: Who does the investments on behalf of club members?
Ans: A structure is usually put in place. Such structures as Investment Research Committee, Executive Officers, Board of Trustees, and Admin office are put in place. These structures work hand in hand to ensure smooth activities of an investment club.
Q: What is the duration of participation in an Investment Club?
Ans: Individual Members of an investment club are advised to attach their savings and investment activities through the club to projects they may want to carry out in a future date of about 3 or 5 years time. This will enable them reap the time benefit the platform club.
Q: How easy is it for a member to quit the Club?
Ans: Rules and regulation of the club usually takes care of this.
Q: Do members contribute equal amount of money?
Ans: This depends on the structure of the club. A club of not more than 20 members may agree on a regular amount to be contributed by members. Also, a club may be established for several classes of people (students, workers, business practitioners). This type may have different amounts club members can choose from since members are not of same status.
Q: Is Investment Club better than if I invest directly on my own?
Ans: As you know if you invest on your own, you bear the risk of investment alone. Also your money may be small which will not allow you to spread it over several investments. Investment club allows your little money to be spread over several investment platforms because it comes into a pool of money (that may run into millions of naira). Also no individual member bears the risk of investment alone. If any quoted stock goes bad, those that are doing well will not allow members lose money.
Q: How can you convince me that Investment Returns are high and I can make it?
Ans: For instance Intercontinental Bank was as low as N4.42 in 2003; today it is N13.50, Ashaka Cement was N12.95 but today N53; Total Plc was N72.50 but now N187.00. These are yields that are more than 200%. However, you only get this on good investments – the structures of the club will ensure.
Q: How do I monitor my contributions to through the club?
Ans: The club’s admin office and admin officers prepare financial positions of the club activities at regular intervals. A club like Oak Magazine Investment Club is to employ the use of the internet to enable members monitor the club’s activities.
Q: How easily can members make their monthly contributions?
Ans: For example Oak Magazine Investment Club will work with partner banks where members will have their individual accounts. 21st century banking has removed all bottlenecks in fund remittances.
Enjoy my Pen, and stay Financially Fit.
Keep A Close Watch On Your Stockbrokers & Registrars
By Ola Emmanuel
Recent email, sms, visitations and calls demand I peep a bit into above subject today before they are handled separately. From my interactions with these people, they have all been complaining of not getting required attention from company registrars. Those who have been writing letters hardly get any response. Also, cases of stockbrokers acting ultra-vires have been re-occurring. So many public offer subscribers do not know whether their subscriptions are successful or not; and have been asking for share certificates. So also is the issue of delivery addresses that have contributed greatly to the growing lists of Unclaimed Dividends.
Awareness, in this respect, has been shallow with millions of investors not knowing what to do to follow up their investments. Complaints against a popular stockbroking firm with head office in Lagos are being laid from Abuja and Port Harcourt over issues bothering on integrity and ultra-vires transactions. I have since sent email to the MD of the stockbroking firm to educate me on the situations. So, also is an issue of people not getting positive responses from company registrars. I will mention two instances here which I expect the concerned to respond to by sending rejoinders to my email address. One: outside the bankers’ confirmation of signature, in what ways can a shareholder easily effect a change of signature that is no longer regular so that he can be receiving his dividends? There is a case of a signature (ostensibly signed some seventeen years ago) with an alleged response from the company registrar concerned that they can only recognise bankers’ confirmation. Also, why is it always difficult for company registrars to respond to investors’ letters; knowing fully well that some shareholders live far from their offices? I have not been asking for rejoinders but I am expecting in respect of above.
Don’t Agree With Stockbroker’s Ultra-vires Actions:
A stockbroker is an agent of an investor who should act on the instruction of the investor to buy or sell on behalf of the investor on the floor of the stock exchange. A stockbroker must build his client’s trust and confidence; and where a client suspects that a particular stockbroker is engaging in unwholesome acts, and it can be proved, a shareholder owe it a duty to report such a stockbroker or stockbroking firm for necessary sanction. Where stockbrokers go outside the instructions of a client (an investor), such an investor is not bound by the acts of such a stockbroker. A transaction carried out by a stockbroker without the instruction of the investor can be rejected, many investors don’t know this.
An investor must cultivate the habit of relating with the market’s players beside the stockbroker. An investor should always request for his/her stockholding statement from time to time. Where a stockbroker is not forthcoming with this, such an investor can approach the CSCS directly and obtain his/her statement of stockholding upon payment of N100. What is required is a written letter (with shareholder’s name and account number specified in the letter) and evidence of the stock ownership.
The Duty of Company Registrars:
A registrar is the keeper of records in respect of stocks and shares. Company registrars are appointed by quoted companies to act as their agents. The registrars maintain the company register where the names and shares held by investors are kept. So they maintain this record. They prepare share certificates and send them to shareholders. Also, they pay out approved dividends to shareholders. Whenever an investor has a problem with a share certificate or dividends, the company registrar is in the best position to attend to this. Therefore, every investor must have functional telephone numbers of the registrar(s) to companies he has invested his money.
Especially when an investor put money in public offers (or in other share investment) he must watch keenly the activities emanating from the company registrars. In this regard, don’t fail to walk into or call the registrars’ offices to clear issues as it concerns you if you sense any delay.
Enjoy my Pen, and remember, ‘It is your life’.
Recent email, sms, visitations and calls demand I peep a bit into above subject today before they are handled separately. From my interactions with these people, they have all been complaining of not getting required attention from company registrars. Those who have been writing letters hardly get any response. Also, cases of stockbrokers acting ultra-vires have been re-occurring. So many public offer subscribers do not know whether their subscriptions are successful or not; and have been asking for share certificates. So also is the issue of delivery addresses that have contributed greatly to the growing lists of Unclaimed Dividends.
Awareness, in this respect, has been shallow with millions of investors not knowing what to do to follow up their investments. Complaints against a popular stockbroking firm with head office in Lagos are being laid from Abuja and Port Harcourt over issues bothering on integrity and ultra-vires transactions. I have since sent email to the MD of the stockbroking firm to educate me on the situations. So, also is an issue of people not getting positive responses from company registrars. I will mention two instances here which I expect the concerned to respond to by sending rejoinders to my email address. One: outside the bankers’ confirmation of signature, in what ways can a shareholder easily effect a change of signature that is no longer regular so that he can be receiving his dividends? There is a case of a signature (ostensibly signed some seventeen years ago) with an alleged response from the company registrar concerned that they can only recognise bankers’ confirmation. Also, why is it always difficult for company registrars to respond to investors’ letters; knowing fully well that some shareholders live far from their offices? I have not been asking for rejoinders but I am expecting in respect of above.
Don’t Agree With Stockbroker’s Ultra-vires Actions:
A stockbroker is an agent of an investor who should act on the instruction of the investor to buy or sell on behalf of the investor on the floor of the stock exchange. A stockbroker must build his client’s trust and confidence; and where a client suspects that a particular stockbroker is engaging in unwholesome acts, and it can be proved, a shareholder owe it a duty to report such a stockbroker or stockbroking firm for necessary sanction. Where stockbrokers go outside the instructions of a client (an investor), such an investor is not bound by the acts of such a stockbroker. A transaction carried out by a stockbroker without the instruction of the investor can be rejected, many investors don’t know this.
An investor must cultivate the habit of relating with the market’s players beside the stockbroker. An investor should always request for his/her stockholding statement from time to time. Where a stockbroker is not forthcoming with this, such an investor can approach the CSCS directly and obtain his/her statement of stockholding upon payment of N100. What is required is a written letter (with shareholder’s name and account number specified in the letter) and evidence of the stock ownership.
The Duty of Company Registrars:
A registrar is the keeper of records in respect of stocks and shares. Company registrars are appointed by quoted companies to act as their agents. The registrars maintain the company register where the names and shares held by investors are kept. So they maintain this record. They prepare share certificates and send them to shareholders. Also, they pay out approved dividends to shareholders. Whenever an investor has a problem with a share certificate or dividends, the company registrar is in the best position to attend to this. Therefore, every investor must have functional telephone numbers of the registrar(s) to companies he has invested his money.
Especially when an investor put money in public offers (or in other share investment) he must watch keenly the activities emanating from the company registrars. In this regard, don’t fail to walk into or call the registrars’ offices to clear issues as it concerns you if you sense any delay.
Enjoy my Pen, and remember, ‘It is your life’.
STAFF TRUST FUND SCHEME: Mackers’ Employees Approach
By Ola Emmanuel
“Becoming wealthy is not a matter of how much you earn, who your parents are, or what you do, it is a matter of managing your money properly”. - Noel Whittaker
In today’s piece, I am going to adopt a different style of writing. I believe this will demystify the topic in such a way to spur every serious-minded group of people unto immediate action.
An employee of Mackers Holdings Limited was concerned about the poor financial dispositions of the company’s members of staff. While relatively few knew the about savings and were enjoying the benefits of investments, the better chunk of the members of staff were living care-freely. The employee in his concern went ahead to make a proposal. Further deliberations at the management level led to the memorandum below:
In view of the well-liked maxim that ‘failure to plan is a plan to fail’, there is need for every staff of Mackers to plan for his or her financial future. This shall be achieved by everyone setting part of his or her salary apart in order to meet the future commitments; thereby reducing the future’s uncertain financial issues to a definite degree of certainty. The following posers will explain this innovation better: (i) How many of Mackers’ staff has savings? (ii) Will Mackers’ pension plan be sufficient to meet your money requirements at retirement? (iii) What are the goals of every Mackers’ staff during retirement years? Are there enough preparations for this?
“In order to encourage a better financial discipline by ways of savings, a staff investment trust fund is hereby put in place. This initiative shall be known as “Mackers Staff Savings and Investment Trust Fund (MSSITF). The trust fund shall encourage staff to save part of their salaries to meet future financial commitment and obligation; and to help Mackers staff members to invest their money in a profitable investment portfolio that promises adequate returns.
“Please note that Mackers, as a company, is not involved – and we will not allow the company to participate if it wants to. We shall choose from among ourselves (staffs) to manage our money. We will hire experts from outside to assist us. Middle level and senior staff shall contribute N5,000 while junior staff shall put in N2,000 monthly.
“To avoid temptation, your monthly contribution shall be removed from your salary at source; and Mrs Grace Solomon has been asked to be the chairman of the board that comprise 6 other members. They shall manage the fund on our behalf; so you don’t need to panic.”
The memo above explains in clear term the concept of a Trust Fund Scheme.
What is a Trust Fund Scheme?
It is a unit trust fund whereby people who are bounded together with a common structure (friendship, employment, etc) decide to take advantage of their relationship to pool money together, on regular basis, for investment purposes. The pooled money is thus invested in diversified portfolio of securities to meet the investing goals of the people. The goals and objectives of the investing relationship are clearly spelt out in the rules and regulations guiding the relationship (prospectus).
The benefits of a trust fund scheme to a willing group of people cannot be over-emphasised. These benefits include the possibility of the people in the group to maximise their savings and investment earnings through hybrid of incomes and capital appreciation which will later be shared at the determined period according to the units or proportion of members’ contributions.
The management of a Trust Fund Scheme may be handled by more than one body – appointed Trustees (comprising of a number of members picked from the investment group) and investment advisors. The appointed trustees may hire an asset management company to handle the day-to-day administration of the fund and acts as investment advisor to the trust scheme.
Enjoy my Pen, and stay financially fit.
“Becoming wealthy is not a matter of how much you earn, who your parents are, or what you do, it is a matter of managing your money properly”. - Noel Whittaker
In today’s piece, I am going to adopt a different style of writing. I believe this will demystify the topic in such a way to spur every serious-minded group of people unto immediate action.
An employee of Mackers Holdings Limited was concerned about the poor financial dispositions of the company’s members of staff. While relatively few knew the about savings and were enjoying the benefits of investments, the better chunk of the members of staff were living care-freely. The employee in his concern went ahead to make a proposal. Further deliberations at the management level led to the memorandum below:
In view of the well-liked maxim that ‘failure to plan is a plan to fail’, there is need for every staff of Mackers to plan for his or her financial future. This shall be achieved by everyone setting part of his or her salary apart in order to meet the future commitments; thereby reducing the future’s uncertain financial issues to a definite degree of certainty. The following posers will explain this innovation better: (i) How many of Mackers’ staff has savings? (ii) Will Mackers’ pension plan be sufficient to meet your money requirements at retirement? (iii) What are the goals of every Mackers’ staff during retirement years? Are there enough preparations for this?
“In order to encourage a better financial discipline by ways of savings, a staff investment trust fund is hereby put in place. This initiative shall be known as “Mackers Staff Savings and Investment Trust Fund (MSSITF). The trust fund shall encourage staff to save part of their salaries to meet future financial commitment and obligation; and to help Mackers staff members to invest their money in a profitable investment portfolio that promises adequate returns.
“Please note that Mackers, as a company, is not involved – and we will not allow the company to participate if it wants to. We shall choose from among ourselves (staffs) to manage our money. We will hire experts from outside to assist us. Middle level and senior staff shall contribute N5,000 while junior staff shall put in N2,000 monthly.
“To avoid temptation, your monthly contribution shall be removed from your salary at source; and Mrs Grace Solomon has been asked to be the chairman of the board that comprise 6 other members. They shall manage the fund on our behalf; so you don’t need to panic.”
The memo above explains in clear term the concept of a Trust Fund Scheme.
What is a Trust Fund Scheme?
It is a unit trust fund whereby people who are bounded together with a common structure (friendship, employment, etc) decide to take advantage of their relationship to pool money together, on regular basis, for investment purposes. The pooled money is thus invested in diversified portfolio of securities to meet the investing goals of the people. The goals and objectives of the investing relationship are clearly spelt out in the rules and regulations guiding the relationship (prospectus).
The benefits of a trust fund scheme to a willing group of people cannot be over-emphasised. These benefits include the possibility of the people in the group to maximise their savings and investment earnings through hybrid of incomes and capital appreciation which will later be shared at the determined period according to the units or proportion of members’ contributions.
The management of a Trust Fund Scheme may be handled by more than one body – appointed Trustees (comprising of a number of members picked from the investment group) and investment advisors. The appointed trustees may hire an asset management company to handle the day-to-day administration of the fund and acts as investment advisor to the trust scheme.
Enjoy my Pen, and stay financially fit.
How To Invest To Earn Extra Amount Monthly?
By Ola Emmanuel
Craig McCaw, born August 11, 1949 was the second born of his parents. A renowned communication entrepreneur and savvy investor, he found himself saddled with the responsibility of rescuing his father’s business at a tender age.
While Craig’s father was on the saddle, he was known, throughout the period of his career, to have bought and sold dozens of radio and television stations; and incurring huge debts in the process. All the four children were involved in the company as employees but Craig soon overtook the other three; and becoming a leader in managing the company.
When Craig’s father died, his mother was forced to liquidate the family businesses one by one to pay debts and taxes owed by the man; leaving a small cable system company. Craig had to take over the management of the business as a college student; and subsequently expanding the cable business and steadily switched into the new and untested field of cellular telephone service. As an investor, he had to borrow huge amount of money, and taking a risk that the portable phone would become a success. By the end of the 1980s, McCaw's Cellular One had become the best known brand in the telecom business; building a national network that had successfully put its competitors far behind.
As is known with investors, McCaw sold the cellular business to AT&T for $11.5 billion, only to embark on a more ambitious investment by embarking on a global ICT venture.
The story of Craig McCaw explains the ‘never-say-die’ attitude of a typical investor who is confronted by failing economic situations. When good investors’ income yields become inadequate, they don’t just look but rather, they seek how to improve upon their earnings. This is an issue we are going to examine today in this piece.
In the face of rising costs of living, it is necessary that everyone saddled with responsibilities improve upon his or her ability to earn. When a question is simplified, it demystifies what may ordinarily appear unworkable. So, in today’s piece, to earn at least N20,000 extra every month is to find ways to earn additional N30 every hour. One of the readers of this column sent me this question two weeks ago. As a mark of honour and respect to the person, I have removed few words from the question: “How much do I need to invest to fetch me at least N20,000 monthly? It has to be monthly because I am a parent with children”. My discussion with the person (after I got the question) warrants that I do this piece.
In a situation where more money is required to get same quantity of value (a product or service), the simple logic is for one to earn more money to enable one neutralises the effect. Where this is not possible, standard of living falls and quality of life is reduced. Being conscious of the need to earn more is about taking deliberate actions to capture the money you have been overlooking or which you don’t know exist, or which you don’t know are yours to take. To those who were at the Ibadan Investment Summit, it was a swell time as they enjoy my paper on how one can locate and possess the hidden incomes that are begging for attention.
Investment Option To Achieve The Target:
However, if this target is to be met through the option of money investment, say investment in shares, a lump sum of N1.15 million will achieve the goal if it can make 21% yield per annum. But where one cannot get the lump sum to invest at the beginning of the year, a monthly investment may be the next alternative. So how much do one needs to invest every month to achieve the target?
To achieve the goal, let situate it on these facts. The first investment will be possible after one has earned money at the end of first month. Also the 12th month income will not make any yield since it will be earned at the end of the period. So, it is 11 instalments that will earn effective rate of 0.0175% (21% per annum) in the possible number of months. Therefore, to make a money gain of N240,000 in a year (average N20,000 monthly), one should be able to make N105,104 investment every month. A better approach is to earn hybrid of incomes through maximisation of one’s potentials.
Why You Need To Increase Your Earnings:
I had mentioned it before on this page that since inflation determines the value of money one can get, it will be fool-hardy if one fails to increase earnings on his money above inflation rate. Money that cannot attract yield higher than the inflation rate is not good money. An investment that can’t return higher rate of interest cannot be seen as good one. For your money to be meaningful, it must earn above inflationary rate, say minimum four per cent higher.
So you need to increase your income? There are many ways to achieve this besides the one ideitified above. For instance, you may have to explore business opportunities around you and take up those that compliment what you are currently doing. What you need to do is figure out what you are good at. Why not find ways to monetize your skills, hobbies, or passions.
Till next week, enjoy my Pen, and stay financially fit.
Ola Emmanuel is the Publisher of Oak Magazine. A practitioner in the areas of Financial Fitness, Human/Business Development, Entrepreneurship and Academic Excellence. Contact: 08023257707; www.oakmagonline.com oakmagazine@yahoo.co.uk
Craig McCaw, born August 11, 1949 was the second born of his parents. A renowned communication entrepreneur and savvy investor, he found himself saddled with the responsibility of rescuing his father’s business at a tender age.
While Craig’s father was on the saddle, he was known, throughout the period of his career, to have bought and sold dozens of radio and television stations; and incurring huge debts in the process. All the four children were involved in the company as employees but Craig soon overtook the other three; and becoming a leader in managing the company.
When Craig’s father died, his mother was forced to liquidate the family businesses one by one to pay debts and taxes owed by the man; leaving a small cable system company. Craig had to take over the management of the business as a college student; and subsequently expanding the cable business and steadily switched into the new and untested field of cellular telephone service. As an investor, he had to borrow huge amount of money, and taking a risk that the portable phone would become a success. By the end of the 1980s, McCaw's Cellular One had become the best known brand in the telecom business; building a national network that had successfully put its competitors far behind.
As is known with investors, McCaw sold the cellular business to AT&T for $11.5 billion, only to embark on a more ambitious investment by embarking on a global ICT venture.
The story of Craig McCaw explains the ‘never-say-die’ attitude of a typical investor who is confronted by failing economic situations. When good investors’ income yields become inadequate, they don’t just look but rather, they seek how to improve upon their earnings. This is an issue we are going to examine today in this piece.
In the face of rising costs of living, it is necessary that everyone saddled with responsibilities improve upon his or her ability to earn. When a question is simplified, it demystifies what may ordinarily appear unworkable. So, in today’s piece, to earn at least N20,000 extra every month is to find ways to earn additional N30 every hour. One of the readers of this column sent me this question two weeks ago. As a mark of honour and respect to the person, I have removed few words from the question: “How much do I need to invest to fetch me at least N20,000 monthly? It has to be monthly because I am a parent with children”. My discussion with the person (after I got the question) warrants that I do this piece.
In a situation where more money is required to get same quantity of value (a product or service), the simple logic is for one to earn more money to enable one neutralises the effect. Where this is not possible, standard of living falls and quality of life is reduced. Being conscious of the need to earn more is about taking deliberate actions to capture the money you have been overlooking or which you don’t know exist, or which you don’t know are yours to take. To those who were at the Ibadan Investment Summit, it was a swell time as they enjoy my paper on how one can locate and possess the hidden incomes that are begging for attention.
Investment Option To Achieve The Target:
However, if this target is to be met through the option of money investment, say investment in shares, a lump sum of N1.15 million will achieve the goal if it can make 21% yield per annum. But where one cannot get the lump sum to invest at the beginning of the year, a monthly investment may be the next alternative. So how much do one needs to invest every month to achieve the target?
To achieve the goal, let situate it on these facts. The first investment will be possible after one has earned money at the end of first month. Also the 12th month income will not make any yield since it will be earned at the end of the period. So, it is 11 instalments that will earn effective rate of 0.0175% (21% per annum) in the possible number of months. Therefore, to make a money gain of N240,000 in a year (average N20,000 monthly), one should be able to make N105,104 investment every month. A better approach is to earn hybrid of incomes through maximisation of one’s potentials.
Why You Need To Increase Your Earnings:
I had mentioned it before on this page that since inflation determines the value of money one can get, it will be fool-hardy if one fails to increase earnings on his money above inflation rate. Money that cannot attract yield higher than the inflation rate is not good money. An investment that can’t return higher rate of interest cannot be seen as good one. For your money to be meaningful, it must earn above inflationary rate, say minimum four per cent higher.
So you need to increase your income? There are many ways to achieve this besides the one ideitified above. For instance, you may have to explore business opportunities around you and take up those that compliment what you are currently doing. What you need to do is figure out what you are good at. Why not find ways to monetize your skills, hobbies, or passions.
Till next week, enjoy my Pen, and stay financially fit.
Ola Emmanuel is the Publisher of Oak Magazine. A practitioner in the areas of Financial Fitness, Human/Business Development, Entrepreneurship and Academic Excellence. Contact: 08023257707; www.oakmagonline.com oakmagazine@yahoo.co.uk
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