Literacy Lecture Series 1.0: “Planting and Nurturing your Money-Tree through Investments”

FarmFunded Literacy Lecture Series (LLS) 1.0. is a 3-Day Online Symposia organized mainly with the objective to enlighten, empower and educate our online community with information across Finance, Agriculture and Technology

1ST DAY OF LITERACY LECTURE SERIES with Financial Literacy held on 12th June 2018 was facilitated by Mr Oladayo Ayanbimpe of Afrinvest West Africa Ltd. 

Financial Literacy means the possession of knowledge and understanding of financial matters. This basically means an individual is well aware and can process and understand financial information. We all need to be financially literate because we need to manage our financials, but we all have to admit that knowledge/theory is way different from practical analysis and management of financial information

How we can plant and nurture our money tree

So three things mainly;

i. The planting part

ii. The nurturing part

iii. The money tree part

Planting your money seed

For a tree to grow, a seed must first be planted. This seed is money since seeds that end up becoming big trees are small when they are planted, this means you can start with a very small amount of money and grow it to something big in the future. Warren Buffet (Arguably the greatest investor of all time) has two golden investment rule which some of us know:

1.Never lose money.

2.Never forget rule number.

You can basically invest in two major ways, either through equity or debt. Equity is mainly investing in the shares of a company as an equity holder (shareholder) you are a part owner of the company, to purchase shares of publicly listed companies, you need to invest through the stock market. You could invest in businesses without the stock market, for example agro businesses such as www.farmfunded.com provides that opportunity. Shares are traded on the Nigerian Stock Exchange(NSE), Last year the NSE made a return of over 40% that means if you invested N1,000 u would have had N1,400 on the average at the end of the year. You can invest in the stock market for as low as N100.

Some companies trade for as low as N0.3(30kobo) per share. with N100 you can buy around 300 units of that stock one thing that is important is that we need to be disciplined enough to save money, make it sizable and then invest it. Another thing that is important while planting is to be contented. stocks go up and come down (that’s d cycle). YOU CAN GAIN 100% AND YOU CAN LOSE 100%, but with professional assistance and guidance you can be on the winning side and not on the losing side. I know we all want to be on the winning side.

Now let’s talk about debt, the debt market is also called the fixed income market. You can also invest in businesses without being a shareholder. You can lend your money to the company or government and then get returns on it. From the word "Fixed Income". This means what you will gain is not a probability, it is fixed and you can't make more or less than the agreed interest rate, it is also to referred to as a risk free investment (government securities), that mean unlike stocks(equity) you can't lose your money because government is not expected to default and they will repay you, like the saying "The higher the risk, the higher the return and vice versa"

Risk free investments have lower or no risks which translate to lower returns compared to risky investments like the stock market, risk free investments include bonds, treasury bills…etc.

How can we nurture the money seed we have planted?

Just like a seed needs to be watered regularly before it becomes a big tree, the money seed also needs to be watered regularly (by adding money to it) so that the pace of the money tree growth can be faster. Secondly, you need to have a diversified portfolio. This means you don't invest all your money in the same stock sector etc. Basically don't put all your eggs in one basket. Lastly, let professionals manage your funds, have a registered stockbroker to help you in your investment decision. Lest I forget, you can invest in mutual funds, these funds help you invest in government securities for as low as N5000. Once you follow these principles, you are on your way to have a financially secure future.

Questions Asked and Answers Provided.

QUESTION: How can someone who knows nothing about stock exchange but had interest in investing go about it?

ANSWER:  For you to start trading, you need to open an account with a registered stockbroker. The stockbroker helps with stock recommendations on stocks to buy and sell. Make sure you have a KYC which means Know Your Customer. You need a valid government means of identification.

QUESTION: What does never lose money imply?

ANSWER: Never lose money means you should invest in a way that you will end up gaining more and not being worse off after investing.

QUESTION: Does investment always have to be about the returns on the investment?

ANSWER: The returns on the investment is the compensation for investing. It should be about returns except you have other personal investment objectives. The returns can come in two ways; Capital gains or dividends. Capital gain means benefiting from an increase in the stock price.

QUESTION: Has a nation ever prospered by its citizens investing in the stock market?

ANSWER: The nation has provided a stock market where you can make returns, take advantage of it and be financially secure. Last year the NSE was the second best performer in Africa.

QUESTION: Does having a stockbroker mitigate you from losing money?

ANSWER: It does to an extent; you need to trust the professional guidance of your broker but have at the back of your mind that it is still a risky investment. Also, good brokers won't advise you to invest everything in one stock because just one news can make you lose almost all. Good stockbrokers only recommend companies with strong fundamentals backing them. Stockbroking firms send daily and weekly report, they have professional analysts that give report to their clients on the stock market daily and weekly to guide u every step of the way.