Originally: Youths and Investing in Stocks

For a while, most of the young people I knew would only invest in new clothes, electronics or other stuff. But when I came to serve in Jalingo I got drawn into investing in the stock market as a long term process. The only shares most of my friends and colleagues had were probably those bought by their loving parents a while back. I'd like to ask two questions:

1. What do you think about the stock market?
2. Have you ever invested in stock?

Thanks as you all reply.

Hello Chimanu,

Nice topic. When you buy shares in a publicly traded company, you're entrusting your financial future into the hands of the current and furute management of that company as well as the people who may take over from them into the future. 

Since when did Nigerians start trusting complete strangers to this extent? I mean, when you think about the level of corruption in our country it's extremely risky to invest in any company if you'll not have any say over the way it is managed.  That is why I shake my head when I think of the almost-distressed banks peddling their shares to [size=5pt]greedy[/size] Nigerians who want to make money out of the labor of other people.

If I'm fortunate to have lots of money I'd prefer to invest it in:
- A savings account, because the financial sector is policed by the government - even if the bank goes under you will not lose all your money (Deposit Insurance). Of course, the value of the money will go down with time due to the effect of inflation.
- Strategic investment in real estate - Plots land and property on the outskirts of major cities and in less developed towns, because as such areas develop and businesses start moving in, the landed properties will increase in value.  But even if that does not happen the land will still have more or less the same value as before.
- Entrepreneurship - I have lots of ideas of my own, so why should I give the money to someone else when I'll have little or no say in how it'll be spent?

Now all I have said really only refers to a situation where you buy shares during the initial public offering (IPO).  When you buy and sell shares during normal stock trading you're only playing a game (gambling) with your money and it is a well known fact that the number of people that lose is always greater than the number of people that win (the difference goes into trading fees collected by stock brokers).

If I have special knowledge about a particular company or industry that other investors don't, then I might trade the stocks to make some money.  But generally I'd simply not want play games with my hard earned money.
I will not invest in the stock market, especially not in Nigeria, and I will not advice my fellow youths to do so.

I'd like to invite others to present their points of view.  See also why do people fall in love with stocks

Thanks.

well, despite your fears, seun, a lot of people make a lot of money from the stock market.  all you have to do is look at the price chart of companies like conoil and zenith etc.  And you would be shocked how your money could have doubled within a month or thereabouts.

the real point is that: what is worth doing is worth doing well.  like you said, if you knew some info about a company, maybe you could invest.  it is the job of an investor to study a list of companies, choose the ones with the best prospects, and invest wisely.  companies like FirstBank, Nigerian Breweries, Conoil, Nestle have a superb track record.  They publish their accounts regularly for the public to see and they have delivered consistent dividends in addition to share price appreciation.  All the info is there..

i invest in stocks and i invest in my startup.  about savings, well, banks liquidate!! and maybe my bank could be cheating me like you indicated in a thread you started.

The difference between a bank and a company is that the bank is obligated to give you your money and the government has laws in place to help keep banks afloat.  The government goes out of its way to monitor the banking sector and initiate reforms when necessary.

The companies whose shares you are holding do not have any obligation to keep the stock price high, and they do not have to pay you any dividends.  If the majority shareholders are able to embezzle money from the company or justify the payment of excessive compensation to themselves and their managers, they may decide not to pay dividends.  As a shareholder holding shares worth maybe 20,000 naira in a billion naira company, what can you do to prevent that?  Absolutely nothing, and that's what makes me hesitant to invest.

You are right, bioye, that a lot of people are making money through the stock market.  The stock market is a game and every game must have a winner - even a lottery has a winner!  But for every winner, there are several losers and many of them are as intelligent as we think we are.  I just want people to know that before they put their savings into stock expecting to become rich as a result.  Some people selling stocks give people the impression that if it's a good company the shares will appreciate but the price of stock is purely a function of demand which is a function of the reputation of the company and not it's actual performance per se.

Note: To carry the argument beyond this point we may need statistics from the Nigerian Stock Exchange and publicly traded companies in the country.

Investing in stocks is a very viable business if one takes time to really learn how to do it. It is really a complex venture, and the returns surpass putting your money in a savings account! What does the bank do with your money anyways? They trade with it, and they give you peanuts as returns! Be aware that if a bank fails, the government/banks are only liable up to a certain amount...so if you have huge dough in the bank you might not get it all bank if the banks caputs.

Not any company can be listed and traded on the stock exchange...there are conditionalities to be fulfilled etc, so the chances of having a rogue company listed is slim. Occasionally there are cases when a company goes under, eg ENRON, WORLDCOM in the US. with a sound knowledge of the market, one can tell and act accordingly before it is too late.

Nigerian stock market has a very good record, do the research! There is really nothing to worry about when working through a reputable agent, who usually earn their wage through commissions, so they better look after the interest of their clients!

Like any serious venture, one must be willing to learn the rope, and trust me there is money to be made in any market- ie when stocks are up or down. You just need to know what you are doing...of course there are some risk involved in stocks. Losses are not uncommon, just as it is in any venture.

They are many books out there on stock and mutual funds...read Rich dad Poor Dad and other similar books if you haven't...these books are eye opener. No school teaches about money and all this things. We just have to learn as much as possible on our own. The most dangerous thing, however, is to have half knowledge...one's better off without any then.

I encourage your readers to learn about business in general and stocks in particular...it is a game of timing and big numbers. So form an investment club, find a mentor and invest...the gains outweights having all your money in a savings account.

Stocks again goodness. Seun made some points there, but i think he didn't hit on it on some areas which i would try to tackle though i am not really good with technicalities.

Now first of all, i am not Robert Kiyosaki's fan, I have read all his books. from poor dad rich dad to guide to investing or whatever. I was even signed up as as an INSIDER member once. Now I wouldn't want to go on criticizing him, because he really did a good job in helping people change their paradigm, in relation to what businesses is all about, and the way to plan your financial account. But in relation to real estate and stocks. I think i should reserve my comment.

Now back to the issue on stocks. I don't even know how to start tackling it, because from what I have read, a lot of you guys have got the entire idea of investing and returns wrong.

And I would explain that by hitting on my reasons why I do not invest in stocks and at the same time tackling the real truth about stocks.

Most people invest in stocks to earn profit, but most people that become millionaires through stocks bought more that 10% of the companies worth. they didn't buy meager shares like you guys are currently doing. Most actually bought into the company and had a say in the companies operations, and they were millionaires already infact. So becoming a millionaire through stocks is only possible, if you are an investor in the companies startup, through a cheap offering, that eventually grows after the company goes public.

Now I don't have that kind of money to invest, that would make me a millionaire through stocks, besides the fact that I still have a lot of my personal plans that i am still yet to finance properly, which disables me from investing into another company that would eventually go public.

Price fluctuation in stocks especially cases of prices of stocks going very high all of a sudden, are governed by many factors which doesn't really have any connection with the companies operations. One of the factor is

Rumours of possible strategic expansion or is some cases arquisition of the company. Mind you that doesn't mean higher dividends, that means higher possibility of profit through that strategic expansion be it through acquiring another company and energizing.

The other factor might be, high demand for that particular stock due to rumours or people trying to convince you that stocks is profitable. Meaning if you convince your friend to buy that particular stock, he tells another friend and the process goes on in promoting that particular stock, and thus the demand for that particular stock goes high, and the price gets affected.

Now the thing about meager stocks is that your returns are very little if they are for investment proposes, can someone please tell me the returns of 100k naira yearly from dividends?, and thats the case of only if that company declares dividends in returns, and doesnt convert it to extra shares, which comes in ratio to your particular units. which for a 100k worth share in respect to the units wouldn't be much. Maybe 5000 naira, thats only 5% of your investment annualy!!. Thats nothing, compare to your investment, you can do better investing into fixed deposits. And thats really not very common. Maybe if you are investing in IBTC, there is a possibility, because i heared that their mutual funds are quite fruitful, besides their minimum investment cost of 50k naira, which if i have would invest into something more reasonable, like buying and selling services.

Now i do have a lot of friends that deal daily in the stocks and forex market, infact I played in the forex once. And they are quite well to do, due to the fact that they spend almost half of their worth, gambling daily, in fluctuations. Not because they study the companies profile or something in that relation. Most daily traders, do not give a Dem about the companies background etc. What they do virtually is gamble with fluctuations using formulas. They call it technical analysis.

And what they do infact is forcast, and that actually affects the price of that stock badly. They are those that either make you rich or bankrupt. The daily traders, can buy and dump and do whatever they want just to get it their way.
And they are the rich ones, they are the ones that do not have money to buy decision making shares, and really make a lot of money through the stock market.

I think i have said enough in that relation and besides the fact that the returns are too small, that you can do better investing in in fixed deposits in the banks. If you have the money to have shares that would allow you to have inputs in the companies decision making, i would say, go ahead, especially if its a company with a good infrastructure and good standings.

But if you do not have that kind of money, and you are not a gambler, i would advice you to keep away from stocks as investments.

Playing in the stock market is virtually gambling in disguise, and can burn you badly if you are not careful.

Seun:

- A savings account, because the financial sector is policed by the government - even if the bank goes under you will not lose all your money (Federal Deposit Insurance Scheme). Of course, the value of the money will go down with time due to the effect of inflation.

I think you mean the NDIC? National(Nigerian) Deposit Insurance Corporation? If you go thru the NDIC decree, you would see that the maximum compensation anybody can get for trapped funds in a Bank is N50,000. So, in essence, where is the security?

Furthermore, investment decisions are made based on estimated returns and not on sentiments. To be frank, you would be better off investing in the Federal Goverment Treasury Bills, cos they are about the closest thing you can get to cash.

If any investment will give a return lesser than the treasury bills, then it is not worthwile. I dont want to get too technical. Any body needing any further clarification as per investments, rates of return, portfolio theory, PM me.

Feel free to share your information on treasury bills openly on the board. I'm interested in this information you have at your disposal. Thanks.

What has happened to long term investment, people? Everybody wants to be millionaire overnight! Wow!! Mind you, I have nothing against it. I'm worried that the impression one gets from Kazey is that stock investment is solely for quick bucks. Yes you can make it that kind of money if you have the capital, no doubt. I do disagree with your opinion, Kazey, but I leave it at that...the internet is a good source for information, so whoever is in doubt should use it to research more on the topic. There is room for savings accountstocks, treasury bills, etc. A sound knowledge is the key to getting the best return out of any them.

Why should I be doing research about other people's companies when I can use the same brainpower (with the money I say I want to invest) to start my own business and yield returns by directly solving people's problems instead of just by outsmarting others?

ok now really something confuses me, i don't remember saying that its wrong investing in a long period of time. Infact most of my business plans actually have a targeted 3 years ROI. So i think that you got what i am saying totally wrong.

By the way this is the points, i actually took, and tackled in my post.

Imnakoya:

Investing in stocks is a very viable business if one takes time to really learn how to do it. It is really a complex venture, and the returns surpass putting your money in a savings account! What does the bank do with your money anyways? They trade with it, and they give you peanuts as returns!

You just need to know what you are doing...of course there are some risk involved in stocks. Losses are not uncommon, just as it is in any venture.

I encourage your readers to learn about business in general and stocks in particular...it is a game of timing and big numbers. So form an investment club, find a mentor and invest...the gains outweights having all your money in a savings account.

And honestly i am suprised at your latest response .

Imnakoya:

What has happened to long term investment, people? Everybody wants to be millionaire overnight! Wow!! Mind you, I have nothing against it.

I'm worried that the impression one gets from Kazey is that stock investment is solely for quick bucks. Yes you can make it that kind of money if you have the capital, no doubt.

A sound knowledge is the key to getting the best return out of any them.

I really appreciate the exchange and sharing of ideas, so i would really appreciate if you respond to my post tackling issue after issue that i raised, so that, the stock investors to be, would be very well educated from our inputs. Thank you.

By the way, why do you invest in stocks? Imnakoya . Just curious.

is there any law that says you can't start small later focus on making more money later. Anyway, my dad invests in stocks but he focuses on safe stocks like Zenith, GTB, Nigerian Breweries,Cadbury etc. But he doesn't invest all his money in stocks and i don't think you should too. I read something in a book about forming an investment club with friends. that way you share the gains and the risk too.

but there are other ways like getting an sme loan and starting a biz. check the dailies, there is a company called Nomex that specialises in doing such though you have to provide one third of what you are borrowing as collateral.

Well there is no law that states so. What we are giving here is our opinions from experience in regards to the topic. So as you said this is what your dad does. Great, so can we get your input from that aspect, experience etc?

Well if i am allowed to quote the greatest Robert, he says and i quote, There is good debt and bad debt. And I would classify borrowing to fund stocks, a bad debt. Because you might lose it, the certainty is there.

A good investment, is an investment whereby, you don't lose from year 1 (in the case of stocks). What I mean here is that, your running cost should not be more than your income from that investment.

An example is starting an Investment with 1000 naira, your income from that investment is 800 naira yearly and your running cost for that investment is 1000 naira yearly, and that means you are losing 200 naira from year 1. What i am encouraging is, at least be on the break even line. let your income from that 1000 naira investment be at least 1000 naira or more yearly. Because you can't count what you do not have as yours.

You might say that, you can sell the shares right, after year 1? but is that not an investment, as it is said, it is not supposed to be sold, for quick bucks. . The point is, you can not get a good feedback from stocks, if they are not meant to be sold, don't forget your money that is tied down, that is money, you can use alternatively to do something else, do we call it opportunity cost in economics?, i think so . If stocks where not meant to be bought and sold, then they are not worth investing in.

The main company is just getting free bucks , for goodness sake. One more thing, we should not forget the value, of money, 1000 naira this year, is not 1000 naira next year, money either devalues or appreciates, based on the economy of the country and that also we shouldn't forget, the position of the company in the market. So now is shares tooo risky or fun?

Be safe, and be able to run for the exit anytime, anytime. That is what an investment should be.

kazey: Why do I invest in stocks?
Answer: Mainly for longterm/retirement. I have a couple of mutual funds I invest in personally through my financial advisor. Secondly through my 401k- all 401Ks invest a certain % into stocks.

I have ventured into individual stocks a little bit...it is just that it requires a lot of time and knowledge. I have some friends really do it well..."shorting the market" so to say. It is a really complex issue and merely posting on forum is just a scratch on the surface. That is why I do not what to make any generalized or categorical statements. I will encourage anyone to do their research and make an informed decision and is also why I suggested an investment club, and a mentor.

Seun: there is no business in this world that would not require some brain- work. Investing in solid stocks has its benefits, it is a source of passive income, and that is the beauty...and not every one has what it takes to be an entrepreneur. You are among the very few that have it in them.

Investment in general is best done having a diversified portfolio (mix of stock T-notes, mutual funds etc), whether you are a running a business or salaried, that way you will minimize your risk.

A good stock to buy will be that Transnational Corporation Plc when it becomes available.

Sounds like you just read Kiyosaki's book. . just kidding, you sound like one of his converts. when you mention 401k, I had a flash back to his theories.

Anywayz as you said, it is for your retirement, well that is something worth noting youths. . Well retiring and relying on what you left hidden is good, especially if it turns fruitful . Non taxable income and all that. hum impressive.

But really, if you have money for short time investment, pm me. I have just the thing that would do the magic, and of course with security.

Seun:

Why should I be doing research about other people's companies when I can use the same brainpower (with the money I say I want to invest) to start my own business and yield returns by directly solving people's problems instead of just by outsmarting others?

Seun, let me ask you a question - do you want your company to grow big and have more shareholders? Do you want to go public one day on the Stock Market and raise funds to expand? If yes, would you expect the prospective investors to think like you?

i keep to the rule: what is worth doing is worth doing well. i doubt anyone here has enough practical experience to be so sure about investing. i am comfortable taking the risks in the market. Heck - everything in life is a risk! And I think i would learn from experience and get better. Because there are good investors and there are excellent investors big or small.

Infact, i think everyone should learn from personal experience. if you are too scared, invest little. But do it full-heartedly..

Seun, ... do you want your company to grow big and have more shareholders?

I'll be quite happy to have my company grow very big, but preferably without the burden of shareholders who don't have a genuine interest in my business but really just want to profit from my labor or fund their retirement!

bioye:

i doubt anyone here has enough practical experience to be so sure about investing. i am comfortable taking the risks in the market.

Lolz. are you very sure about that statement . Think again.

Wise people would have love to invest in Nigerian companies but when you look at what is available you will have to Proceed with Caution.

Some vital information that investors need to be able to make good tradings on the stock exchanges are just not there.

Unlike in the US where you can get the down low on companies through EDGAR and some other tools, the Nigerian Stock Exchange does not have anything close to that. If i want to know if there is any heavy insider trading going on in any US company i can easily do that with the click of a mouse, but how do i do that on a company in Nigeria. Most of the data and information on the Nigerian Stock Exchange website are not up to the minute, so how does one make informed judgement about a company's health.

I as a person i don't believe one should just buy some stock and wait for dividends at the end of the year, you have to be actively trading in order to shore-up your investment portfolio.

I think the NIGERIAN STOCK EXCHANGE and NIGERIAN SECURITIES AND EXCHANGE COMMISSION should try and do better in these respect so as to make core information on publicly traded companies on the floor more public.

joftech:


Some vital information that investors need to be able to make good tradings on the stock exchanges are just not there.

Most of the data and information on the Nigerian Stock Exchange website are not up to the minute, so how does one make informed judgement about a company's health.

Well entrepreneur's in the house, this is a very potential area, dont you think? This is an area that needs exploring. Real time stock exchange, information rendering. Forget the Stock Exchange website and just start you own, with real time feeds, and charge members reasonable fees, and have partnership with stock brokers for example to be providing the extra services, such as buying and selling stocks. Thanks joftech, for making this known.

Well entrepreneur's in the house, this is a very potential area, don't you think?

How many people will be willing to pay for this service, we Nigerians like free stuffs and that's why our image is well dented on the Net. Also the infrastructures that will need to be put in place will gulp a whole lot of money.

And for Christ sake how many of the company directors will want their dealings/down-low to be revealed. Getting these information is going to be very hard since most of the people running/own these companies have bad records and are mostly after how they can enrich themselves over night.

Kazey and Jofteck raised valid points. Nigeria in general is an emerging and evolving market...things won't remain docile forever, so if you have an idea, it really makes all the sense to explore it vialibility through some research. Do not allow the present state of Nigeria to discourage you, ever!...An enterpreneur will always challenge the status quo, and'll keep trying until he finds a way.

In fact, if you limit yourself to present events, you will never make it...strive to see the future! think big!

joftech:

How many people will be willing to pay for this service, we Nigerians like free stuffs and that's why our image is well dented on the Net. Also the infrastructures that will need to be put in place will gulp a whole lot of money.

With such a mindset, i don't really know what to say. I was told worse, when i wanted to start a web hosting company for Nigeria. And So far, i have no complains. Infact I would say, Thank you Nigerians. I am really impressed by the way you guys spend online.

One thing you must know is that , you really do not need a huge infrastructure to run a online presence, be it capital wise or even office wise. A lot of people get the idea wrong, that you need millions to invest online. No!! No!!. Most of the money would be spent on the coding, and infact even paying people for hourly data entries wouldn't be expensive, especially when you get partime workers. All you need is a boot, near the stock exchange market, and some connections with inside brokers to get the real data's within.

Would Nigerians pay for the service? Oh yes, they would pay. If the price is reasonable, if your target is to satisfy every single stock exchange trader. That was the complains of many people, but people are still investing blindly, why do you think, they wont pay something reasonable like 100 Naira monthly to earn thousands? Now we are not talking about one regular trader. we are talking about at least 50,000 different individuals all over Nigeria, who trade daily in stocks.

Infact if you include extra services such as specific stock monitoring via sms services, that would open extra avenue for a lot of guys such as students who want to make extra bucks, by gambling in stocks.

Would the companies complain, if you render such services such as giving the companies tradings in real time? By regulations, they are supposed to declare tradings in public. So I don't think that is a problem. There is nothing like close door dealings in the stock market, especially when there is public offerings.

First of thanks seun for the change in title, its more to the point. Also i threw up this topic in relation to the aspiring enterpreneur. most of the big IT companies today started as small startups and grew when people invested and so did other non IT companies too. Thats why before the crash of 1999 and 2000 many had become multimillionaires selling shares in the companies. Now how many of us here are looking in that direction.
I believe actually for you to sell stock publicly you have to have been a publicly registered business for 5 years before listing but you can avoid this by having a private offer for interested folks.
In 2003, the fromer Malaysian prime minister, who was voted as entepreneur of the year said that the probl;em of most enterpreneurs was their fear of lossing hold of their business.i.e they attached too much sentimental value to the businesses and that was the reason for the poor growth of most businesses. So who'll be the first to seel we can actually have an investment forum here too.

First of all that wasnt lordimpaqs view i posted that while he was still logged in
Thanks seun for the change in title, its more to the point. Also i threw up this topic in relation to the aspiring enterpreneur. most of the big IT companies today started as small startups and grew when people invested and so did other non IT companies too. Thats why before the crash of 1999 and 2000 many had become multimillionaires selling shares in the companies. Now how many of us here are looking in that direction.
I believe actually for you to sell stock publicly you have to have been a publicly registered business for 5 years before listing but you can avoid this by having a private offer for interested folks.
In 2003, the fromer Malaysian prime minister, who was voted as entepreneur of the year said that the probl;em of most enterpreneurs was their fear of lossing hold of their business.i.e they attached too much sentimental value to the businesses and that was the reason for the poor growth of most businesses. So who'll be the first to seel we can actually have an investment forum here too.

hum what do you really have in mind. We are all ears. So feel free .

most enterpreneurs was their fear of lossing hold of their business.i.e they attached too much sentimental value to the businesses and that was the reason for the poor growth of most businesses.

@lordimpaq, one of the worst thing that can ever happen to an enterpreneur is to see his controlling power in his/her company eroded away by bringing in others, you won't find it easy to bring others on board, since you don't know their vision for your company and one thing that is sure is that people coming to join you are coming to earn some nice bucks, but what you want is mostly to have a thriving company where you will get to be the lord and general overseer.

If anyone know what those VCs at Google went through when Larry & Co started foot dragging about offering their IPO, you will know that it's not easy to go public or bring others on board. For them to even hire the present CEO, they make sure he his willing to let them run the show behind the scene, today anyone that follow what's going on in Google closely knows that Eric Schmidt is only but a figure head ceo.

Power no dey easy to leave just like that my bros.

kazey:

Well entrepreneur's in the house, this is a very potential area, don't you think? This is an area that needs exploring. Real time stock exchange, information rendering. Forget the Stock Exchange website and just start you own, with real time feeds, and charge members reasonable fees, and have partnership with stock brokers for example to be providing the extra services, such as buying and selling stocks. Thanks joftech, for making this known.

kazey, when i read that i smiled knowingly. i was thinking this 1 1/2 years ago. anybody interested in this solution should feel free to contact me. so we could deliver this solution faster. there's no point being competitors..

So does NSE have a central repositry server that you can connect to obtain these data, and what is the assurance that they will let you get access to their server if they have one that's online 24/7. If i were to the the Admin, i will have some reservations about giving access to just anybody. Anyway is any stock broker that's trading on the NSE floor here, i will like to hear about what and what they are using for their trading.

I will be willing to be a part of the project. I will sugest that the following name for the portal ( www.olofofo.com.ng, www.arinurode.com) PM me for more. LOL

yeah, they should be able to give access, if you know how to get permissions to use them, for informational proposes. And yes i think they do have a server for that. And yes I might be interested.

By the way the problem with ideas is everybody actually thinks of it, but in Implementation of that idea is where we make a difference. You can always think of an idea , Everybody just has it up there.

Well, if anybody can provide me with a list of at least 10 Nigerians who made their millions solely on buying and selling shares, then I'm going to invest in it.