Lazyyouth4u:


Do you mind sharing?

Investment is a game of probability and calculated risk.

That is just my own risk management strategy

If I have a portfolio of N10 million, I won't leverage more than N2 million eventhough the lender allows me to draw up to N10 million.

In case of any mistake in my forecast and calculation, I can always come out fine without losing my shirts and swimming naked.

While thinking of the upside, it is prudent to also consider the downside

Interest rate 15.95% Olorun oooooooooooooooooooooo

emmanuelewumi:
Mail from an Investment Banking firm yesterday

Hamachi:
Interest rate 15.95% Olorun oooooooooooooooooooooo

Try microfinance banks at 3.5% per month, that is 42% per annum

emmanuelewumi:



Investment is a game of probability and calculated risk.

That is just my own risk management strategy

If I have a portfolio of N10 million, I won't leverage more than N2 million eventhough the lender allows me to draw up to N10 million.

In case of any mistake in my forecast and calculation, I can always come out fine without losing my shirts and swimming naked.

Great strategy! Thanks for sharing.

emmanuelewumi:



Try microfinance banks at 3.5% per month, that is 42% per annum

emmanuelewumi:



Investment is a game of probability and calculated risk.

That is just my own risk management strategy

If I have a portfolio of N10 million, I won't leverage more than N2 million eventhough the lender allows me to draw up to N10 million.

In case of any mistake in my forecast and calculation, I can always come out fine without losing my shirts and swimming naked.

Are you saying you will not borrow more than 20%?

emmanuelewumi:


Try microfinance banks at 3.5% per month, that is 42% per annum

Microfinance bank loans are not for playing in the stock market. They are mainly for those doing buying and selling in the informal sector.

Hamachi:
Are you saying you will not borrow more than 20%?

Exactly. It is a speculative position, which I take once in a while

It is a 180 day loan, with opportunity for a rollover.

If it is a term loan needed for the expansion of my business, I can borrow 100%

NL1960:


Microfinance bank loans are not for playing in the stock market. They are mainly for those doing buying and selling in the informal sector.

The higher the risk the higher the interest rate, buying and selling in the informal sector has a lower risk.

The interest ought to be lower

emmanuelewumi:



The higher the risk the higher the interest rate, buying and selling in the informal sector has a lower risk.

The interest ought to be lower

The high interest rate is the lack of collateral. Which collateral you wan collect from okrika seller who buys a bale to sell?.

emmanuelewumi:


Exactly. It is a speculative position, which I take once in a while

It is a 180 day loan, with opportunity for a rollover.

If it is a term loan needed for the expansion of my business, I can borrow 100%

hmmmmmmmmmm

NL1960:


The high interest rate is the lack of collateral. Which collateral you wan collect from okrika seller who buys a bale to sell?.

emmanuelewumi:


Exactly. It is a speculative position, which I take once in a while

It is a 180 day loan, with opportunity for a rollover.

If it is a term loan needed for the expansion of my business, I can borrow 100%

So for slow people like me, is this how it works for someone with 5m that takes a loan of 5m?

I put my 5m contribution and take a 5m loan from them to buy 10m worth of shares which are kept in their custody. After 6 months, I either (a)pay them their interest and the 5m and take all my shares purchased, or (b)I rollover for another 6 months after paying their interest or (c)I ask them to sell some or all of the shares to repay the loan and interest and give me the balance of cash and/or shares.

Is this correct? Am I missing anything?

emmanuelewumi:



The higher the risk the higher the interest rate, buying and selling in the informal sector has a lower risk.

The interest ought to be lower

No o. Buying and selling in informal sector is more risky o. That’s why micro finance banks never last. Most of their loans are unsecured and go bad. So they try to compensate with the high interest rates.

ojesymsym:
OPM!!! I think there is a church so named.

Anyway, OPM in the context of this thread, funny thing is that ahib, NL1960 and lazyyouth are basically saying the same thing using different jargons, terms, grammar, terminologies and different case studies.

OPERATING PROFIT MARGIN (OPM)

Lazyyouth4u:


So for slow people like me, is this how it works for someone with 5m that takes a loan of 5m?

I put my 5m contribution and take a 5m loan from them to buy 10m worth of shares which are kept in their custody. After 6 months, I either (a)pay them their interest and the 5m and take all my shares purchased, or (b)I rollover for another 6 months after paying their interest or (c)I ask them to sell some or all of the shares to repay the loan and interest and give me the balance of cash and/or shares.

Is this correct? Am I missing anything?

It is a facility for traders and speculators.

Assuming you have a N5 million portfolio, you can get a trading facility of N5 million at 16%.

If you bought Zenith Bank shares at N11 with the facility in April 2020 during the lockdown and decided to sell in October at N20.

Your N5 million shares will be sold at about N8.8 million after making room for commission.

Your loan plus interest will be worth N5.4 million in 6 months. Subtract it from N8.8 million, you have a profit of N3.4 million.


But again instead of an upside, you might have a downside. Reason why this is not for everyone, except you have some level of knowledge, information and experience

emmanuelewumi:



It is a facility for traders and speculators.

Assuming you have a N5 million portfolio, you can get a trading facility of N5 million at 16%.

If you bought Zenith Bank shares at N11 with the facility in April 2020 during the lockdown and decided to sell in October at N20.

Your N5 million shares will be sold at about N8.8 million after making room for commission.

Your loan plus interest will be worth N5.4 million in 6 months. Subtract it from N8.8 million, you have a profit of N3.4 million.


But again instead of an upside, you might have a downside. Reason why this is not for everyone, except you have some level of knowledge, information and experience

is it not suppose to be N20-N11=N9*5 millions shares?

emmanuelewumi:



It is a facility for traders and speculators.

Assuming you have a N5 million portfolio, you can get a trading facility of N5 million at 16%.

If you bought Zenith Bank shares at N11 with the facility in April 2020 during the lockdown and decided to sell in October at N20.

Your N5 million shares will be sold at about N8.8 million after making room for commission.

Your loan plus interest will be worth N5.4 million in 6 months. Subtract it from N8.8 million, you have a profit of N3.4 million.


But again instead of an upside, you might have a downside. Reason why this is not for everyone, except you have some level of knowledge, information and experience

For traders and speculators? Ah ok. I see

But thanks for the explanation though

Hamachi:
is it not suppose to be N20-N11=N9*5 millions shares?

I think he meant to say N10m shares (the loan and the contribution).

Hamachi:
is it not suppose to be N20-N11=N9*5 millions shares?

Commissions on buying and selling, taxes to FG, dues to CSCS, NSE and SEC

I just wanted to get the calculation right

emmanuelewumi:


Commissions on buying and selling, taxes to FG, dues to CSCS, NSE and SEC

Lazyyouth4u:


I think he meant to say N10m shares (the loan and the contribution).

I assumed his portfolio was his Contributions.

Contributions can be shares or cash.

emmanuelewumi:


Interest income of over N400 billion

So they paid 9.89% tax?

Lazyyouth4u:


Lockdown only in Lagos, Abuja and Ogun States? Are you being serious Anyway, no comment

Forgive the guy

Lazyyouth4u:
For those people that don’t understand why billionaires with lots of money still go to take loans from banks, let me show a basic example of how OPM works. You can thank me later

Case A : Business man has a project of USD40m. Instead of carrying out the entire project with his own money, he goes to the bank to borrow USD30M and then puts only USD10M of his own money. The project succeeds and earns USD100M profit. He pays back USD40m (USD30m principal plus USD10m interest). The remaining USD60m is his profit. So he basically makes 6x his money back (6 multiplied by the USD10m invested). Neat profit. If business fails, he only loses USD10m.

Case B : Business man puts all the capital of USD40m and takes nothing from the bank. Project succeeds and earns same USD100m. He has no loans to pay. The entire USD100m profit is his. But wait a minute. He only makes 2.5x his money back (2.5 multiplied by the USD40m invested). Neat profit but less gain on money invested. If project fails, he loses the entire USD40m and possibly goes bankrupt

Lesson learned about OPM: most big business men would rather put the least money required to enhance profit and minimize their risk. Nobody will risk their entire net worth in business when they can use Other People’s Money to minimize risk and make higher profits on the money they invest.

So the project is used as collateral right?

Lazyyouth4u:


Speculators are rubbing their hands with excitement waiting for you guys to leave NSE so they can buy some good stocks at dirt cheap prices, and then cash out when they sell back to una at high prices when una return to NSE when Tbill rates fall again. Don’t we just love this game?

Wicked lazyyouth

igbizen:

Wicked lazyyouth

igbizen:

So the project is used as collateral right?

Exactly.

emmanuelewumi:



Try microfinance banks at 3.5% per month, that is 42% per annum

Lol. Fintechs charge about 5% per month..

Is there any bank in Nigeria that pays interest on dorm accounts?

Foreign banks do not pay interest on deposit, na Nigerian wan come pay ?

chigo4u:
Is there any bank in Nigeria that pays interest on dorm accounts?