₦airaland Forum

Another reason I don't pay attention to or focus on networth (total assets less total liabilities) is that in most instances networth is not readily available as cash. I prefer to focus on liquidity most of the time. Networth I think is on the whole a matter for my Will or Trust. Networth really plays no part in my everyday life. Networth I find is useful when people are trying to raise debt for whatever reason. I have spent a good part of my life time paying down debt so I do not envisage raising any debt going forward.

Btw I am not disagreeing with your initial statements. I am simply stating that it is not something I focus on or even think about. It will all (networth) simply be listed in a Trust and Will.

emmanuelewumi:
Your networth is the total value of everything you own eg house, savings, retirement savings account, bonds, mutual funds, cars, collectibles, business, shares, real estate, life insurance etc minus your liabilities eg student loans, pre payment received, car loan, mortgage loan etc.

True my current annual expenses are less than half of my passive income. I still aim to have three times my annual expenses because it allows one to compound some of the passive income to enable it grow over time.

Re sources of current passive income are equity dividends, FGN bonds and three rental flats.

Yes you are right that the emergency reserve can technically count as part of networth. But in my mind I expect to spend it when the need arises or when the time comes. So I personally do not count it as networth (I am quite certain I will spend it e.g. I could wake up one day and say I am off to the Caribbean or Hawaii for 6 months holiday - that's my idea of a lovely EMERGENCY). Networth is not a concept I pay attention to because it can fluctuate widely over time particularly if much of your networth is held in equities. I imagine if majority of ones assets were held in real estate one could mentally keep a note of their networth which isn't the case with me. I do not have majority of my assets in real estate just a bit excluding my home of course.

emmanuelewumi:
That is why number 2 is or, not and.


What are the sources of these passive incomes?

I am sure your annual expenses is 50% or less of your annual income.

Emergency reserve is part of the networth

Agree on the whole with the combination of both statements. However I am not bothered about networth as long as I have 2 years expenses as an emergency fund and a passive income that is three times my annual expenses. That will do me just fine

emmanuelewumi:
Personal finance experts believe you are financially independent if you have the following

1. An emergency reserve that is equivalent to your expenses for a minimum of 6 months

2. A networth that is 30 times of your annual expenses or an annual passive income that is twice your annual expenses.


Do you agree with this?

And when does the bond mature?

PresidentBuhari:
It was bought through bank. It's two payments a year i.e roughly N264k a year.
I don't have the contract note but information recorded at the time of purchase was;
YIELD - 10.93
CLEAN PRICE - 1102.6
DIRTY PRICE - 1156.4

Good morning. Yes the coupon is paid twice a year. The only FGN bond currently available on the secondary market with a 16.39% coupon matures on 27 Jan 2022. It was issued on 27 Jan 2012 (ten year bond). With a 16.39% coupon and N264k interest payment per year means the face value of the bond he bought is N1,610,738 (N264,000/16.38%). Thus, the N1.85m capital spent on the bond purchase includes accrued interest and the bond price premium of at least N6 over par.

emmanuelewumi:
He said bi-annual coupon and not annual coupon.

Meaning he will get the stated coupon twice in a year

With a coupon of 16.39%, then it is most likely your bought the FGN bond maturing on 27 January 2022. Therefore you bought above par and the capital you state below of N1.85m includes includes accrued interest to the date you made your purchase so it is perfectly normal. Kindly note that you get the accrued interest back at the first semi-annual date of the bond following your purchase which would be next month. Finally, it is not expensive since the yield of about 7.4% if bought recently perfectly reflects the short duration to maturity of about 7 months.

PresidentBuhari:
Could anyone help calculate this.
I bought FGN Bond with a coupon of 16.39%.
The capital was N1,850,000 with bi-annual coupon payments of N132,000.

I was informed the capital to be received at the end of the tenure is N1,585,000.

Is this normal or an expensive bond?

Correct and on point.

Lazyyouth4u:
Whether you buy at premium, par or discount , just try to get the highest ‘yield’ possible (note I didn’t say ‘coupon’)

Yield = coupon divided by the amount you paid for the bond

Correct this is why I also said 15% as an average over a 30 year period is a big ask but not impossible if you are in a position to take advantage of periods of market price dislocations (bonds or shares). As a result, compounding the interest of the coupon payments is possible with discipline. Very similar to the discipline required when reinvesting declared company dividends. This is what I have done so far. It is also why I think my 20 to 25 year bond purchase next year will be made using the coupons and dividends I expect over the next 12 months.

ojesymsym:
But it is almost impossible to reinvest your bond interest within the bond itself, or am I missing something?

Life is a journey and an investment portfolio that will be useful in future takes time to build. The beauty of this thread, I feel, is how over the years it has grown from being a TBill only discussion thread to one encompassing and discussing all or most asset classes (Nigerian shares, US shares, FX, real estate, REITs, Eurobonds etc etc). They all have an underlying theme. They are income generating and encourage us all to invest during our active years to make all our lives more comfortable in future in whichever way we choose to live our lives (long life allowing of course). I am not suggesting one does not live as comfortably as one can today or during our active lives, I am merely pointing out that it gladdens me to see how this thread has over the years made more people become aware of some of the benefits of investing.

The above said, the healthy discussions over different investing strategies (short-term, mid or long-term) are great although I do think it can all be had without insulting anyone with the exception of great sarcasm. I find great sarcasm healthy for the soul just as laughter is.

You now get the general idea with the slight clarification below in the second paragraph.

ojesymsym:
Oh I see what you mean. On the bond side using the 15% lot, at the end of the 20th year, the 1M will have yielded 1M + 12.2993M. - Correct

Then the coupons or interest themselves would yield another 1.8M if it is invested in other instruments that are able to also provide same investment interest rate.
Not quite. The 1.8M is compounded interest of the coupon payment interest by the 20th year

Sure. Kindly find below two lots. One using 12% which is about the rate available today for a 30 yrs FGN bond and the other using 15% to enable an easier comparison to the 15% used previously.

ojesymsym:
Is it possible for you to do a case study with say 1 million and maybe 20 years so some of us can better understand?

Currently 15 years. But I am looking to buy a 20 to 25 year one from the secondary market sometime next year. Most probably July next year.

emmanuelewumi:
What is your longest tenor

Well, in this case, I am the lender thus I am not complaining... More happy days ahead

emmanuelewumi:
Compound interest is a 2 edged sword, good for the lender but disastrous to the borrower.

I am a fan of bonds and do have some though I have not bought a 30 year one yet. Nevertheless, yes the coupons over the years have been reinvested in other asset classes (fx, real estate, listed company shares e.g. MTN etc etc). When your principal has been recouped with the bond coupons the remaining years is jara... if held to maturity!

emmanuelewumi:
It actually took me a very long time, before I could understand the rationale behind some core fixed income investors who buy 30 years bonds.

They are so liquid, that they deploys their cash to buying real estates when are are sure of a minimum rental income yield of 10%

Confirmed below (compounded) but 15% is a tall ask to then be the average return on the N9m annually received for the next 29 years though one has stopped at 20 years in the table below.

emmanuelewumi:
From my calculation, N9 million every year for the next 20 years @15% grew to N1 billion.

I stopped calculating, the initial plan was to get the value in 30 years, but had to stop at 20 years.

I want the results from others if they will tally with mine

CBN's 3rd Quarter TBill Calendar.

Meanwhile, the Naira has been appreciating recently against the US dollar. Long may it continue. Amen.

It is not 419. This half of the year has a shorter number of days than the second half of the year (difference is usually 1 or 2 days depending on whether its a leap year or not). This is the reason for the point something percent shortfall.

TotoNaRubber:
do you have a clue why they are short paying everyone?

Shebi CBN don start 419
It's against the contract to pay the investor less than the agreed interest coupon rate.

LagosInter:
Why not also include cost of transport to the bank too?

The broker or bank charges are usually embedded in their bid/offer prices. Not all banks charge custodian fees btw. Focus on the offer price if you wish to purchase. You can phone or email a number of them to explain/breakdown their charges to you. You can even ask them to send you an example following which you should make sure you understand them. If you have further questions following this, they will be happy to answer them. Good luck.

Akerewe:
pls what are d charges on this fgn bond in d secondary market? i saw something like 7.5%vat, 0.05% and custodian fees. pls house help analyze these aforementioned charges!

Enjoy

OgogoroFreak:
Wonderful

They are all Federal Government debt instruments with varying tenors. Sukuk is I believe is currently up to 7 yrs, Treasury bill up to 1 yr and FGN bond up to 30 yrs.

Akerewe:
thanks for your swift response. Pls any difference between sukuk, treasury bill & fgn bond?

All FGN bonds are always available to sell or purchase on the secondary market. Approach your bank or broker for current prices.

Akerewe:
Pls house kindly let me know if the attached bond is still available. Also I want to know the different between this bond and sukuk or treasury bills. Am into sukuk nd treasury bill nd will like to try my hands on this bond if it's still available because of the rate. Kindly advise me.

Insightful quote below.

Excellent foundation and financial planning Sir Emma. Is there no room to add Mr/Mrs/Miss NL1960 to the Xmas sharing event this year?

emmanuelewumi:
Just 7 funds ooo, for different purposes and to avoid co-mingling.

I have

FBN Quest Money Market Fund, for rental income

Abacus Money Market Fund for University Education of the kids

VGIF emergency fund

FSDH Treasury Bill Fund for flenjor

Coral Income Fund: 30% of dividends earned are invested there. Liquidated everything during the lockdown to take position in the stock markets.

United Capital Fixed Income Fund is for diversification and personal retirement plan

United Capital Money Fund: I am my grandma's eldest grand son, rental income from her properties are invested there. We use the fund to renovate and maintain the properties, 80% of the surplus is shared among the 20 grandchildren in December during the family reunion party

Seconded. Totally agree.

ojesymsym:
Americans and Singapore and other first world countries have a productivity and greatness mindset. So they always strive to get better in all that they do.

This is not about prayers at all. As a matter of fact, your second statement is what I am talking about. Because of the destructive mindset of our people believing that the country will never get better, they allow their greed get the better of them to destroy any sector they man, no matter the position they hold whether na security man, or politician.

I have followed CNBC's Insana for many years. I think his opinion below should be a warning and lesson. A word is enough for the wise. History does repeat itself.

Insana: The pied pipers of cryptocurrency are leading investors to their doom

https://www.cnbc.com/2021/05/20/insana-the-pied-pipers-of-cryptocurrency-are-leading-investors-to-their-doom.html?recirc=taboolainternal

I also like how he ends the article...

"If you have profits, take them and go back home. If you have losses, cut them.

If you haven’t yet played, stay home, stay safe and be well."

The annualized rate of return over 37 years using your initial and final value figures below is 19.07%

$:NGN Final value in 2021 = 485 Naira

$:NGN Start Value in 1984 = 76Kobo

I would also advise you that in future learn to ask questions politely. You have no right to TELL someone to do any calculations for you. So ask politely. I decided to compute the above for you because it is clear that you are unable to do the calculation yourself even after I had communicated the formula for computing it. Wishing you the best. Take care.

STNWAUME:
In 1984 exchange rate was N0.76k per USD today it's N485 per USD.

Do the calculation and tell me the returns for those holding dollar assets?

The annualized rate of return over 37 years is 17.44%

ASI Final value (today) = 38,324

Start Value in 1984 = 100

And below is the formula if you wish to calculate it yourself for verification purposes.

(((final value/initial value)^1/no of years)-1)*100

emmanuelewumi:
The All Share index was introduced in January 1984.

At 100, looking at the current figure of the ASI who can help me with the annualized growth rate of the index from January 1984 to date?

Time will tell. Take care.

afroxyz:
So the central banks decided that gold has intrinsic value, not that Gold has anything has any value to offer. You expect Central bank to recognize the very thing that threatens their existence? Nice try

The intrinsic value of gold is or portends from the fact that all central banks in the world have acknowledged the value of gold as a store of value since time immemorial . So much so that many of them have a portion of their reserves in physical Gold. No central bank recognizes any cryptocurrency as a store of value. Sorry but I do not see that stance ever changing.

afroxyz:
When inflation rises, first assets that get hit a risky and speculative assets. Cryptos and tech stocks fit that bill. When has crypto ever been 'legal'? If you are talking about intrinsic value, please what is the intrinsic value of gold?

The inflation broadbased market price action is unrelated to the bitcoin or cryptocurrencies market price movements. Cash generating equities (companies) have intrinsic values. Cryptocurrencies do not. I maintain within 5 years they will not exist. Digital currencies may very well exist but cryptocurrencies will not exist LEGALLY.

afroxyz:
Stocks paced toward a third straight day of declines, with technology shares leading the way lower as concerns over inflation persisted

https://uk.finance.yahoo.com/news/stock-market-news-live-updates-may-19-2021-221605666.html