I invest in stocks because I thoroughly understand them. I do my own stock analysis (I even built this tool and this one too to help others with their own stock analysis); I teach financial modelling; I do projects for investment houses (currently working on a VaR, value at risk, model for a foreign investment corporate client); I have made enough mistakes over the last ten years that I now recognize the common pitfalls and what works. Most importantly, investing in stocks is a vital component of any very sound personal financial investment plan.
Many of us work hard daily. Even after spending the first two decades of our lives in school and are now working full-time, many of us still do Masters, Ph.D and professional courses. We are constantly developing ourselves in order to increase our earning power. And some of us succeed very well. You now earn enough to cater for all your needs and those of your dependants with still some money left. And this is where many of us fail to do things right.
When you don’t have a sound financial investment plan, other people’s plans look good to you. You will easily fall for the real estate salesman’s talk about buying properties. You will feel left out when your friends are doubling their money in the latest investment scheme. Even the FGN savings bond will look heaven-sent to you. No matter how strong-willed you are, you will always be facing immense pressure as no financial investment plan is like a vacuum and difficult to keep that way. One day, you will break and go for one of the investment schemes you see your friends doing. And more often than not, you will get burnt and swear off any form of investment. Then the vacuum-struggle cycle restarts.
The bulk of my financial investments were handled by professional investment managers as a mutual fund investor. As time went on, I slowly began to invest directly in stocks myself. Before then, I had been burned by the 2008 crash, when radio jingles, billboards, and TV ads urged people to buy stocks, and every listed company had a public offering. The First Bank advertisement for their public offering at N31/share still stands in my mind. My dad got charcoal from it. Everything he put in completely burned. I lost everything I put into Mutual Benefits Assurance (except the dividends they gave me in 2008) and Finbank. Therefore, I was much more careful to do things right and learn how to invest properly. Through my own financial investments, I have gained a lot of practical experience since 2011. Over the years, I experienced ups and downs in my portfolio. I used to feel sick when it went down at first (especially when I put my money in), but now I am well accustomed to it and see buying opportunities during market downturns.
I follow the mantra of getting rich slowly. There is no get rich quick scheme in my investment plan. I am not interested in any scheme that promises to double your money in two months or a year. My interest cannot be piqued by any proof of how well your real estate or bitcoin or XYZ scheme is doing in the real world. My own plans are solid and I are executing them religiously, not because I don’t believe that they work. It’s OK if you believe that they work. Although less impressive, mine does work for me as well.
The excess funds I have are invested in the stock and bond markets, while I work hard at my profession (data analysis). Also, I keep enough cash in a high yield savings account (cash account) to cover my four months’ living expenses. My portfolio includes both Nigerian and U.S. stocks. The same applies to bonds as well. They make complete sense to me. It doesn’t worry me. Being able to see my money work for me in those investments gives me more peace of mind than seeing it in my bank account.