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THE BIG MONEY IN INVESTMENT IN SHARES!!! INTRODUCTION The biggest and most important feature and impact of the capitalist system is the opportunity it provides for the astute and determined person to accumulate wealth through savings and investments in publicly listed shares. Every capitalist economy has a Stock Market as an engine of capitalism and it is this engine that you can utilize as a driver to the achievement of your financial fortune. This pearl called the Stock Market makes it possible for you to invest your savings and make big money. It is a machinery which makes it possible for your money to work for you tirelessly 24 hours a day, 365 days a year and perpetually!!! The Nigerian Stock Market is so vibrant that many have been known to have become millionaires within a very short while through dealing in shares, You would find it almost impossible to see any investor in this country that has lost so much money as to have become bankrupt through dealing in shares. If your goal therefore is to make a reasonable money within the shortest time in a legitimate way, your surest bet is to begin saving very seriously and investing your savings in equity shares of listed companies. In this chapter, let me introduce you to the Nigerian Stock market and how you can work through it to achieve your dreams to become a multimillionaire!!! THE CAPITAL MARKET You are probably very familiar with banks and other financial institutions that provide facilities for short-term claims and obligations which maturity varies from one day to one year. These institutions are known as the money market and are best suited for the needs of individuals and unit centers with short-term needs. The simplest way of presenting the capital market to you is to make you see it as an efficient means of channeling funds from surplus to deficit economic units. It helps those with excess funds in terms of savings to channel it to those units that need such funds for a consideration known as equity capital interest in publicly quoted companies. To put it simply, the capital market is the market where you can buy or sell equity holdings by cash. It makes it possible for new investors to invest in both primary and secondary issues and also makes it possible for old investors to sell their equity interest to new investors and received cash for meeting their needs. Basically, both buyers and sellers meet at the floor of the market every working day through their agents known as stockbroker and arrive at an agreed price through the forces of demand and supply. Thus, you can become a shareholder in any listed company by buying at least a share of that company through your broker in the capital market and you may sell your share through the same process anytime you wish. WHY YOU SHOULD BE A SHAREHOLDER What exactly is a share? Simply put, a share is part ownership of a company. A share is any of the equal parts into which the capital of a business company is divided, giving the holder a right to a portion of the profits. The main reason why it is so important for you to became a shareholder in companies is the fact that you instantly become a part owner of the companies in proportion to the stock you hold and become eligible to share as a matter of right any profit generated by the company or companies in which you hold the shares. The beauty of being a shareholder is that once you buy at least a share of a company, you make money each time anyone buys that company’s product without any work or effort on your part; your shares earn you income even when you sleep!!! If you bought shares in an oil company, you earn profit from anyone who fills his tanks with gas from your company’s filling station. If you bought shares in Coca-cola, you earn profit from anyone who buys a bottle of coca-cola! If your shareholding is in Nestle, you earn profit dividends from every household that uses magi in cooking!!! It is an incredibly advantageous position to be a shareholder than a consumer of a service or product of companies. The consumer “loses” cash but gains utility whereas the shareholder earns profit dividends and delays his own gratification till much later. The shareholder also enjoys the rights and privileges of a shareholder such as becoming eligible for election into the Board of Directors of the Company under certain conditions, attendance at companies’ general meetings and voting and proxy rights. In addition to these, you earn capital appreciation, dividends and bonuses as may from time to time be declared by the Boards of the Companies in which you hold shares and if you succeed in investing wisely in blue-chip or high performance organizations, these would make you grow rich and increase your net worth so substantially you would not believe the results. What is more, your shareholding is acceptable as collateral for loans for further investments and financing of other lucrative projects. In a capitalist economy, no man or woman can afford not to own shares in companies!!! That will be a lose, lose and lose situation. Shareholdings make you a winner all of the time, even when you relax, go on holidays, enjoy a picnic or sleep!!!! HOW TO BUY AND SELL SHARES You qualify to buy and sell shares on the stock market once you have attained the age of 21 or above. Juniors could buy shares through their parents or guardians till they reach contractual age when the title can be transferred bona-fide to them. Contrary to popular belief, you don’t have to be rich or comfortable to buy or sell shares. Most income levels can venture into the capital market. While some wealthy people invest thousands and millions in shares, lower income investors can participate with as little as fifty Naira . You can easily buy or sell shares in the capital market because it is always possible for an investor to transfer some or all of his or her shares through a broker at any time. Even in the case of the death of a shareholder, his or her shares can be transferred to the children or sold in the market by the estate. Theoretically, stockbrokers and security dealers are intermediaries or middlemen who bring together both providers and users of capital. Dealing with shares on the floor of the Stock Exchange therefore takes place through them. Investment Advisers however are members of the Nigerian Stock Exchange and they are the ones to provide advisory and invest management services to a wider spectrum of investors who need to buy and sell shares in the market. Though investment advisers do not sponsor primary listings to the Nigerian Stock Exchange nor deal in listed securities, investment advisers are very important operators in the capital market on whose actions and advises over 80% of investors will have to rely on for their investment decisions. While most Stock broking firms will turn down most small investors with less than #5million invest able funds, investment advisers are available to assist most investors no matter how big or how small their invest able fund is. In most practical situations therefore, you will find the services of investment advisers closer and much more relevant to your need and pocket when you are thinking of growing your wealth in the capital market. They will sit down with you, find out your need, work out a suitable portfolio to meet your needs and give you personal and relationship services that you need at all times. When your portfolios have risen to a reasonable couple of millions, you might then consider using both the advisers and a stockbroker. DETERMINE YOUR PERSONAL INVESTMENT GOAL (S) Basically, the main objective of investing in shares is to grow your wealth in order to enable you to buy something or some things in the future that you might not be able to afford now. I will list here specific goals that instigate most people to invest and this should guide you in your investment decisions. Your objective for investing will also determine whether you will invest in stocks or in other securities that suit your needs most appropriately. They are as follows: - 1. TO GENERATE CAPITAL APPRECIATION: For most investors, the main objective for tying down their money in investment is mainly the expectations they have regarding the increase in the worth of the capital outlay on such investment over a time period. The increase in worth comes in terms of increase in the market price of such investment over time, dividends earned, bonuses receives and general premiums on the amount invested in terms of earnings per share. Some investors in blue chip companies have been know to have earned double their investment capital within six months of investment. The best option to invest in when you are after capital appreciation is common stock or equity capital of companies. You may however explore other options such as local and foreign stocks and Bonds, Life Insurance, Closed end Funds or other convertible securities in your investment decisions. It is my well considered opinion that if capital appreciation is one of your objectives for investing, you have no business putting your money on any equity that will not double your capital within the space of twelve calendar months. 2. HEDGE AGAINST INFLATION: - One harsh economic fact we must all face is the fact that the value of money is going down over time. Cash retained reduces in value per each day it is held and the only circumvent from inflationary pressures is to invest in shares or real estates. 3. NEED FOR LEVERAGE: - Perhaps the most important reason many high net worth and the already rich people invest is the POWER or leverage they acquire through such investments. Investments give power and advantages beyond the imaginations of most ordinary people. You should know that if you acquire up to 5% of the equity shareholding of any publicly quoted company, you have the inalienable and undeniable right by law to be invited into the Board of such a company as its Director. Along with this appointment come such advantages as prospects of becoming the Company’s Chairman of the Board, earning of Directors fees and remunerations, enjoying the utilities and perks of office of a Director such as director’s cars, company chauffeurs, cooks and operatives and nomination of your favorites to management positions. Thus, you “small” investment of just 5% in equities will earn you leverages that go far above this investment every given year!!! Even as a small time investor, the average shareholder is entitled to power he often neither realizes nor utilize. Your holding could be used as collateral securities for loans for other investments and you are entitled to attend AGM’s and vote on decisions in proportion to your holding. This is true but that is POWER to every shareholder for the company must by law send such things to every shareholder even if his/her holding is just # 50 only!!! 4. LIQUIDITY OR REGULAR INCOME: - For many people, the main aim of investing would be to achieve some measure of liquidity or availability of cash and regular incomes. You may be targeting to raise enough funds to send you child to Harvard in 7 years time or to go on a holiday tour to Europe or to build a house within 10 years or to achieve other lofty or desired goals dear to your heart. To turn your dreams into reality, you would have to be clear in your mind what those dreams really are and what it will cost you and when the necessary funds must be available to finance them. 5. SAFETY OF PRINCIPAL: - The prime investment goal of many people is the safety of their principal from any form of loss. To some of such investors, the security of the principal is uppermost and may be a matter of life and death. The investment that guarantees absolute safety of capital are life insurance, government bonds and convertible securities. Incidentally, the instruments that offer the most capital security also come with the least returns and those with higher risks bring in the most returns. 6. TAX BENEFITS: - In some cases where the potential investor is a very rich and high income earner, obtaining tax benefits and relief might be a very important investment goal. Since withholding tax and value added tax come with equity investments and returns, investment in securities might not be suitable for such investors. The best and most assured way of getting tax benefit is to invest in life insurance. WHY YOU SHOULD FEEL SECURED INVESTING INTHE CAPITAL MARKET: - Many people desire to take advantage of the opportunities in the capital market to get rich but they are held back by fears about losing their hard earned savings through fraudulent practices of any of the operators in the market who might take advantage of their gullibility in the market place. They are afraid of being swindled when they fall into the hands of dubious elements. They fear losing their monies to manipulators and usurpers who devise various means to cheat in the market. They fear stockbrokers and investment advisers who can manipulate their investment portfolio mandates to their own advantage. They fear losing their funds to banks and companies that fail in the market. These are genuine fears but most of these fears dissolve with adequate information on the various means available in the stock market for investor protection. It is ignorance of these provisions that cause investors fears. Firstly, investors must deal with only stockbrokers or investment advisers that are well- known professionals with a proven record of honesty, diligence, faithfulness, integrity, truthfulness and sincerity. You should not deal with individuals that you cannot easily contact, connect or locate with detailed office and home addresses, telephones, church or religious affiliation and family homes. Next, you must know that one of the core of the Stock Exchange’s relationship with the investing public is investors protection. The Stock Market is a closely regulated and monitored market and many measures have been put in place to protect the investing public. Codes of conduct exist for the Council members, the e Staff, the Dealing Members and the Directors of quoted companies that regulate the access of such officials to the stock market. Elaborate and extensive mechanisms are in place to enforce fair-trading and to monitor the market to ensure that false markets are not created and that investors are protected from losses in every way. Some of these mechanisms are strict licensing requirements that guarantee transparency and accountability, trading and clearing and Settlement systems that ensure genuineness and transparency, trade reporting and information systems, enforcement of duty to the investor and surveillance mechanisms. Investors are protected from losing their investment with an Investor Protection Fund and the regulation that pegs price movements within the 5% limit. Listing requirements require full disclosures, presentation of true and fair accounts, annual general meetings and facts behind the figure among others. Where anyone has any dispute or complaint against any operator in the market on any issue, dispute resolution mechanisms are in place through the Joint Monitoring Committee and the Disciplinary Committee of the Council. With all these measures in place, the average investor should feel comfortable investing in the Nigerian Stock Market and achieving his/her financial dream thereby. WHERE YOU SHOULD INVEST TO GROW AND INCREASE YOUR WEALTH : INVESTING IN NIGERIA’S TOPMOST BLUE CHIP COMPANIES The astute investor who would invest wisely would however only stake his money on the equities that have been known to perform very well in the last 5-7 years, As far as the Nigeria Stock Market is concerned, the following thirty stock have been known to have produced very good returns to their shareholders who must have in fact smiled all the way to their banks. While we do recommend every investor to consult an investment adviser before investing his money (even if the investor is an highly enlightened stock market operator) about 30 stocks have been know to be consistently excellent in performance over the years. In view of the fact that investment in equities carries with it an element of risk, I seriously advise that you do not invest in any company that cannot be described as blue chip Company with a track record of performance over the years and even then you must consult experts before taking a decision. The identities of blue chip companies in Nigeria and their performances in terms of returns between the years1993 and 2003 are as follows: - NO COMPANY TOTAL NO COMPANY TOTAL RETURNS RETURNS (%) (%) 1. 7-UP 1,213 16. TOTALNIGERIA 302 BOTTLING PLC COMPANY 2. GUINESS 1,020 17. NIGERIA 297 NIGERIA BOTTLING PLC COMPANY 3. NIGERIA 869 18. ASHAKA 292 BREWERIES CEMENT PLC 4. NESTLE 778 19. OANDO 290 FOODS NIG PLC 5. GAURANTY 772 20. SMITHKLINE 244 TRUST BEECHAM BANK PLC. 6. NIGER 619 21. UNITED BANK 231 INSURANCE FOR AFRICA 7. UNILEVER 580 22 NATIONAL OIL 207 NIGERIA PLC 8. CADBURY 571 23 CORNERSTONE 205 NIG PLC INSURANCE PLC 9. FIRST BANK 517 24. UAC 204 OF NIGERIA 10. TEXACO 500 25. VITAFOAM 195 NIGERIA NIGERIA PLC 11. DN MEYER 392 26. JULIUS 177 BERGER 12. UNION 378 27. ROYAL 173 BANK OF EXCHANGE NIGERIA ASSURANCE 13. AFRIBANK 355 28. CFAO NIGERIA 149 14. MOBIL 346 29. C& I LEASING 141 NIGERIA 15 ACCESS 341 30. FSB INT. BANK 91 BANK
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