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Best Place to Invest Money by MaryJeanMenintigar


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									                       THE BIG MONEY IN
                    INVESTMENT IN SHARES!!!
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.

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.
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
                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.

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
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.


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
2.            GUINESS           1,020           17.            NIGERIA              297
              NIGERIA                                          BOTTLING
      PLC                      COMPANY
3.    NIGERIA      869   18.   ASHAKA          292
      BREWERIES                CEMENT
4.    NESTLE       778   19.   OANDO           290
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
8.    CADBURY      571   23    CORNERSTONE     205
      NIG PLC                  INSURANCE
9.    FIRST BANK   517   24.   UAC             204
10.   TEXACO       500   25.   VITAFOAM        195
      NIGERIA                  NIGERIA PLC
11.   DN MEYER     392   26.   JULIUS          177
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
15    ACCESS       341   30.   FSB INT. BANK   91

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