Basic things to know before investing

May 2022

Do you remember what Children’s Day was like growing up? We thought to share eight money lessons for you to implement and share with your kids and young friends. Remember, someone must plant a tree before others can sit in a shade.

1.    Discipline through Savings: Saving from what you have is key. Encourage children to save from their pocket money- no matter how little. The amount saved might not be much, but the consistency with savings teaches discipline. Little drops of water makes a mighty ocean.

2.    Accountability: Rather than using the traditional wooden box or “kolo”, consider getting them clear plastic jars to monitor their progress as they save. You can turn this into a fun, healthy competition as each child saves to the top of the jar. Once you reach a milestone, open an investment account (see more details in number 8 below)

3.    Value Signaling: You should not be ashamed to admit to not being able to afford something. Kids these days would eat pizza and ice-cream all day if you let them – show them the cost savings in having a home cooked meal. You also enjoy family time with the kids.

4.    Demonstrate opportunity cost instead of teaching it: Showing the concept of opportunity forgone with simple statements such as “If you buy this video game simply because you want it now, you won’t be able to buy the pair of shoes you need”. This will teach kids about decision making and the effects of the opportunity forgone than a lecture and will help them differentiate between their wants and needs.

5.    Goal Setting and Budgeting: Help your kids recognise the importance of setting goals and the importance of working towards those goals. A budget can be useful, it helps you curb your expenses as you increase savings towards your goals.

6.    Reinforce the value of money: Take children shopping with the money they’ve saved up, have them count it out and attempt to make a payment for their purchase. You will be amused at how quickly their excitement will turn into shock and then disappointment when they realise how low their purchasing power is. This will help them appreciate things.

7.    Go digital: We used to think we were hip and well informed but with advancements in technology, today’s children are more informed than most adults. Children are familiar with how to navigate YouTube, tech gadgets, games and apps. These already take their time, why not meet them halfway by introducing them to educational apps and the world of Robo Advisory tools, it’s easier to teach kids with the things they are familiar with.

8.    Take advantage of compound interest through Investing: Buy an investment in your child’s name to create a sense of ownership. Teach them the concept of compound interest as the capital appreciates. You can open a mutual fund account on their behalf . Please send us an email on [email protected] to guide you on how to get started.

Beyond teaching kids how to count, it is important to also show them what counts. This year, we hope you take the time to impart these valuable money lessons that will serve our kids in their lifetime without putting a damp on the fun of the occasion. 

Your Wealth Management Partner
 

March 2022

We observed some similarities between the swindler phenomenon and investment schemes that turn out to be fraudulent.  We have highlighted five ways to avoid falling victim to them.

1.    Due diligence is EXTREMELY important: Don’t warm up too quickly to strangers without fact-checking from multiple independent sources. The same goes for investment opportunities.

2.    Appearances can be deceiving: Swindlers are usually well dressed, lavish and often generous to potential victims. This is basically laying the foundation for when they would eventually ask for money they wouldn’t pay back.  Don’t get overwhelmed by actions and promises that appear too good to be true.

3.    Maintain mystery around your finances: Victims are targeted because they appear comfortable. While it’s important to live your best life- don’t let perceptions gleaned from your online activity draw a fraudster’s attention to you.  

4.    Be wary of confidence tricksters: They usually confide in their victims to earn trust by sharing fictional stories about hardships.  Things always seem urgent when they require you to part with money, so you might not have time to think rationally about the decision.

5.    Recognise red flags early, ’shine you eye’: Swindlers repeatedly borrow money and continue to lavish it. They may likely suggest you engage in illegal activities for money and in some scenarios, resort to threatening the victims till they ‘’ghost’’ you and become unreachable. Predictably, they will also not satisfy their obligations when it falls due.

Like investment companies that court you to invest with promises of high returns within a short time, a money swindler can also be someone in your life who regularly “borrows” from you. Please stay on guard. Save diligently in your period of abundance, by keeping your excess cash in a Stanbic IBTC mutual fund for your emergency needs. Log in to your existing account to top up your investment or open one here with as little as ₦5,000

Till next time, 

Your Wealth Management Partner 
 

Before you make any investing decision, sit down and take an honest look at your entire financial situation -- especially if you’ve never made a financial plan before. 

The first step to successful investing is figuring out your goals and risk tolerance – either on your own or with the help of a financial professional like Stanbic IBTC Asset Managers. There is no guarantee that you’ll make enough money from your investments. But if you get the facts about saving and investing and follow through with an intelligent plan, you should be able to gain financial security over the years and enjoy the benefits of managing your money. 
Evaluate your risk appetite  

All investments involve some degree of risk. If you intend to purchase securities - such as stocks, bonds, or mutual funds - it's important that you understand before you invest that you could lose some or all of your money and you can gain a lot of money.  

The reward for taking on risk is the potential for a greater investment return. If you have a financial goal with a long time horizon, you are likely to make more money by carefully investing in asset categories with greater risk, like equity mutual funds or bond funds, rather than restricting your investments in assets with less risk. On the other hand, investing solely in cash investments or money market funds may be appropriate for short-term financial goals or for investors with low risk appetite. 

Consider an appropriate mix of investments
By diversifying your portfolio or having an appropriate mix of asset categories, an investor can protect against significant losses.  Historically, the returns of the three major asset categories – equities, bonds, and money market have not moved up and down at the same time.  Market conditions that cause one asset category to do well often cause another asset category to have average or poor returns.  By investing in more than one asset category, you'll reduce the risk of losing money and your portfolio's overall investment returns could have a better performance.  If one asset category's return falls, you'll be in a position to offset your losses in that asset category with better investment returns in another asset category.

Create and maintain an emergency fund
Most smart investors put enough money in a savings product to cover an emergency, like sudden unemployment.  Some make sure they have up to six months of their income in savings so that they know it will absolutely be there for them when they need it. 

A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors. It generates returns for early investors by acquiring new investors and is similar to a pyramid scheme in that both are based on using new investors’ funds to pay the earlier backers. Ponzi schemes often promises very high outrageous returns, paying early investors this outrageous returns with the aim of luring and trapping other naïve investors.

Investors are always advised NEVER to put their monies in Ponzi schemes no matter the rate of returns being promised. Always remember that, the higher the return , the higher the risk. All Ponzi schemes mask the risk with promise of high return/reward.

Like mutual funds, ETFs offer investors a way to pool their money in a fund that makes investments in stocks, bonds, other assets or some combination of these investments and, in return, to receive an interest in that investment pool. Unlike mutual funds, however, ETFs do not sell individual shares directly to, or redeem their individual shares directly from, retail investors.  Instead, ETF shares are traded throughout the day on national stock exchanges and at market prices that may or may not be the same as the NAV of the shares.  The objective of an ETF is to replicate the performance of a particular index