EMPOWERMENT SERVICE

RCCG. CITY OF JOY ZONE 16TH September, 2018.

 

INVESTMENT OPTIONS FOR YOUR TOMORROW

(a) DEFINITION OF INVESTMENT

Investment can be defined as the commitment of money/fund for a time in order to derive future benefits that will compensate the investor for:

  1. The time the fund(s) is/are committed
  2. The absorption of expected rate of inflation
  3. The uncertainty of the future payments arising from investment.

In order not to over stress oneself to earn more income, one can send an extension of oneself – your money to work for you. That way, while you are putting in hours for your employer, or even mowing your lawn, sleeping, reading the paper or socializing with friends, you can also be earning money elsewhere. Quite simply, making your money work for you maximizes your earning potential, whether or not you receive an increase, decide to work overtime or look for a higher-paying job.

True investing does not happen without some action on your part. A “real” investor does not simply throw his or her money at any random investment; for his or her expectation of profit. Yes, there is risk, and there are no guarantees, but investment risk can be reduced when thorough analysis are made prior to the decision for the appropriate investment option so as to minimize risks.

(b) INVESTMENT OBJECTIVES

Many people invest for many reasons, below are some of the reasons why people commit their money or funds into investments;

  • Capital appreciation
  • Speculative reasons
  • Bonus
  • Dividends
  • Both bonuses and dividends
  • A means to be on the Board of the company
  • A means to acquire a company
  • Accumulation of shares for collateral as access to finance projects.
  • Matching investment with expected expenses e.g. rent, school fees, baby delivery, special project, etc.
  • Saving for future usage, investment or project

(c) FACTORS TO CONSIDER BEFORE CHOICE OF INVESTMENT

It is necessary to consider some factors and make some analysis of a company before investing in it, such considerations includes but not limited to the underlisted factors:

  • Investment objective/motive
  • Available fund
  • Duration of investment (short, medium or long term)
  • Dividend and bonus history
  • Stable Board and management
  • Current market price and price history
  • Products and services of the company
  • Company’s financial records/performance
  • Sectorial consideration
  • Government policies

(d) TYPE OF INVESTMENTS/OPTIONS

  • Money market activities
  • Savings
  • Fixed Deposits
  • Loans
  • Treasury Bills
  • Forex
  • FGN Savings Bond – (Debt Management Office) – under Ministry of Finance

(1) INVESTMENT IN SHARES

FUTURE OUTLOOK: Share Dematerialization/Investment Requirements

  • Appointment of a stockbroking firm, member of the Nigerian Stock Exchange (NSE)
  • Creation of CSCS Stock Account
  • Know and maintain a single Clearing House Number (CHN: The alphanumeric CSCS number)
  • Consolidate/Harmonize multiple Clearing House Number (CHN) in CSCS through Stockbroking firm.
  • Monitor your stock account regularly
  • Release your bank account details to Registrars for direct credit of Dividends.

 

MANDATE FOR E-DIVIDEND PAYMENT

The Securities and Exchange Commission (SEC) has put in place, a system whereby shareholders complete E-Dividend Mandate forms whereby Registrars pay dividends direct to shareholders bank accounts to avoid unpaid dividend.

INVESTMENT STRATEGY

  • Divest from any company that has failed to give any brief for up to 2 or 3 years.
  • Diversification – Invest in different asset classes in order to spread risks.
  1. TREASURY BILLS – Central Bank of Nigeria
  • Available every 2weeks through registered Agents/Banks
  • Minimum amount required to bid at the auctions N50,001,000.00. However, the amount can be collected from individuals from authorized Dealers/Coordinators, E.g. Cardinal Stone require minimum of N1, 000,000.00 from individuals. You can get the interest up front – i.e. immediately the purchase is made.
  • Tenor 91 days, 182 days or 364 days.
  • You can roll over the money at maturity.

You should study the attachments and decide to plan for your tomorrow today.

 

  1. FGN SAVINGS BOND – (Debt Management Office)

Highlights

(1)Monthly – Offer

(2)Minimum – N5,000

(3)Tenor – 2years and 3years

(4) Interest paid every Quarter

(5) You do not need to invest in it monthly if you cannot afford it every month

(6) If you invest N100,000 you can use the bond to borrow money. It is secured.

(7) You can sell it before maturity in the Stock Exchange through your registered Broker

(8) It is like buying shares in companies listed in the Nigerian Stock Exchange (NSE).

(9) It has compound interest as you can use the interest you get every quarter to buy bonds in subsequent months. For greater detail visit: www.myprayerdiary.org.ng

PREPARED BY:

Elder Emmanuel Osagie Osarumwense

On Behalf of Elders of City of Joy Zone, RCCG.

– (OSAGIMA)

 

INVESTMENT OPTIONS FOR YOUR TOMORROW

 

BY

 

VICTOR OKEREKE (ACS)

HEAD, BOND UNIT

 

ON BEHALF OF

 

THE MANAGING DIRECTOR

CENTRAL SECURITIES CLEARING SYSTEM (CSCS) LIMITED

 

BEING A PAPER PRESENTED TO MARK THE 2009 THANKSGIVING SERVICE

 

ORGANISED BY:              OSAGIMA RECONCILIATION MINISTRY

At City of Joy Zone 5, Headquarters, Redeemed Christian Church of God, Ajah, Lagos, at 10:00a.m. – 12. Noon on March 29, 2009.

 

 

INVESTMENT OPTIONS FOR YOUR TOMORROW

INTRODUCTION

We are honoured by your invitation to share our thoughts with you at this annul event to mark the establishment of the Osagima Reconciliation Ministry. We are indeed very pleased and congratulate your Ministry immensely.

DEFINITION OF INVESTMENT

Investment can be defined as the commitment of money/fund for a time in order to derive future benefits that will compensate the investor for:

  1. The time the fund(s) is/are committed
  2. The absorption of expected rate of inflation
  3. The uncertainty of the future payments arising from investment.

In order not to over stress oneself to earn more income, one can send an extension of oneself – your money to work for you. That way, while you are putting in hours for your employer, or even mowing your lawn, sleeping, reading the paper or socializing with friends, you can also be earning money elsewhere. Quite simply, making your money work for you maximizes your earning potential, whether or not you receive an increase, decide to work overtime or look for a higher-paying job.

True investing does not happen without some action on your part. A “real” investor does not simply throw his or her money at any random investment; for his or she expectation of profit. Yes, there still is risk, and there are no guarantees, but investment risk can be reduced when thorough analysis are made prior to the decision for the appropriate investment option so as to minimize risks. Some economic tips and requirements for successful dematerialization of shares in CSCS Ltd. As future outlook were also provided.

INVESTMENT MANAGEMENT

Management of involves looking for ways to minimize loss/risk in any investment. A risk situation occurs when you are required to make a choice between two or more alternatives, whose potential outcomes are unknown. This is why technically speaking, a risk situation involves a potential outcomes are unknown. This is why technically speaking, a risk situation involves a potential loss or gain and the greater the risk, the greater the gain or loss.

INVESTMENT PROCESS

An individual or organization will undoubtedly, not have exactly the same amount of income as his desired consumption and in some cases will have more income than consumption. Sometimes the reverse is the case. Therefore the excess of income over consumption is saved, thus, the process of employing this saved fund is known as investment. An individual or organization gives up current consumption in order to enjoy a better amount of consumption in the near future. Therefore, when the investor is thus compensated for the uncertainty associated with his funds committed in an investment, the investor receives a risk premium. This is an expected stream of future benefits arising from the investment.

DIFFERENT TYPES OF RISK IN SHARE BUSINESS, AMING OTHERS:

  • Financial risk – uncertainty as a result of the method of financing a business.
  • Business risk – uncertainty of income flow arising from the nature of the firm’s business operations.
  • Liquidity risk – uncertainty associated with the secondary market operation for the security, it is the ability to buy or sell a security early without much change in price i.e how quickly the security can be bought or sold and how close to its current price it can be bought or sold and how close to its current price it can bought or sold.
  • Exchange rate risk – uncertainty or returns associated with investing in other countries – in a currency other than one’s home currency.
  • Country risk or political risk – uncertainty of returns associated with changes in the political or economic environment of a country, where the company exists in which one invested.
  • Risk premium which is the return an investor gets to compensate him for any uncertainty.

INVESTMENT OBJECTIVES

Many people invest for many reasons, below are some of the reason why people commit their money or funds into investments;

  • Capital appreciation
  • Speculative reasons
  • Bonus
  • Dividends
  • Both bonuses and dividends
  • A means to be on the board of the company
  • A means to be acquire a company
  • Accumulation of shares for collateral as access to financial to fund projects.
  • Matching investment with expected expenses e.g. rent, school fees, baby delivery, special project, etc.
  • Saving for future usage, investment or project

FACTORS TO CONSIDER BEFORE CHOICE OF INVESTMENT

It is necessary to consider some factors and make some analysis of a company before investing in it, such considerations includes but not limited to the underlisted factors:

  • Investment objective/motive
  • Available fund
  • Duration of investment (short, medium or long term)
  • Dividend and bonus history
  • Stable Board and management
  • Current market price and price history
  • Products and services of the company
  • Company’s financial records/performance
  • Sectorial consideration
  • Government policies

TYPE OF INVESTMENTS/OPTION

  • Money market activities
  • Savings
  • Fixed Deposits
  • Loans
  • Treasury Bills
  • Forex
  • FGN Savings Bond
  • Small/medium scale Business start – up
  • Real Estate
  • Investment in Private/Public Companies
  • Purchase of shares (Equity, etc)
  • Corporate Bond (Debentures)
  • State/Federal Government Bonds (Long term loans)

INVESTMENT STRATEGY

  • Divest from any company that has failed to give any brief for up to 2 or 3 years.
  • Diversification – Invest in different asset classes in order to spread risks.

The classes of Assets are:

  1. Equity
  2. Bond
  3. Mutual funds – (closed ended – fixed number of years, no dividend) (open ended – free entry and free exist).
  4. Unit trust – dividend paid periodically, pooled funds are invested in different classes.
  5. Money market instruments
  6. Real Estate
  • Re-balancing of your portfolio.
  • Seek information in the direction of your investment
  • Monitor your investment.
  • Periodic evaluation of your investment to ensure that set objectives are being met.
  • Investment should be done with the assistance of a professional, financial/stock investment agent with a good understanding financial/stock of the market
  • Investment should be based researched facts and figures.
  • Have knowledge on when to go in or exist from your investment.
  • Have knowledge of the projection of the company you are investing in.
  • Knowledge of the Price-Earning Ratio of the company (P/E ratio) – it measures the number of years in which an investor can recoup his investment.
  • Capital allocation decision – what proportion of the investment will go to risk.
  • Investment with high return or risk free investment that has low return.
  • Asset allocation distribution of risky investment among various assets classes.
  • Security selection decision – describes which choice of securities one should make within the same asset class.
  • Active strategy; simply put – buying and selling from time to time.
  • Passive strategy – buys and holds.

PRICE DISCOVERY IN SHARE BUSINESS

There are three schools of thought on how prices of shares can be estimated. These are: the fundamental analysis theory, technical or charting analysis and random walk theory.

The Fundamental Analysis Theory

This school of thought believes that future price of shares can be determined by the stream of possible future dividend discounted to the present, using shareholders cost of equity.

P = Market value (mv) = D/Ke (no growth in dividend)

P = mv = d(1+g)/ke-g ( with growth in dividend)

Ke = cost of equity = % return on investment

G = growth in dividend

D = dividend

Mv = market value = price (p)

Technical or Charting Analysis

This School of thought believes that the value of shares and Securities can be determined by studying the past trends of prices. It involves looking at the last 12 months or 6 months.

Random – Walk Theory

This School of thought believes that price of share fluctuates based on the availability of useful information about the company because investors react accordingly.

Capital Market Economic Status

It has been established that various interrelated factors led to the recent fall in share prices in the Capital Market which the stakeholders are making every effort to address, prevent and redirect the market capitalization towards growth.

In view of the solid state of most of the quoted companies, there is utmost confidence and encouragement for investors to take advantage and invest in stocks for long term gains. The renown Warren Buffett’s Price Investment Advice after acquiring outstanding returns by buying undervalued shares in great companies states that “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” He went further to recommend that investors look for companies that deliver outstanding returns on Capital and produce substantial cash profits and with huge economic advantage to protect them from competitors.

Economic Tips

  • There is need to save before making investment.
  • Until you save, you cannot invest
  • Every Naira you save earns more Naira, but every Naira you spend earns nothing.
  • You must strike a balance between spending and saving.
  • Every debt you owe that is not invested takes you far away from financial freedom.
  • We cannot control inflation or the economy in a way but we can manage our individual economy.

FUTURE OUTLOOK: Share Dematerialization/Investment Requirements

  • Appointment of a stockbroking firm member of the Nigerian Stock Exchange (NSE)
  • Creation of CSCS Stock account
  • Know and maintain a single Clearing House Number (CHN: The alphanumeric CSCS number)
  • Consolidate/Harmonize multiple Clearing House Number (CHN) in CSCS through stockbroking firm.
  • Monitor your stock account regularly
  • Release your bank account details to registrar for direct credit of Dividends.

Concluding Remarks

Ladies and Gentlemen, it is very important to emphasize that the Nigeria Capital Market is already positioned on an upward looking trajectory. This our Nigeria of good people and great Nation, being the new rebranding slogan, has good potentials for investors, therefore, local and foreign investors who wish to be part of Nigeria’s undoubtedly imminent great future should commit their resources that will facilitate the great leap benefits for themselves and the Nation.

The CSCS and Nigerian Stock Exchange’s Automatic Trading System (ATS) have improved market efficiency, operations and transparency which will continue to maintain the credibility already established in transparency an timeliness of transactions in the stock market.

Finally, this is the time for all stakeholders to be inspired and motivated by the vision, focus, commitment and candour of the Clearing House of the Nigerian Stock Exchange (NSE) towards achieving a reliable, efficient, secured and confident Capital Market.