"Money without financial intelligence is money soon gone." — Robert Kiyosaki
Joined October 2018
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I think we can have a more balanced perspective on this subject if we consider these 5 factors:
1. The average rental yield in Nigeria is about 5% to 7%. For prime locations, it ranges between 8% to 12%.
Calculating with these rental yield numbers, a N90M is expected to generate a rent of N4.5m to N10.8m every year. We can peg it at the base minimum of N4.5m.
The projected N3m annual rent puts the house at just 3.3% rental yield, which is below the average industry standard.
2. Houses just like every other asset apprecaite in value over time. Owing a rental property is similar to owning a dividend paying stock. Your rents are your dividends. You also have the gains of capital appreciation.
Let's say the house owner collects rents for 10 years, he would have earned between N45m to N108m in rental income.
Real estate in Nigeria appreciates by an average of 10% (or more depending on location) per year. This means a N90m house should be worth at least N243m in 10 years time. If we factor in the rental income generated from the house within the 10 years time frame, it isn't so much of a bad investment.
3. Reinvesting the rental income into other assets can also help you break even faster. Mr. A that invests his yearly rental income into stocks, bonds, or even other businesses will most likely make more returns from his house than Mr. B who just collects his rents and keeps it in the bank.
4. House is a defensive asset. People use it for a balanced portfolio diversification and a hedge against risks of exposure to volatile asset classes like stocks and crypto. Not all assets should be for fast income growth. Some could serve as a safety net.
5. You can sweat the asset (house) further by using it as a collateral to secure loans for other fast income generating businesses.
I know there might be concerns of inconsistent payment of rents, maintenance costs and others, but on a on much bigger scale, if we objectively consider all other factors, building a house for rent is never a bad investment.
It may not be the best investment option out there, but it isn't a bad one either.
Some Common FAQs On NGX Stock Investing.
𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧: What if these stock investment platforms crashes or ceases to exist. What will happen to the investments?
𝐀𝐧𝐬𝐰𝐞𝐫: All your stock investments are in the central securities clearing system (CSCS) depository.
The CSCS is like an electronic vault that keeps records of all your stocks investments and in event of any issue from your brokerage platform, you can still access all your stock holdings via your CSCS account.
This is why whenever you sign up with any stock brokerage platform, they assign a CSCS number to you.
𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧: Why do some companies pay little dividends despite making billions in revenue?
𝐀𝐧𝐬𝐰𝐞𝐫: It depends on the dividend policy of the company.
Some companies, esp. the banks and other bluechip companies, pay a decent amount of dividend to its investors.
While some other companies prefer to pay just little dividends and reinvest most of their profits back into the business for growth and expansion.
If you want to earn a high dividend, invest in high dividend paying companies like the banks, REITs, etc.
However, dividends are just icings to the cake.
Your focus as a young investor should be more on capital appreciation and not dividends.
𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧: Why do some IPOs/stocks underperform?
𝐀𝐧𝐬𝐰𝐞𝐫: Stocks represent businesses.
These businesses can sometimes become unprofitable, run into losses, or get into heavy debt due to unfavourable macroeconomic factors or mismanagement.
When this happens, the performance of the business will also affect the performance of its stock.
This is why it is important to keep tabs with the financial reports and corporate disclosures of the companies you invested in.
𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧: Is it all stocks that passed through the IPO stage before listing?
𝐀𝐧𝐬𝐰𝐞𝐫: Not all stocks list via IPO.
Some stocks list by introduction.
Listing by introduction is when a company places its existing shares on an exchange without issuing new shares or raising fresh capital at the time of listing.
Stocks like Aradel, BUA Foods and Geregu listed by introduction.
𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧: What are the best penny stocks to invest in?
𝐀𝐧𝐬𝐰𝐞𝐫: Most penny stocks can be money traps.
I'd advise you focus more on companies within the core thriving sectors of the economy.
Core sectors like the Telcom, Consumer Goods, Industrial, and Banking sectors.
As long as these sectors are doing fine, stocks within the sectors will deliver good returns.
𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧: How can you tell if it is more ideal to invest in your business or to invest in other assets?
𝐀𝐧𝐬𝐰𝐞𝐫: Your business is the core of your finance.
If you have a profitable business that is still in its growth phase, it is ideal you reinvest into the business to scale its cash flow.
However, if the business is already established and has consistent cash flow, you can from time to time, deploy some of your business profits into stocks and other assets while still maintaining the growth of your business for more cash flow.
𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧: What is the difference between NIDF and ETF?
𝐀𝐧𝐬𝐰𝐞𝐫: NIDF means Nigeria Infrastructure Debt Fund.
An Infrastructure Debt Fund is a pool of capital from different investors for funding infrastructural developments like roads, bridges, electricity, water supply, etc.
Investment in debt funds generates returns via dividends or interest payment depending on the terms of the fund.
On the other hand, ETF means Exchange Traded Funds.
An ETF can be a basket of stocks which trades as a single stock in an exchange.
An example is the S&P500 ETF which is a collection of the 500 largest companies in the US.
An ETF can also track the prices of commodities.
An example of such ETF is the GLD ETF which tracks the price of Gold and is traded as a stock.
We also have crypto ETFs like IBIT which is the Bitcoin ETF that tracks the price of Bitcoin.
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One thing we can learn from the ultra HNIs is how they build their positions. Look at what Elumelu did with Seplat and what Otedola is doing with FirstHoldCo.
Don't just invest.
Learn to build position too.
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“About once every two years the market falls 10%. Every six years the market’s going to have a 25% decline. That’s all you need to know. You need to know that the market’s going to go down sometimes. If you’re not ready for that, you shouldn’t own stocks.”
— Peter Lynch
$BNB chain becomes the first blockchain to surpass $1,000,000,000 in tokenized stocks and ETFs.
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3 things that can give you an unfair advantage:
1. Being early.
2. Being in the right circle.
3. Being in the right place at the right time.
Whenever you find yourself in any of these positions, maximize every advantage that comes with it.
When a govt is doing well, you don't need statistics to explain it. The citizens will feel it by themselves.
The concept of time value of money explained using the popular "Ajo".
If you do contribution or Ajo, always make sure you are among the first to receive the contribution money at the beginning of the year.
The same 5M naira Emeka received in January from the contribution isn't of the same value with the 5M naira Femi will receive in December.
You know why?
Time is money.
Because Emeka is a smart gee, he understands that time is money.
He understands that the value of money depreciates over time, esp. in a high inflation plagued country like Nigeria.
5M naira received in January will definitely have more purchasing power than the 5M naira received in December.
Also, Emeka, who received his 5M naira in January, has the leverage of time to invest early.
If he's a conservative investor, he can invest in the fixed income market and still make a decent ROI of 35% to 55% by the end of the year.
That's an extra 1.75M to 2.75M naira to his account.
If he's an aggressive investor, he might make an extra 5M naira or even more by December.
On the other hand, Femi gets his own 5M naira by December after contributing all through the year.
But what Femi doesn't understand is that inflation has taken a bite off his money.
5M naira in December at 25% annual inflation rate will now have a value of 3.75M naira.
Femi has already lost 1.25M naira to inflation, and by the time he gets to the market, he'd realize that he has actually lost more.
Again, time is money!
The earlier you can have access to money, the better.
Always be like Emeka.
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You’re the greatest project you’ll ever work on.
Restart. Reset. Refocus.
As many times as it takes.
Just don’t quit.
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The difference between being rich and being wealthy.
These two terms are often used interchangeably, but they are not necessarily the same.
Being rich generally refers to having a high level of income or substantial spending power.
Being wealthy refers to having accumulated valuable assets and financial resources relative to liabilities, ideally with the capacity to sustain one's lifestyle without depending entirely on active income.
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Income determines your earning capacity, but financial discipline determines how much of that income you retain.
