Dangote is Africa’s richest but do you know your net worth?

You know Jeff Bezos is the world’s richest and Aliko Dangote is Africa’s richest, but do you know your net worth?

By the way, given the stock market rally, Aliko is $1.51 Billion richer since we said happy new year.

To measure is to know – if you cannot measure it, you cannot improve it. – Lord Kelvin

It’s easy to just keep living your life – making money, buying stuff, putting some money in savings but not making real progress in terms of growing your net worth.

Calculating your net worth allows you to track your growth, so if income grew by $5,000 and net worth grows by only $1,000, you know you spent most that additional income.

Treat your investment portfolio like your fashion closet

Whether it’s closet or wardrobe you have, there would be a bit of this and that in it.

Some trendy stuff and some classic stuff, some traditional and some western pieces, some expensive items and some Etsy stuff.
You’d also have stuff for different seasons or weather conditions. As well as covering for different parts of your body.

Even if you have a stronger affinity for a particular item or type of clothing, it doesn’t mean you won’t buy some of the other things too.

An investment portfolio is quite similar, you should buy some stocks and some bonds, some Nigerian stocks and some international one’s too.
Also, while you might have affinity for one type of asset class, you shouldn’t buy just that one.

Nigerian stocks – Capital growth.
International Stocks – Growth and currency hedge.
Real Estate – Inflation hedge
Treasury Bills – Security

Just as nobody has a closet with only shirts, you shouldn’t have an investment portfolio with only stocks or even worse the stock of one company and the most extreme – only the stock of your employer.

Should you refinance your debts now that interest rates are low?

With interest rates on a down trend, the winners are borrowers who can get cheaper loans.

This week I got a mail from the orange bank that their rates have dropped from about 21% to 16%. So how can you make this interest rate environment work for you?

Perhaps, you should consider refinancing existing loans.

Refinancing basically means to replace an existing loan with a new loan that pays off the old loan.

If you have an outstanding loan of N1m from Red Bank at 21%, work to Orange Bank to get a loan of N1m at the new 16% interest rate. With the new loan, you can pay off the old loan at the Red Bank.
This helps you to reduce your monthly repayment bill.

You however need to watch out for closing out costs, prepayment penalties and changes in the terms of the loan that may be disadvantageous to you.

What is your ‘money script’ and could it be holding you back?

Everyone has got a ‘money script’. It’s there in our heads, unconsciously shaping our financial behavior throughout our lives. Basically, it the playbook from which we make most of our money decisions.

Most of the lines of code on this script come from our childhood by observing the words and actions of parental figures. Some lines have also come from our peers, the television and social media in today’s world.

According to financial therapist, money scripts are “typically unconscious, trans-generational beliefs about money” that are “developed in childhood and drive adult financial behaviors.

Clearly, some of those stories are limiting and we need to be particularly aware of those limiting beliefs and take steps to rewrite those negative codes in our money script by building positive money habits, making positive confessions and telling ourselves new stories about money.

Whether your money script is as a result of either lacking money or being around too much of it in childhood, you can write new lines of code in adulthood.

Access Bank CEO has sold NGN 1 Billion of company stock this January

A filling on the NSE revealed that Access Bank CEO has sold about 100 million shares worth just over a billion Naira since the turn of the year.

The trades we’re done over days between Jan 10 and Jan 20 at an average price of N10.44

Bloomberg reports that the CEO owns about 1.44 billion shares, so in the grand scheme of things, 100 million shares (7% of his stake) isn’t particularly significant in my opinion.

It’s also important to note that the shares are an indirect holding via Trust and Capital Limited.
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By the way, I like that the NSE now reports dealing in shares by company insiders.

What should investors make of this?

As investors, I think that insider buying is potentially more interesting than insider selling. Because, with insider selling, it could just be funds to take care of some bills.

You should however, flag insider selling and put it on a watchlist. You can then red flag it if it becomes aggressive, persistent and of significant volume. The reason is you shouldn’t red flag (which should lead to a sell trade) is to avoid panic sales if there is nothing to see.

What can you invest in – The different asset classes.

Wondering where to invest?

Well, you’d have to find something that falls under any of these categories – asset classes.

An asset class is a grouping of investments and securities that share similar characteristics and behaviour in different market conditions.

Simply, its the umbrella grouping of different investment options.

  • Cash & Cash Equivalent – Treasury Bills, Commercial Papers and Fixed Deposit.
  • Fixed Income – FGN Bonds, State Government Bonds, Corporate Bonds, Eurobonds.
  • Equities – Domestic Stocks and International Stocks
  • Commercial Real Estate – Rental Property
  • Commodities – Oil, Gold, Cocoa etc
  • Alternatives – P2P Lending, Private Equity, Venture Capital

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In the coming days, we will look at platforms that allow you to invest in each of these.

Fees Associated with Investing in a Mutual Fund

All mutual funds have fees and expenses that are paid out of investment returns and potentially from fund assets. Some mutual funds also have a sales charge that is paid when buying or selling your interest in a mutual fund.

Some of the associated fees include:

Management Fee – Most mutual funds charge a management fee of between 1% and 2%. This is intended to cover the costs of the investment manager – salaries of the analysts etc

Performance Fees – In addition to the management fee, some mutual fund managers could also earn an incentive fee. They would typically earn 20% of excess returns above a certain pre-agreed level.

Expense Ratio – These comprises the fees that are due to the other parties involved in running a mutual fund as well as advert, marketing and other associated costs.

Trading Fees – These is embedded in the cost of buying and selling individual securities held in the fund.

The sum of the fees vary across mutual funds, so you want to look at the prospectus of each fund so you know what you are paying and how it compares with other funds.

Some Common Approaches to Stock Selection

The job of a portfolio manager is to find the best security, the best sector and the best country to invest their clients’ money. There are different ways by which investment managers take on this task.

Here we share a few:

Bottom-Up Approach – The manager focuses on selecting individual companies they think would do well irrespective of what is happening in the sector or the economy. The problem with this is that a rising tide lifts all boats and vice versa, so sometimes a sinking sector or economy can impact even the good businesses.

Top-Down Approach – The manager starts from the global economy to see which regions of the world would do well, then moves to which economies and which industries would do well, before circling on a particular company to invest in.

A combination of top-down and bottom-up – The manager decides on which countries to favour based on a top-down analysis but builds the portfolio of stocks within each country based on a bottom-up analysis.

Technical analysis – Unlike the top-down or bottom-up approach that looks at the fundamentals of each company, sector and country, the technical approach studies past price data and graph to forecast the future direction of investment prices and thus make investment decisions.

How Different Couples are Splitting their Bills

The modern family no longer relies on one person being the breadwinner and handling all the money stuff – income, paying bills and investing. Today, both men and women are bringing in the bacon or as I saw this morning, someone brings the bread and the other brings akara.

However, this doesn’t mean that the responsibility for money management in the home is being split equally or proportionally in all cases, some still have it the ‘old school’ way.

Here we look at some different methods used by couples:

Equal Splits – The partners contribute equally towards settling bills and making investments. This would suit couples on an equal footing in terms of income and debt.

Proportionate Splits – The partners make pro-rata contributions based on their income toward settling bills and making investments. This would suit couples with unequal incomes.

One Person Pays – If one partner is a stay home parent, going to school or out of job, the other partner handles all the household bills. It could also be by choice that the family lives on the income of one partner and saves/invests the income of the other partner.

Allocate the bills – With this system, each partner has a certain bill that they are responsible for.

Combine Everything – The couple put all their resources into a joint account from which bills are paid, investments are made and each person also makes personal spending.

Clearly, there are many ways couples can manage their finances and none is necessarily right or wrong. Every couple just have to find a system that works for them. You may find it by trying different methods until you hit what works. It’s also important to remember that what worked then may not work now, especially if there’s been a material change in the financial situation of either of the partners.

Where to Get Relevant Information About a Mutual Fund

All mutual funds have different characteristics – fees, risk, objectives, holdings, performance and management. As such, before investing you want to have to read up on these to make an informed decision on the appropriateness or otherwise of the mutual fund for you.

The information to make this decision can be found in the fund prospectus and the fund fact sheet.

A fund factsheet summaries key information about the mutual fund, including its performance history, investments, risk rating and the costs associated with owning it. It also provides a quick overview of the fund’s top investments, as well as the asset allocation mix of the investment portfolio.

Most mutual funds prepare a fund factsheet every month and this can be found on the website of the mutual fund company.

Also, the SEC regularly publishes the NAV (Net Asset Value) of registered mutual funds on http://www.sec.gov/data