Archive for July, 2007

My Stock Holdings

July 31, 2007 at 7:15 am · Filed under Investing

July 31, 2007 @ 1.40p.m – Written by January

Recently, I’ve been conducting an audit on my stock portfolio to assess the health of my investments. I usually do this every month because it helps me to stay focused on my goals for purchasing these stocks in the first place. Sometimes, it may be short or medium term. My individual stock holding is twelve. About three months ago, I had ten stocks in my portfolio. I only have this minimum of stock holdings because I believe in a gradual build up rather than having 1000units here and there of different stocks. So, my stock holdings range from First Bank, Union Bank, GTB and Intercontinental Bank to Lasaco Assurance.

I bought Lasaco Assurance as a result of my stockbroker’s advice. He stated that by 2008, the cheapest stock that will sell below N20 would only be within the Insurance sector while the cheapest stock in the banking sector will sell at N20 and above. So based on his advise, I reviewed my stock holdings and came to the conclusion that it would be too early to sell right now. If you’re considering cheap stocks to buy, I would suggest Oceanic and Union Bank respectively. I checked out their earning per share from the third quarter results released recently and it was as follows;

 

S/No.

Securities

Quarter

EPS

P/E Ratio

1.

Oceanic Bank

3rd

1.15

25.74

2.

First Bank

3rd

1.43

28.25

3.

Union Bank

3rd

1.14

35.97

4.

Access Bank

3rd

0.46

42.00

5

Zenith Bank

3rd

1.64

38.41

6.

Fidelity Bank

3rd

0.16

75.75

7.

Bank PHB

3rd

0.70

43.14

8.

Diamond Bank

3rd

0.61

32.80

 Let’s backtrack a bit. If you’re a bit confused as to what EPS means. I’ll try and explain it. For instance, in the table above, Oceanic Bank’s EPS for the third quarter is N1.15k-for a lay investor, it simply means that every 50k unit of share you have in Oceanic Bank brings in an income of N1.15k. If you take a glance at the table above, you’ll notice other relatively cheap stocks such as First Bank and Zenith Bank. I intend to buy additional shares to my current holdings in First Bank and UBN. I would also be purchasing Oceanic Bank and Access Bank. To meet this target, I will be saving a minimum amount of $1,000 every month till December. I will also be taking advantage of the Share Loan Scheme offer from UBA’s banking platform (read my article on Borrowing for the capital market). I usually wait until December because bank stocks are usually cheaper due to the fact that most of these financial institutions have released their year-end financial results. The result for Union Bank, UBA and Zenith are being awaited at the floor of the NSE.

I usually use EPS and P/E ratio to determine stocks I’ll be investing in. For instance, Access Bank’s EPS for the 3rd quarter is 0.46 and it’s P/E ratio is 42.00. To determine if Access Bank’s share is cheap, I usually go to other sectors with a similar EPS to compare. What I found is stated below:

 

S/No.

Securities

Quarter

EPS

P/E Ratio

1.

PZ Industries

2nd

0.46

54.63

 Comparing Access and PZ Industries, the EPS for PZ Industries is much higher than Access Bank, which makes PZ an expensive buy compared to Access. This is what I do on a monthly basis to identify cheap stocks I can invest in.

 

Comments (2)

How To Accelerate Your Net Worth

July 30, 2007 at 8:38 am · Filed under Investing

Now that you’ve calculated your net worth, you’re probably excited about seeing that number go up, and once it starts going up, you’re going to want to see it keep going up, faster and faster, rocketing to the sky.

For my net worth growth, I have a goal of a 3% increase per month in the year, which amounts to a 36% increase over the course of the year.

Here are the nine methods I plan to use to increase my net worth growth. I recommend focusing for a while on each item before moving onto the next one.

1. Pay off all debts, starting with high interest ones

Start doing this during the year by paying off all high interest and non-interest debts.

.

2. Maximize employee matching of retirement investments

You should claim every single naira that your employer offers you as a matching amount in your retirement account. If you don’t, you’re basically telling your employer to keep part of your salary and actively choosing to stunt your net worth growth.

 

3. Trim expenses

The key here is to eliminate “bad” expenses: ones that won’t do anything to increase your net worth. For example, lunch at fast food outlets is almost always a bad expense, as is extra clothes shopping and almost every electronics purchase. Cut out these extra expenses from your life and suddenly the margin between your income and your expenditures becomes a whole lot fatter. That margin is your net worth growth, and you just made it bigger.

 

4. Keep money you’re not spending in a place where it earns

Your savings account should be earning a bare minimum of 3% per annum. If you’re not earning more than that, you’re denying yourself some automatic net worth growth. Also, you should find out if you’re eligible for a high-interest current account, like the GTMax account ( a product of Guaranty Trust Bank Plc.), which offers a higher interest than the savings account. A minimum balance of N150,000 is required for this account.

 

5. Start a portfolio

Once you’ve built up an emergency fund, you should consider starting an investment portfolio. Once you begin to accumulate a lot of money in savings, investing is the next logical step for helping your money grow.

 

6. Reinvest income from investments

Once you begin investing, you’ll find that you may receive income from these investments, such as dividends. Instead of pocketing that money, roll it back into the investment until you have a real reason to take it out. It’s just more net worth growth acceleration. Intercontinental bank offers a savings account with the features of a current account. You can deposit your dividend warrants in such an account till you really need it.

 

8. Invest all windfalls

If you suddenly get a windfall due to an unexpected gift or an inheritance, don’t think about buying a flat panel television or an Hummer Jeep. Invest that money as soon as you can. You can start buying such perks when your net worth is growing at a rapid pace by itself. I like the campfire analogy: if you’re trying to start a campfire and someone hands you some wood, are you going to use it to build the fire or are you going to whittle yourself a new toy?

 

9. Pay for things only in cash

If you can’t get your hands on the cash to buy something, wait until you can. This includes everything short of a new home, including automobiles.

If you follow these rules, you’ll watch your net worth slowly begin to accelerate and take off like a jet going down the runway and lifting into the air.

Did you like this article. Please drop your question, comments and feedbacks. Your comments will be posted here.

Comments (2)

8 Money Mistakes … And How To Avoid Them

July 28, 2007 at 11:48 am · Filed under Bad Spending Habits

Here are some of the mistakes we make regarding money and how to avoid them. Here are some of these mistakes:

  • Saving with the right hand and spending with the left hand.
  • Playing it too safe.
  • Living in the moment.
  • Throwing good money after bad.
  • Following the crowd.
  • Letting your ego get in the way.
  • Ignoring frugality.
  • Not having an emergency fund.
  • Believing that your future self will take care of it.

 1. Most of us indulge in the “big boy arrival syndrome”. We often indulge in spending cash as soon as we earn it thereby eating more than we can chew. For instance, you have a lot of fun but at the age of forty-five, you realize that life is not a huge party without no assets in the kitty. Start getting used to putting a bit away every month.

2. Once you have your financial house in order and plenty of money in an emergency fund, start investing. Put your cash in investments that you can be confident. I usually suggest that people invest for the long term. Do not be in a hurry to sell for short-term gains because you will be eroding the capital gains on your investment.

3. Don’t put all of your money in one place- make sure that you invest in at least a few different things. I usually suggest mutual funds and individual stocks for the long term.

4. Look for ways to trim your spending, and the best place to this is by looking at your daily routine. Do you stop for at the nearest Mr. Biggs every morning for breakfast? Do you eat an expensive lunch everyday with your colleagues at the nearest fast food outlets? Do you smoke or drink habitually? Do you subscribe to magazines and cable channels that you do not fully utilize? Do you withdraw from other financial institutions ATMs rather than your using your banks’ATM? Making a change can recoup huge sums of money, but many would be investors forget about them and instead spend their time wondering how to increase their investments net worth.

5. What happens if you lose your job and another one isn’t immediately forthcoming? If you have an answer that does not involve panic, you’re on the right track. However, if you don’t have an answer that doesn’t involve panic, then you’re not prepared to be investing. Keep at least a few month’s worth of salary for emergency funds i.e. money that you can run with when you need it.

6. Believing that your future self will take care of it – I know a lot of people that tell themselves this when indulging in impulsive purchases, instead of investing. However, your future self might be unemployed, in poor health or financially bankrupt.

 7. If everyone else is doing it, don’t do it. You dream of big things, but then keep going through the same routines. What keeps you from international travel, having that nice care or house? A lack of plan, that’s what. Start looking at what it would really cost, then break it down into small pieces that you can wrap your hands around. Piece by piece, you can have the kind of life you want instead of wandering through life.

 8. Don’t you ever think that you’re a know it all investor – the second you believe that, the second your investment portfolio will fall apart. Don’t make frequent trades or the fees and commission will eat you alive.

 

 

 

Leave a Comment

The Benefits of Global Depositary Receipts II

July 27, 2007 at 7:47 am · Filed under Investing, Uncategorized

July 26, 2007 @ 10p.m – Written by January

Category: Investing

While reading the daily papers  today, I discovered that GTB’s GDR listed on the London Stock Exchange has gained 0.10cents. For those of you who don’t have a clue to what a GDR, read my earlier article on this issue.

As from next week, I’ll be highlighting on cheaper stocks we can buy and how to identify a cheap stock.

The GDR functions as a means to increase global trade, which in turn can help increase not only volumes on local and foreign markets but also the exchange of information, technology, regulatory procedures as well as market transparency. Thus, instead of being faced with impediments to foreign investment, as is often the case in many emerging markets, the GDR investor and company can both benefit from investment abroad. Let’s take a closer a look at the benefits:

For the Company
A company may opt to issue a GDR to obtain greater exposure and raise capital in the world market. Issuing GDRs has the added benefit of increasing the share’s liquidity while boosting the company’s prestige on its local market (“the company is traded internationally”). Global Depositary receipts encourage an international shareholder base, and provide expatriates living abroad with an easier opportunity to invest in their home countries. Moreover, in many countries, especially those with emerging markets, obstacles often prevent foreign investors from entering the local market. By issuing a GDR, a company can still encourage investment from abroad without having to worry about barriers to entry that a foreign investor might face.

For the Investor
Buying into a GDR immediately turns an investors’ portfolio into a global one. Investors gain the benefits of diversification, while trading in their own market under familiar settlement and clearance conditions. More importantly, GDR investors will be able to reap the benefits of these usually higher-risk, higher-return equities, without having to endure the added risks of going directly into foreign markets, which may pose lack of transparency or instability resulting from changing regulatory procedures. It is important to remember that an investor will still bear some foreign-exchange risk, stemming from uncertainties in emerging economies and societies. On the other hand, the investor can also benefit from competitive rates the U.S. dollar and euro have to most foreign currencies.

Conclusion
Giving you the opportunity to add the benefits of foreign investment while bypassing the unnecessary risks of investing outside your own borders, you may want to consider adding these securities to your portfolio. As with any security, however, investing in GDRs requires an understanding of why they are used, and how they are issued and traded.

Comments (7)

Our Insatiable Lust for Phones.

July 26, 2007 at 9:10 am · Filed under Phones

Advertisements these days are targeted towards visual appeal. Without visual appeal, I doubt if most of us will purchase anything. For the past few months, I have been studying our purchasing patterns within a developing economy such as Nigeria.

The Telecommunication industry has witnessed a huge growth since inception. Service providers such as MTN, Celtlel, Globacom, PTO’s have succeeded in attracting major industry players such as Nokia, Ericcsson, Siemens, and Samsung into the Nigerian market. Some few months ago, Nokia reported an incredible sales figure of 1billion phones within Africa. Financial analysts have predicted that Nigeria and the rest of Africa will provide the needed growth for these organizations.

What has this translated to? It has caused an insatiable lust for phones of varying sizes, functions and architectural build. In reverse, we have suddenly become a consumerist nation, buying anything that appeals to us, invariably draining our pockets as a result of our misguided actions.

I know of individuals who have three to four mobile phones (different brand names), subscribing to the services of different mobile service providers and also spending a huge amount of money on servicing these phones. Let me give you an instance, my brother-in-law sometime ago decided to run an audit on his mobile line with a particular company. He got in touch with one of his friends who’s a call agent and asked for this personal information. Want to know what figures he came up with? It was a whooping N1.8mn within a year. Imagine what that money would have earned if it were sitting in a fixed account or an investment portfolio.

I never cease to be amazed when peers and colleagues change phones at will and spend a huge amount over phone bills. You might want to conduct an audit for your mobile lines.

I usually advise friends that if you are spending a lot on phone bills and you are not receiving or generating an income that will cover the cost of these calls; then you have no business making a call in the first place. Make use of cheaper alternatives such as SMS, email or instant messaging. I understand from my research that messages can be sent online at no cost to a phone.

Try to do without your mobile phones for a day and see the incredible savings you would have made over the week. I use an official line with a monthly credit of N5,000. I stretch this amount over a month and possibly atimes into the following month by limiting my calls per day and using SMS as a means of communicating with family or peers. I do not make a call except it’s really important, an emergency or I need an immediate answer. I also for now do not need a personal line till I change jobs or resign.

Did you like this article? Click on the comment link to drop your feedbacks, suggestions and questions (if any).

 

Leave a Comment

My Monthly Steps Towards Financial Freedom

July 25, 2007 at 9:17 pm · Filed under Financial Independence, Savings

When I posted the article on “Can’t save or invest with a monthly income of N58,000 – Let me teach you how? I realised the article was going to attract a lot of attention and this was my aim. To wake us up from our financial slumber as Nigerians. I believe if I could do it, several more can also do this. This article is a follow up to the above named post. I await your reactions and comments.

I have been asked this question a couple of times by friends and colleagues “how do I manage my finances?“. The answer is simple – live below your means. While I realize that we have a lot of financial responsibilities at the home front. Trying to live up to society’s expectations will ruin our goal towards achieving financial freedom.

These are some of the things I do on a monthly basis to get myself out of the rat race.

Every month, make a habit of setting aside 70% of your monthly salary for investment (applicable for a single person) while for a couple, I advise a minimum of 30%.

I always tell my friends that it is possible to live within the month on a shoestring budget of N10,000 but I’ve always had different opinions about the wisdom in this. If you have not been living on a shoestring budget, take a gradualistic approach.

For married couples, I advise you have a minimum of three months salary as an emergency fund. For singles, I advise that you have a month salary as an emergency fund. I treat my savings as a bill/debt which must be paid ASAP. I don’t know what your opinion may be. I’m interested.

Secondly, I bring my food from home throughout the week; I do not lunch out at fast food outlets. I have long realized that it is one of the fastest ways of eroding money from your wallet. Imagine if Mr. A spends N800 on a daily basis at his favorite fast food outlets. On a weekly basis he will be spending a total of N4,000 and on an annual basis that is a total sum of N48,000 on lunch alone. Imagine what that amount would have earned if it was left sitting in an interest earning account or invested in a stock portfolio. I have learnt to be creative with my cooking.

We live in a nation where each family has a huge number of dependents. Responding and satisfying monetary requests from dependent family member is a Herculean task that gradually removes more money from our wallets. What I usually suggest is to list each request as it comes in. I do not grant more than three requests in a month and once my list is full, I move the next recipient to the following month. This allows me more freedom to manage my resources efficiently.

I do not indulge in monthly shopping sprees. I have narrowed my shopping for clothes, shoes and bags to once a year and I usually have a fixed budget for this activity. During my service year, I spent my monthly salary on Italian shoes, bags, skirts and shirts. This attitude left me without any savings and at the end of service year, I only had N30,000 left in my savings account. Those clothes are now whiling away in my wardrobe due to my present job (semi-formal/casual). I usually schedule my shopping activities towards my annual vacations.

I usually suggest a separate account, which I refer to as the ‘welfare account’. Every month, save a minimum of 5% of your monthly salary. This account will be used for shopping and other items you intend to purchase. Before shopping for anything, make a list of the things you will be buying and stick to this list.

The SHOPRITE /SILVERBIRD/CITYMALL/NUMETRO MANIAC – Lagos is the home of entertainment and leisure. Judging by the way people troop to the above named locations on a daily basis, these outlets are also smiling to the bank on a daily basis. While I agree that groceries and foodstuffs sold at Shoprite is relatively affordable almost at par with the open market, I do not see the reason why families would make a trip from locations such as Berger, Okokomaiko, Festac, Ejigbo to the Island just to buy shredded beef. Save those long trips for family day out which will afford you the opportunity to bond with your family. I know a couple of individuals who visit these outlets on a daily basis to watch films and also do a bit of window or actual shopping. I understand the maximum fee for going to the cinema is N1,500 for adults and N500 for children. That is N90,000 free give away to these cinema houses and other forms of entertainment we indulge in.

Emotional Spending – I have learnt not to shop when I’m tired, angry or depressed. I usually end up buying what I don’t need and at outrageous prices.  A tired, angry or depressed mind is susceptible to clever and brilliant advertising. What I do is to save my shopping till Saturday morning and I usually go with a list of items that I strictly adhere to. I have discovered that when I shop in the early hours of the morning, I’m more alert and less susceptible to fanciful packaging and brilliant adverts.

Comments (4)

Performance Review – How to Maximize Your Raise.

July 25, 2007 at 7:18 am · Filed under Career

July 25, 2007 @ 8.00a.m – Written by January

Categories: Career

Half Year performance review is here again within my workplace. You need to see my colleagues scurrying up and down, searching for missing files, pictures and reports of achievements till date. I can imagine the usual misgivings and misconceptions that arise due to the inability of the Line Manager to cascade and ensure everyone understands the importance and relevance of the performance review to our career development within the organization.

 

I can hardly blame my Line Manager. I don’t think he has a full grasp of the review concept. What I can tell you is that the performance review session is a stressful time within my organization because it’s like attending an interview. This time management is considering why you should still be paid what you are currently earning or why you deserve a pay raise. As employees, we usually fail to prepare for this important event in our professional lives. I will be outlining what we can do to maximize our paychecks at the end of the month.

 

The most important element affecting your performance review and your pay raise is your performance. If you are not interested in increasing your performance, then you should not be reading this because you are giving up a large chunk of your paycheck. Let’s face it; it’s hard work being outstanding. If you are willing to put in the hard work and be recognized for your outstanding achievements, your paycheck will stand out from the rest.

 

Lately, I have been bombarded with the term “Compa-Ratio, Performance Rating, Market Anchor Ratio e.t.c and I have been wondering how all these terms have a direct relation to my take home pay at the end of each month. If you’re as confused as I am, be aware that you must understand the rating system that is applicable in your organization. There are two elements to the rating system: Your rating which is usually a 1-5 number, and your Compa-Ratio, which is usually expressed as a number between 0.80 to 1.25 (or as a percentage (80%-125%). These two numbers determine whether you’ll get a raise or not.

 

Your goal is to be rated a 4 or 5 because managers are instructed to rate their direct reports according to a specific distribution to prevent them from giving all employees 5’s. Compa-Ratio or Compensation Ratio is represents how well you are paid compared against an industry standard. Compa-Ratios are position specific. Each position has a salary range that includes a minimum, midpoint and a maximum. These three values represent industry averages for the position. The Compa-Ratio is calculated by dividing your base salary by the mid point industry average.

 

A Compa-Ratio of 100% or 1.00 means you are paid exactly what the industry average pays and are at the midpoint for your salary range, while a ratio of 0.75 means you are paid 25% below the industry average. You might think that you want to have a high ratio, meaning you are paid more than the market average, but this is the exact opposite of what you want. You want your salary to be below the midpoint average. Why? Because this ratio to a large extent determines whether you are allowed to get any raise at all and if so,

how much. Managers are given rules that dictate the raises they can give.

For example;

 

Compa-Ratio

Raise Action

1.15+

No raise, possibly bonus

1.00

Company average raise expected

0.80

Above average raise expected

 

If you are in a high compa-ratio, it is expected that you will get promoted into the next position. This will bring down your compa-ratio. If you are not promotable to the next position for any reason, you need to rectify that as soon as possible. That may mean finishing a degree or certification program, enrolling in a mentoring program, or picking up a needed skill. This is something you need to do whether your company pays for it or not. The worst thing you can do is sit at the top of your pay range and not be able to move into the next position. You will consistently get low to no raises and you will be the first to get laid off during down times. So take the initiative to fix whatever is keeping you out of the next higher position.

Tying your rating and your compa-ratio together is what determines your actual pay raise. If you are an exceptional employee with a low compa-ratio, you will get the lion’s share of the raise allocation. If you are an underperformer with a high compa-ratio, you will get slim to no raise. Knowing where you stand with these two numbers will tell you what you need to do. The key is doing it before your next performance review. Make it easy for your boss to move you into the position above you by having all the requirements for that position before you go into your review.

Leave a Comment

Are You Frugal or Stingy?

July 24, 2007 at 2:47 pm · Filed under Frugality

July 24, 2007 @ 2.50p.m – Written by January

Categories: Frugality

There’s a big difference. One is a virtue and the other is a vice. A lot depends on how your frugality affects others.

A friend of mine grew up with a hostile father who never made provisions for her. She currently works with one of the major telecommunications company. When she goes shopping for clothes, shoes and bags, she patronizes what we commonly refer to as “the bend-down boutiques”. Is she being frugal or stingy?

A friend of mine dates a guy who never takes her out for the occasional dinner or movie. Is he frugal or stingy?

My dad’s younger brother worked within the banking industry and anytime he needed to buy new suits, shoes and underwear’s, he usually came knocking at our door to pilfer from his elder brother’s collections. Was he being prudent or simply stingy?

Your niece or nephew came first in a class of thirty-three and you’re down on cash. Does economizing on a suitable present make you frugal or stingy?

All of us have to make choices about how we spend our money. Wise choices allow us to build our wealth and, eventually, achieve financial independence. How do you decide if you are stingy or just plain frugal?

I posed this question to a couple of my friends and the response I got was quite overwhelming. For some, one man’s meat is another man’s poison.

You might be stingy if …

  • If you decide to give out some your old clothes that are relatively in good condition to charity, you’re frugal. On the other hand, if you give out old and tattered clothes that your housemaid may not wear, you’re probably stingy.
  • If you use a tea bag for more than one cup of tea, you’re frugal. If you use the same tea bag for a guest, you’re stingy.
  • If you decide to buy cheap clothes that will soon wear out for your niece or nephew for achieving excellence in their results, you’re stingy.

Frugality implies you’re being careful with your resources while stinginess is a vice, and carries a whiff of meanness. For me, frugality is the activity required for me to live below my means while stinginess is the activity of requiring others to participate in my frugality.

A stingy person would not be caught dead being generous, lending a helping hand, never gives a dime to the church or mosque, does everything possible to keep as much money as possible at the expense of others.

It’s time to look at yourself…how do I feel with my about my choices regarding charity, sharing or being generous? If the spirit of generosity guides you, your choices would sit well with your conscience. However, if you’re angry and constantly defending your decisions, you might want to take look in the mirror. When in doubt, apply the Golden Rule. Are you treating others as you would want them to treat you?

What are my alternatives?

You don’t have to buy an expensive present if you put some care into selecting the gift item.

You don’t have to give to every Tom, Dick and Harry who asks you for change. But you may feel better saying if you regularly give to a charity of your choice or to the beggars on the street.

Did you like this article? You can send in your comments and it will be published.

 

Leave a Comment

Our Inability To Achieve Financial Freedom

July 24, 2007 at 7:10 am · Filed under Financial Independence

July 23, 2007 @ 6.51p.m. – Written by January

Categories: Financial Independence, Saving

The desire to achieve financial freedom early in life is driven by several factors. Such desires can arise from our background (read my article on Our Parents Financial Mistakes-Are We Repeating Them?), habits, our needs vs. wants, peer pressure and a whole lot of other issues. I desire early financial freedom to pursue the following interests:

  • International Travel
  • Art School
  • Photography School
  • The financial ability to support my unborn children if they choose to attend top rated graduate school.

 However, these goals can suffer a setback if I do not apply the principles of frugal living on a daily basis. At different occasions, I have tried to teach my friends this principle without coming across as a ‘know it all’ kind of individual. One thing I have learnt is without financial discipline, the road to financial freedom is a long way off.

 For instance, some of my friends may never achieve financial freedom based on their daily choices. Choices ranging from savings and investment to frugal living. A large percentage of my friends keep their money in the bank even after the funds have passed the limit of emergencies. I read in the papers a few days ago that the current inflationary rate is 6.4% due to the recent increase in fuel and the few days of 10% VAT increase. What this means for an individual with N1mn and above in the bank is that what N1mn could buy at the beginning of this year, such an amount cannot purchase the same item.

 Inflation has eroded the time value of money. Investing such an amount in a mutual fund or stocks would prevent time value erosion. When individuals win or become major beneficiaries of huge amounts of money, the tendency to spend the money on frivolities is very high. A friend of mine invested N345,000 in one of this finance/investment houses in Ibadan (pennywise, wealth solution e.t.c.) and received N1.2mn as pay off for his investment. He actually bought three slots with three different organizations and made the same amount of money totaling N3.6mn. He immediately purchased a round trip ticket to England for the entire family setting him back by N0.6mn without taking into consideration the cost of shopping for three kids, himself and his wife. At the end of the day, he will be spending nothing less than N1mn on the entire trip. So what was his actual return on investment? It’s N1,565,000mn.

Our penchant for using ATM’s apart from the bank we patronize gradually removes more money from our wallets over time. For instance, if Miss .B uses a GTM debit card at Zenith Bank’s terminal three times a week, to withdraw or transfer varying sums of money. At the end of the week, a total of N600 will be deducted as service charge. Over the period of a month, that sum will rise to N2,400. You might say ‘that’s not a lot of money’ but the picture changes if these random withdrawals occur over the period of a year. That would be a total of N28,800. Imbibing financial discipline can be a Herculean task at the initial stage but our net worth will be better as soon as it becomes part of our daily existence.

Leave a Comment

Investment Outlook

July 23, 2007 at 8:07 am · Filed under Investing

July 22, 2007 @ 6.20p.m – Written by January

Categories: Investing, Stock Portfolio

Last week, I received a mail from Michael of wisefinance.blogspot.com regarding the article on FCMB & Fidelity Bank’s aim of raising funds from the domestic and international capital market. His comment is stated below:

I like the entries in your blog and your approach to investment analysis.
About 7 more Nigerian banks will be raising funds through the capital market this year. What are your thoughts on their outlooks? I would not think First Bank has the best outlook in the short term even though it’s probably the least risk.

What do you think? FCMB? Fidelity? Access? PHB? Skye? Wema? and possibly Union bank. Diversifying in all of them will not bring the best returns, diversifying in the 2 or 3 best prospects however just might be invaluable.

I would like to know what are your thoughts?

I usually advise prospective investors that investing in the capital market is for the long-term or medium term depending on your reasons for investing in the first place. I’m against short-term investment because tax and commissions will erode capital gains from your investments. From my research and findings, I understand that First Bank stock is scarce on the floor of the NSE, investors will benefit from the likely price appreciation, as the technical suspension will be lifted in a months time. The audited result of the bank is expected to hit the market this month or latest next month. It is likely that the audited result be released towards the lifting of the technical suspension if it is an impressive result; otherwise, it may be released after the technical suspension has been lifted. It is also being speculated that the bank is likely to give a bonus issue of 1 for 6, which will invariably increase the share capital of the company. I think First Bank has a positive outlook both in the short and long term.

Market hearsay is high on a probable bonus issue of 1 for 4 from Union Bank’s audited result expected to hit the market any moment from now. If the bonus issue is eventually given and is of a sizeable quantum, the market price of the stock will rise higher than it’s current price. Union Bank raised additional funds in 2005. The possibility of the bank coming to the market to raise additional funds this year is very slim. At the beginning of this year, Fidelity Bank was selling at N2.17, which implies a 458.3% appreciation in the price of the stock since trading opened this year. The bank’s stock will continue to be attractive if the development that’s being rumored in the market place is true.

The bank will be holding an Extraordinary General Meeting later this month and top on the agenda of the meeting is the possibility of share reconstruction in the bank. If this happens and the bank’s stock follows the trend of others like Access Bank and Bank PHB, it means the stock will be attractive in the long run. 

Comments (5)

Older Posts »