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|Core Values-Why am i investing|
|Written by Toyin Oke on Saturday, 17 October 2009 09:30|
To thy own self, be true
- Shakespeare inspired by Socrates
This is the most important question you must ask yourself: Why am I investing? Why am I in the stock market? Why am I doing what I am doing? Many people have different reasons why they invest, just as many people have many reasons for doing what they are doing. Some of those reasons might not be palatable to you but of course it’s their reason for doing what they really want to do. The same applies to investing. We all invest for various reasons. Perhaps you want an alternative source of income to supplement your salary. Perhaps you wish to invest for the security of your children’s future. Perhaps you wish to invest for your parents and provide for them a regular source of income apart from their pension. Perhaps you wish to start investing for your retirement now, so that you would not have to be dependent on anyone when you are old, or have to rely on a meagre pension. For some, they invest for the fun of it; they just enjoy the process of seeing their portfolio grow.
All these reasons are good, but in order to get the best of investment via the exchange, the reason for investing should be core to your values – things you really believe in; come rain or shine. Those reasons would enable you to weather the storms that will come during the course of your investment. For me, my reasons for investing are as follow:
1. To Be Involved In The Process Of Creating Wealth
I don’t just want to be told stories of how this became that after 2 years. I want to be a part of it. I want to know what happened and how it happened. Creating wealth involves creating opportunities for others to become rich and be able to take care of their financial needs. Through regular investment in the stock market I have been able to develop and hone skills that have enabled me to make the best out of my investments. I have also been able to discover trends, the ebb and the flow of the stock market in which when taught to others will enable them get better returns for their investments in a shorter period of time than I did.
A trend I discovered recently was that when a stock split of a 1 for 3 or 4 is effected on a stock, it was easier for the stock to bounce back to its initial position (GTB 2006 and 2007, RT Briscoe 2007, Flour Mills 2006, Union 2005 etc) but when a 1 for 1 spilt is done the shares can almost not bounce back to its initial value. Sometimes a decline is noticed (NBL 2005, First Bank 2006.) Please note that I’m not proposing it as a law nor a principle; it’s just a trend I noticed. Trends enable you to plan, plot and strategize your next move.
2. Provision of Learning Curve
Many claim to have investment formulas that are sure fire. No matter how clever and erudite your principles of investing in the stock market, the best place to put it to test is to be involved. I’m a long term person. I subscribe to Warren Buffet’s philosophy that “Our favourite holding time is forever.” How do I claim to be a believer? It’s by buying a stock and seeing how long I can stand when things happen in the direction I didn’t expect, even when the fundamentals are right.
The skills you learn while trading with coins are not the same with notes. You have to be skilled with notes; you can make mistakes with coins and go unhurt. Just make sure they are not your last coins. The investment world is unforgiving. It’s a winner-takes-it-all environment and so you have to know what you are doing in order to venture. The mistakes you make as an amateur is for your growing, if you try those mistakes in the open when you are matured, it might take the wind out of your spirit.
3. Build an Asset Cache
An asset cache is the part in your portfolio that brings in income either residual or passive. Stocks can make up an asset cache and so are properties, bonds, gold etc. When you invest in stocks, you create an asset cache that can yield dividend, bonuses, capital appreciation or enable you to buy more units of the same shares at a lower price via rights issues. Simply put, an asset puts more income into your pocket.
Stocks can serve as an asset in which you can use as collateral for many things including taking bank loans. A CSCS statement of your portfolio can be used as collateral to get loans from most of the financial institutions.
4. Make Profit
Sure, everyone is in business to make profit. Profit helps in the growth, expansion and continuity of the business. Sure profit from your investment can come in forms of capital appreciation, dividends and bonus shares. I’m sure I do not have to tell you what to do with your profits. Les Brown once humorously teased that when you have money, someone would find something cute on you. He said “If you are ugly as I am, your wife would come home and say “You’ve got earlobes like Denzel honey.” Enough on profit, I’m sure profit especially good profit does put smiles on everyone’s face.
A smart investor would always want to see how best he can optimize his returns on investment and at the same time holding to his principles and ethics. As a summary on this, Warren Buffet has proposed a simple law in investing, it goes thus:
Rule 1: Never lose money
Rule 2: Never forget Rule 1
A word is enough for the wise.