Kalu Aja Profile picture
Aug 26, 2019 24 tweets 10 min read Read on X
If you had N1m, how would you invest it?

This question is really asking how you would allocate N1 million amongst different asset classes. But before we consider that, let us start from the basics.

#FinPlanAssetAllocation
What are asset classes?

Asset classes are securities that exhibit the same characteristics. For instance, Fixed Income as an asset class, will include all financial instruments that pay fixed returns.

#FinPlanAssetAllocation
They will range from “risk free” securities like Sovereign Bonds, to risky junk Bonds issued by the private sector. Look at asset classes as cars that take you to an investment destination.

#FinPlanAssetAllocation
Variable income as an asset class group will include all financial instruments whose return are not fixed, but variable in nature. These asset classes range from Equities, to include Real Estate Investment Trust (REITS), and even Derivatives.

#FinPlanAssetAllocation
So, how would you allocate N1 million?

Well, it depends on:

1. your age,

2. how much risk you are willing to take, and

3. how long you want to wait before you need your principal.

#FinPlanAssetAllocation
To be clear, we are investing, not saving. What is the difference? Saving is simply the act of putting money away, while investing is the act of putting away money with a specific objective in mind, & the expectation of a positive return.

#FinPlanAssetAllocation
First consideration: how old are you?

Age is a very important factor because the younger you are, the more risk you can take. Why? If you are younger & lose all your investment capital, you have a better chance of starting over & replacing lost income

#FinPlanAssetAllocation
Also on a positive note, age in finance means more compounding periods i.e., age means that your investments have more opportunities for earning to be ploughed back to grow compounded

#FinPlanAssetAllocation.
If you are younger, its advised you invest more in variable income securities like equities, because over time they offer greater chances of higher Capital Appreciation returns, but with a higher risk.

#FinPlanAssetAllocation
If you are nearing retirement, then you should not under any circumstance invest more than 20% in variable income securities like Equity, no matter the return potential.

#FinPlanAssetAllocation
Ok...give you time to take it all in..we discuss Risk Profile and Investment Duration tommorow..

Same time

#FinPlanAssetAllocation
Second consideration: What are your objectives?

If your investment objective is to GROW your investment capital ie Capital Appreciation Goal, then you want to invest in variable income asset classes like shares.

#FinPlanAssetAllocation
This is because variable income securities can appreciate your principal and have a higher propensity to beat inflation than fixed income securities. Keep in mind that more variable investment means more risk.

#FinPlanAssetAllocation
If, however, your objective is to protect your principal from loss with a Capital Preservation goal, then you should invest in fixed income. The risk here is that your returns may not beat inflation.

#FinPlanAssetAllocation
Last Consideration: How long do you have to stay invested?

If you have a long investment horizon, i.e. you can keep your investment in the financial market without seeking it back for more than 5 years, then you want to stay in variable income like equities.
This is because equities as an asset class allow the investor participate in the long term success of the company by reaping capital Appreciation and/or Dividends.

#FinPlanAssetAllocation
However, if your will want your investment capital back in less than 24 months, it is advisable you invest in fixed income because you can determine exactly how long you want to stay invested.

#FinPlanAssetAllocation
Let us look at scenarios:

Recently-employed 21-year old Ade, was gifted N1 million by his rich aunty. He wants to save this to fund his wedding in 10 years. How should he invest this fund?

#FinPlanAssetAllocation
I recommend:

70% in Variable Income, specifically mid and large capitalization stock

20% in Fixed Income, specifically 2yr Saving Bond

10% in Cash as Money on Call with a Bank

Why?

#FinPlanAssetAllocation
His Objective is long term capital appreciation so Shares 70%

He may need cash before 10 years, so I invested 20% in safe Government bonds payable every 24 months. This is also diversification to protect the portfolio.

#FinPlanAssetAllocation
Ade may need cash to buy his engagement ring, we put 10% in Call bank to prevent breaking any invested principal before maturity.

Asset Allocation is the most important ingridient for investment success.
Lesson is basically done but I will give you homework😊

2. Okoro, 64, about to retire, received N1m as gratuity advance payment. How should he deploy this?

Can you post a sample Asset allocation for Okoro?

I will post mine tommorow....we can compare

#FinPlanAssetAllocation
These case studies have picked both extremes of investors. You may find yourself with similar objectives as either examples, e.g., low risk profile but seeking capital appreciation, which then means that you need a balanced portfolio.

#FinPlanAssetAllocation
Again this is not a recommendation to buy or sell, shares are very risky and you can lose 100% of your capital....always consult a financial adviser before investing.

tommorow....same time

#FinPlanAssetAllocation

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with Kalu Aja

Kalu Aja Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @FinPlanKaluAja1

Jul 26
Currency notes issued by the Nigerian Government.

Look closely, the Nigerian pound has "promise to pay on demand one pound" What does that mean? The note says One Pound already, so what is being promised?

Let's talk about money.Image
The paper you have in your wallet is Money... It's not actually "money".

Money is the gold, silver, or assets held by the Central Bank or nation that issues the currency. A Naira note is simply the Central Bank of Nigeria saying, "if you give us gold, we give you Naira" and "if you give us our Naira, we will give you back gold".Image
Same for the US Dollar.

The US Treasury is saying, "Give us gold and we give you paper ...called dollars."

So Currencies are bonds. Instead of trading with your gold, you now trade with Central Bank paper.

Again, look at the US Dollar today, there is no promise to repay your gold. HmmmImage
Read 9 tweets
Jul 22
Household Consumption in Nigeria Has Declined

The alarming drop in consumption rates in Nigeria is not discussed enough. According to a report by the Nigerian Bureau of Statistics titled "Nigerian Gross Domestic Product Report (Expenditure and Income Approach) (Q1, Q2 2024)," published in July 2025, the data reveals a troubling trend: real household consumption expenditure has been declining since Q3 of 2023. Specifically, household consumption expenditure fell by -42.28% in Q1 2024 and -61.18% in Q2 2024, reflecting lower rates compared to the same quarters in 2023. On a quarter-on-quarter basis, real household consumption expenditure decreased by 45.71% in Q1 2024 and plummeted by 99.24% in Q2 2024.

These figures are difficult to digest.Image
This sharp decline in consumption is one reason why many foreign multinationals are exiting Nigeria; Nigerians today struggle to afford anything priced in dollars, including imported PMS (Premium Motor Spirit). Image
Why Is Consumption Weak?

Consumption is weak due to stagnating wages and rising inflation. Companies are attempting to stimulate sales by repackaging 500g items into 50g sachets. This sachet economy traps consumers in a cycle of inflation, making it impossible for them to bulk buy and escape rising prices.Image
Read 8 tweets
Jun 22
Two points on Iran and the Strait of Hormuz

1. Crude oil accounts for about 85% of Iran's government revenue. Iran exports approximately 90% of its oil via the Strait of Hormuz

2. China is the largest purchaser of Iranian oil. Closing the Strait of Hormuz means China gets less oil than it needs from Iran; thus, China will go elsewhere, possibly to Russia. Not smart to lose a key export market to a swing exporter

Closing the Strait of Hormuz to 90% of your oil exports is like resigning from your high-paying job so you don't pay alimony to your ex-wifeImage
Image
Instead of typing one liners, do some research. You are seriously comparing the volume an oil tanker can carry with the volume a train can carry?

I asked Grok

“Approximately 90% of Iran’s oil exports are transported via sea. Iran produces around 3.2 million barrels per day (bpd) of crude oil, with about 2.6 million bpd exported. Of these exports, roughly 2.34 million bpd are shipped through maritime routes, primarily via the Strait of Hormuz from Persian Gulf terminals like Kharg Island. The remaining 10% (around 260,000 bpd) can potentially be exported via the Goreh-Jask pipeline to the Jask terminal on the Gulf of Oman, though actual usage of this route has been minimal, dropping to less than 70,000 bpd by September 2024 and ceasing thereafter. Non-maritime exports, such as via rail or land routes, are negligible for oil due to infrastructure limitations”
Slow down, do your research, then respond

You can't compare a ship carrying oil to a train carrying oil

“A standard oil tanker, specifically a Very Large Crude Carrier (VLCC), can carry about 2 million barrels of oil (approximately 280,000 metric tons). Other common tanker types, like Aframax or Suezmax, hold 500,000 to 1 million barrels (70,000–140,000 metric tons). Tanker sizes vary, but VLCCs are widely used for long-haul maritime oil exports, such as from Iran to China.

In contrast, a standard freight train configured for oil transport, using tank cars, can carry significantly less. A typical oil train in regions like North America or Eurasia has about 70–100 tank cars, each with a capacity of 700 barrels (100,000 liters). In the China-Iran rail corridor, trains may have fewer cars (e.g., 40–70) due to infrastructure constraints like rail gauge differences or locomotive power, translating to roughly 28,000–70,000 barrels per train.”
Read 4 tweets
Apr 19
A Financial plan is a process

You go from A, to B then C

So whats Lets review the steps
1. Have a Plan

First and foremost, it's important to define your purpose for investing or delaying consumption.

Understanding the “why” behind your decisions informs the “how” you should proceed.

For example, if you're investing or postponing consumption today in order to spend during retirement in 20 years, your investment strategy will differ significantly from if you're saving to consume next year.

Being clear about your goals will help you create an effective investment strategy
2. Now that you have a plan, the first step is to build an Emergency Fund.

An Emergency Fund is a savings account where you set aside three to six months' worth of essential expenses, such as food and rent.

The process is straightforward:

1. List all your expenses and categorize them as “essential” or “non-essential.”
2. Determine the monthly cost of the non-essential items.
3. Save this amount in your emergency fund; it should be kept in cash or near-cash.

Why is this important?

If you invest without an emergency fund and an unexpected situation arises, such as a job loss or a damaged car, you may be forced to sell your investments to cover those expenses.

An emergency fund acts as your safety net.
Read 7 tweets
Apr 9
Let's compare assets during these turbulent times.

I have picked five asset classes:

Gold, represented by GLD ETF
US Stocks, represented by VTI
US Property, represented by VNQ
Digital Assets, represented by Bitcoin BTC
US Bonds, represented by UCITS

Let's track performance for one week, one month, a Year, and Five years.
What if I bought 5 years ago?

One word, Bitcoin. It's not even close; BTC killed the competition, went to the moon and back.

It's risk on, so cash rotated from bonds to stocks and, curiously, gold.

Property posted anemic returns. Image
About a year ago?

Markets grew slightly nervous, reducing risk-taking.

Investors shifted from high-risk BTC and stocks to gold and bonds. Gold led, followed by Bitcoin.

Stocks and property lagged. Image
Read 7 tweets
Mar 17
The US Markets are on a diet.

What makes the GDP rise or fall?
.
It's a combination of spending and net exports

1. Consumptuin rises, GDP rises
2. Investment rises, GDP rises
3. Government Spending rises, GDP rises
4. More Exports than Imports, GDP RisesImage
A recession, two negative quarters, happens when consumption or investment falls.

Take the US, for example. Personal consumption (buying cars, stoves, healthcare, etc.) is about 70% of the US GDP. If there is economic uncertainty or inflation, households stop spending, which causes a fall in consumption that fuels a recession.

The US economy shrank by 0.9% between April and June 2022, meaning a recession, because the earlier quarter was also negative. The Biden team denied there was a recession. Sec Yellen said "growth is slowing"
,Image
Thus, from April 2022, the US started spending $1t in debt every quarter to compensate for the fall in private consumption.

If you remove the government spending that created most government jobs, the US economy will not be in a recession but a depression.

What Donald Trump is doing is taking out the artificial. Debt-fueled growth from the marketsImage
Read 5 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!

Ethereum

0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy

Bitcoin

3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us!

:(