Thread by @FinPlanKaluAja1

Welcome to out tweetalk on Investing, titled  "Financial Intelligence 101 - making the most out of the Nigerian economy ".

Before we start, a few caveats, these tweets are my opinion and do not constitute investment advise.

Procedure is I lay out my tweets, at the end you can ask questions...I will be available for one hour.

The topic has to  main objectives

1. Financial Intelligence 

2. Making the most out of the economy

Let's talk about both

1. Financial Intelligence 

Investing can be a science and art but it's always a planned activity

Saving means you are deferring consumption. Investing is a planned deferral with a specific objective.

Financial Intelligence is basically knowledge based investing.

Financial Intelligence is the how, why and when of investing. Alan Greenspan, the former US Federal Reserve Bank inferred "a lack of financial Intelligence is the number one problem of our generation" so Financial Intelligence is an important skill to have.

So how does an individual invest? what factors should be considered.

1. Having an objective 

2. Agreeing a risk profile 

3. Determining investment objective.

I speak more about this in this article, but do read this later.

nairametrics.com/2019/06/27/if-…

In summary, there is an investment spectrum with Capital Appreciation on one side and Capital Preservation on the other.

When you invest, you are actually plotting your objective along this spectrum.

e.g. "I want to save to buy a house in 5 years by investing 100k a month in a treasury bill."

That's objective is Capital Preservation. You capital is safe, you are seeking to simply earn on invested capital. The risk level here is low.

e.g. 2

" I want to save from retirement, I am investing N100k in a stock mutual fund every year for 5 years"

This is Capital Appreciation, in this instance your are putting your capital in play to grow the initial capital.

Risk here is higher.

Financial Intelligence gives a framework to determine how to match investments to objectives.

Two Infographics.

This decision  tree walks the investor via questions to specific asset classes.

eg if you need your investment returns in less than a year, then no equity.

This second infographic on Asset Classes lays out risk and reward again matching them to assets..

Capital Appreciation is taking risk

Capital Preservation is less risk

These infographics show a purpose based investment plan, i.e. you are investing to meet a predetermined investment goal NOT a return. 

DO NOT chase returns, Invest to meet a predetermined financial goal.

If 2 investors will have different goals, they will have different plans

I can speak a lot on financial Intelligence 101 but in summary 

1. Have a plan

2. Start to implement your plan early

3. Pay yourself first 

4. Be constant, invest constantly

5. Watch inflation

Let's move to making the most of the Nigerian economy

What are we certain of?

The FGN is going to borrow N5.2b a day, yes day. FGN investments are considered "risk free" cause the FGN will meet Naira obligations, (even if it prints)

How can an investor take advantage of this?

1. Agree your investment objective and tenor 

2. Find the Inflation rate, write down

3. Find FG investments that corresponds to your investment tenor, write down rate

4. Get the current Nigeria Stock Exchange All Share Index

continued next tweet.

5. If the NSE ASI ("Risky") is trending more than the selected FGN bond return and inflation, buy more shares, subject to your age.

6. If FGN bonds ("risk free") are returning more than NSE ASI, buy more FGN bonds. Earn a higher return, "risk free".

Whatever strategy you agree or come up with should be expressed in an Asset Allocation plan, which is basically how you allocate your capital to various assets ie diversification to meet that clear investment objective.

These tweets all have a more complex maths and strategy behind them, my intent today is to give you a glimpse and questions you can ask your financial advisor. 

In closing, let me quote Warren Buffett "be fearful when others are greedy, be greedy when others are fearful"

Let me quote Warren Buffett "be fearful when others are greedy, be greedy when others are fearful"

So

What investment today are Nigerians fearful about?

What investment are Nigerians greedy about?

Finally 

Ponzi scheme are not investments.

Currency trading is speculation and gambling.

You can lose all your capital buying shares

FGN bonds enemy is inflation 

Dollar return is really low

Euro and Yen return are negative

Thank You.