Nigeria is a country with surprising enigmas. In spite of the financial opportunities in her capital market, many a citizen of the country is still oblivious of some basic principles of investment, thus, finding it difficult to cultivate the habit. This makes it easy to liken an average Nigerian to a man who lives in a house with the abundance of food of different kinds but still goes out to beg for food. In the words of Robert Kiyosaki, “Don’t work for money, make it work for you.” Also, Aya Laraya noted that “When you invest, you are buying a day that you don’t have to work.” Most people work tooth and nail to earn money but do not leverage the money to enhance wealth. The self imposed oblivion of investment fuels the need to conscientiously acquaint Nigerians of the expediency of investment.
Investment in a lay person’s view means any commitment of fund for a future benefit but not necessarily in terms of returns. This makes financial investment which is hinged on the fundamental principles of risks and returns different from layman investment. In distinguishing between financial investment and layman investment, Robert G. Allen says “How many millionaires do you know who have become wealthy by investing in savings account? I rest my case.” It will suffice to say from the above quote that layman investment means savings. A person may put is money in savings for two years because he wants to buy a car. However, such sacrifice does not generate returns on his money. It will therefore be sufficient to say that all investors are savers but not all savers are investors.
Financial investment on the other hand means the acquisition of financial assets to enhance one’s wealth. It involves the commitment of funds in real or financial form with the hope of receiving additional returns in the future. While real assets include: land, houses, gold etc., financial assets include: shares, bonds, mutual fund schemes, debenture, etc. Investors expect to reinforce their future consumption possibilities by improving their wealth. Financial investment enjoys a symbiotic relationship with the two Rs principle of risks and returns. It is a long term activity and this is aptly captured by Warren Buffet, a renowned stock investor, when he said “The rich invest in time, the poor invest in money.” Financial investments are usually longer than savings (liquid investment) and this makes it supply higher returns than mere savings.
It’s trite as a general principle of life that nothing good comes without sacrifice. This rule touches different aspects of life, such as: the legal position that for a person to be granted relief, such person must have suffered mischief. Great investors are great sacrificers and according to Gordon B. Hinkley, “You will come to know that what appears today to be sacrifice will prove to be the greatest investment that you will ever make.” In financial investments, for there to be benefit, sacrifice must have been made.
Before a person considers investments, certain processes must be taken. The budding investor must draw a financial goal plan by assessing his goals and the steps he wants to take to help make them a reality. Such financial goal plan may include: to retire with a lump sum, to secure a good future for one’s children, to pass on money to next generation, to finance business or develop a project, to embark on philanthrophic activities, or to aggrandize one’s standard of living. The would-be investor must avoid extravagant lifestyle and stay off debt. He must be able to sacrifice going to Chicken Republic or any profligate spending in order to actualize his financial goal. An important question many people ask is “when do I invest? The sooner you invest the better it is. By investing into the market right away you allow your investments more time to grow, whereby the concept of compounding interest swells your income by accumulating your earnings and dividends.
The relevance of investment cannot be over stated since it is everyman’s goal to actualize financial security. It is the process of moulding a pot of wealth. The advantages of Investment include, but not limited to: ensuring financial stability, guaranteeing longer life expectancy, reduction of poverty, serving as a shield against inflation, planning for retirement, procurement of assets, financial planning and creation of wealth.
Conclusively, investment is connected with the axiomatic saying that while money does not grow on trees, it can grow when one properly invests it. A person who suddenly strikes gold and leaves the gold dormant or refuses to channel it into appropriate quarters where it can yield more for him may sooner or later regret it. In the words of Grant Cardone, “Investing puts money to work. The only reason to save money is to invest it.” One may be surprise to know that commercial banks that are meant to keep people’s savings engage them in gainful enterprises. Only a small percentage of Nigerians invest or reach their financial security goals. This is mostly owing to excessive dependence on a particular source of income. Every individual irrespective of their work, background or problem must strive to embrace financial investments.
Written by : Oladele Ajayi, an investment banking enthusiast.