The investment paid off and I learned another lesson. Investing in yourself is key to increasing earning power
By Osita Chidoka
Today, I want to speak about the investor mindset and the lessons I learned in the journey of financial freedom. Investing is not for the rich, nor is it about the size of your income. It is a mindset to plant so that you can reap.
During my national youth service in Abuja, I lived with my Aunt and her husband in their 2 bedroom flat in Area 1. They were pleasant and accommodating. I slept in the sitting room while their wards slept in one of the two bedrooms. I was lucky because housing in Abuja was a big issue.
After service and winning the NYSC Award, I was automatically employed at the FCT. My family sent me some money to rent a one-bedroom boys’ quarter as was the case in Abuja then. I remained in my Aunt’s house. I used the money to open my first stockbroking account at CSL Securities in 1997. I was 26 years old then. Some of the receipts of my deposits are attached. I bought bank IPO shares and was big on GT Bank on the secondary market (big by my standard).
I stayed with my Aunt until I became Personal Assistant to Chief Okete, Minister of State, Ministry of Works and Housing. In 1998 I moved to the Ministry’s guest house. During that period, we travelled a lot and I received regular per diem which I did not spend as we normally enjoyed free accommodation from host state governments. As I returned to Abuja from each trip, my first port of call was CSL to deposit whatever cash I had and buy more stocks. Albeit without much knowledge.
By 1999, the whole world was booming with the dot com narrative. People became millionaires overnight literally in months on top of wild valuations. I sold most of my Nigerian stocks and two of the shops I had in the Wuse market in my childish dream of becoming a dollar millionaire through dot com investing. There is no shortcut to success.
I opened a foreign stock broking account through CSL and started dreaming of the doubling of my money every month if not weekly, as I had read. I attached a copy of the portfolio performance I received in January 2000. One day in March 2000 the market crashed and over a few months, I watched with stunned disbelief as I lost about 80% of my portfolio. I saw my whole savings vanish in my bid to hit a target before I turned 30. I lost.
Undeterred but shaken, I turned to my father who advised me to buy and sell cheap land since Abuja was a new growth centre. I started buying land in Kubwa, Nyanya, and reselling at a markup to regain my lost capital. After a few lucky bets and income from my work, I sold everything I had and decided to invest in myself through graduate school in the US. After school, I was hired by ExxonMobil and returned to Nigeria. The investment paid off and I learned another lesson. Investing in yourself is key to increasing earning power.
In 2005, with a good salary and some confidence, I returned to the stock market. I started buying again slowly as I had become aware of Warren Buffet and value investing. By 2007, greed got a better part of me as I went big on the IPOs of those days.
I bought UBA at N35, Oceanic at N16.50, and others like that. In 2008 the market crashed in Nigeria and my UBA share went all the way to N3. As part of the aftermath of Sanusi’s reforms Oceanic Bank and others went down with my capital for the second time. This time I had hedged with low-cost properties, following my father’s advice, who was heavy on land in Enugu.
Despite, the setbacks, I made money sometimes, earned dividends, and lost sometimes. I attached some dividend slips from 1998. In 2008, I spent my Christmas reading Snowball a book about Warren Buffet and it changed my perspective on investing.
Here are some of the lessons I learned.
1. Investing is a knowledge-driven activity. You must study the market, the business you want to invest in, and the intrinsic value. Every Friday I read annual and quarterly reports of companies I invest in or track till today.
2. You cannot beat the market. My effort to get rich by timing the market to buy low and sell high was amateurish and stupid. If you don’t have capital and knowledge buy equity-traded funds that track the market you will be fine.
3. Buying shares, no matter how small, is buying part of a business. You must know the business and also ensure you are buying it below its intrinsic value and that the business has a sustainable earning model.
4. Investing is a long-term game. Time is your friend and enemy. If you start investing before you are 30 and stay consistent, compounding will make you rich.
5. Diversification is good for retail investors. Cash, stocks, property, insurance policies, and now foreign currencies will keep you afloat.
6. Country risk is real. The growth I witnessed in the 2006 to 2014 timeline was wiped away by devaluation in the 2015 to 2023 period. Bad government is a huge tax on investment.
7. Warren Buffett’s value investing style is a good place to learn. I read his annual reports every year. If you are a retail investor focus on the broad market, through equity traded funds like Stanbic IBTC Equity Fund or the Stanbic IBTC ETF 30. I have Google alerts on all the companies I invest in and all the business trends I am tracking.
8. A personal example: in December 2013, I studied the annual report of all quoted insurance companies and discovered an insurance company trading below its intrinsic value. I told my broker to start buying. We bought at between 50k to 62k. By the time they announced their 2014 results, the price rose to N2 and people flocked to the company and it drove up the price to over N4. I sold. The company is NEM insurance.
9. Invest in yourself, through education, research, and consistent pursuit of knowledge. An investor mindset is a learning mindset.
All my young friends on this street, the time is now. Time is your friend. There is no easy way, but developing the investor mindset is to defer gratification, refuse to follow trends, and plan your future. Age 30 to 40 is the golden decade. Use it wisely.
These are some of the ideas I will share in detail in the Mekaria Mentorship Program. Once we sort out the technical issues the program will go live. Watch out or join the MMP now.
* Chidoka is a former Aviation Minister.