MY OWN MEANDERING EXPERIENCE

It’s been some years since I started investing in the Nigerian Stock Market and though there’ve
been ups and downs, in all it has been a very interesting and beneficial experience. The tales
abound; some of regrets and quite a number of profits and joy. But in it all, there have been distinct
lessons (from my own personal experiences and from others) which could not have been learnt any
other way, and which have made me a much better investor. It is these tips learnt during my ups-
and-downs that I now share with you in the hope that you might avoid some of those mistakes I
made.

Start With What You Have

Some of the saddest statements (concerning investing) I constantly hear are ‘I’ll invest when I have
a large amount of money (N500,000 or more)’; ‘Investing small amounts can’t make a difference’;
‘How much profit can you make from N5,000? It is the big boys that make all the profit!’
Unfortunately, all these statements are just lame excuses from people who are either ignorant are
who can’t get themselves to do what they know they should. My first investment was a meagre sum
of N6,000 but now… In fact, the best way to become a seasoned investor is by starting out with
small amounts. This gives you the chance to try different approaches and learn all you can without
risking much. Too many people think the stock market is ‘forward ever’, so they accumulate a
large amount and jump in feeling like George Soros, only to get burnt because they never bothered
to learn the basics. It isn’t the loss that is the problem however, but the lack of emotional stamina.
A person who started small would have learnt that ‘these things do happen’ without tears and
would have taken time to find out why. He/she would know that they could be caused by thousands
of reasons, not necessarily bad or good, and have the emotional stamina to handle it. Also,
investing small amounts is one of the oldest and most tested rules in mankind’s’ history; ‘little
drops of water make a mighty ocean’. Putting a little aside periodically to invest takes much
discipline (reason for the ‘large amount’ myth) but it is the easiest way known to man to
accumulate great wealth. And don’t forget; with the power of compounding, those small amounts
will mushroom into an avalanche tomorrow! Consider that N5,000 monthly at 20% interest will be
worth over thirteen million in 20 years.

No Matter What Else You’re Doing, Make Sure You Have Some Investments
I have friends who in the early days refused to join the ‘League of Xtraordinary Gentlemen’ (stock
market investors) because they “would rather invest the money in a business”. Now I have nothing
against that, but today when I consider that while we both rank pari passu in terms of business, not
only do I have my stock market investments but also more funds to put in a business – since my
investments have multiplied –, I know that it was I who made the right choice. There’s no law that
says you shouldn’t invest in the stock market because you’re trying to build a business. Even Bill
Gates has other investments in the market apart from Microsoft. Investments in stocks can serve as
a backup and cheap source of funds for your business, and a backup can allow you to be more
daring. In addition, you can even use your shares as collateral to take loans. With shares, it’s a win-
win situation.

Have a Long-Term View of Your Investments

After the 2003 stock market euphoria, I made my worst blunders so far. Caught up in the greed and
frenzy, I invested thousands in Total (N190 then) and Texaco (N180 then) based on their 2003
peaks – both had gone way above N200 with Total reaching about N270. I had a myopic view of
the market and my plan was to sell them in a few months immediately they regained their peak. Of
‘cos, I got seriously burned! The market was on its way down! Finally sometime last year, out of
despair, I sold the Texaco shares for N105 (can you believe it!) and Total N190 (thank God!), and
this after two years. Now listen; two months after I sold Texaco, the nonsense company (forgive
me) changed their name to Chevron and you can imagine the rest. Right now, the stock sells for
around N170. They were actually waiting for me!
The point of all this is that if you base your market decisions short-term, make sure you’re an
expert on Technicals (and even experts, most experts, get burned) or your days in the market are
numbered. Unfortunately because of the present market boom, more and more people – half of
whom have never seen a daily list – are indulging in this practice egged on by brokers and
companies selling shares. There’s not many things more ridiculous than hearing a market woman
ask, “I want to buy The Big One. What will the price be at the end of the year?” And the poor
banker who has a target to meet has to soberly reply, “At least N70. Maybe even N100…” Having a
long-term view doesn’t however mean you can’t embrace those incredible chances when they do
come. If The Big One rises to N100, cash out, no problem. BUT don’t buy it because you think it
might get to N100 by the end of the year. Buy it because it’s a good stock fundamentally. This way,
even if it does badly short-term, you know it will bounce back. Long-term, you can’t lose.

Grab Opportunities As They Come Your Way

In February, a friend of mine told me to invest in Afroil, then at 40k. I didn’t and today, I can only
gnash my teeth as that same N0.40 stock hits N10 – over 2000% growth in 6 months! But it hasn’t
all been bad; Japaul shares crashed to 90k (December 2006) from N2.20 (IPO in 2005), and I went
on a buying spree against my stockbrokers advice. Today, Japaul sells for over N7. Win some, lose
some. Opportunities would always come and go, but you must always be prepared. Most
opportunities come in undervalued stocks, those stocks nobody is reckoning with or everyone is
abandoning. All it takes is some research (low-priced is not a synonym for undervalued, nor high-
priced for overvalued), lots of courage and a little cash. It’s a good habit to always have a little in
savings either in the bank or with your stockbroker. If NEED be and you’re absolutely SURE the
investment is worth it, do borrow some money but don’t get greedy.
Check out this excerpt from Kiyosaki’s CASHFLOW Quadrant on why consumers will always be
poor:
“When the supermarket has a sale on, the consumer runs in and stocks up. When the stock market
has a sale, most often called a crash or correction, the consumer runs away. When the supermarket
raises its prices, the consumer shops elsewhere. When the stock market raises its prices, the
consumer starts buying!”

Don’t Leave Excess Cash Hanging with Your Stockbroker (or anywhere else in fact)
There’s almost nothing worse than being caught in a bull market with excess/unutilised cash.
Having a little in savings for chance opportunities does not mean forgetting it with the broker.
What’s the point of making your broker rich with interest from your money? If you’re going to
leave your money stagnant, you might as well leave it in your bank account and earn the puny
interest for yourself. But really, your research should be constant so that at every point in time, you
have an option of buys. As I compose this article, I’m wondering what to do with some money
which has been earning interest for my broker for about a month now. I regret not having bought
more of some particularly good stocks when they were cheaper and now, with the bulls going
bonkers, it’s hard to find good stocks to buy.

Believe In Yourself
Maybe you did some research and discovered that a particular stock has prospects even though
everyone feels otherwise; maybe your gut feelings tell you to buy a particular stock; maybe you
feel – with reason – the bottom is going to fall out of a particular stock even though the whole
planet is going gaga over it; whatever it is, sometimes you’ve got to believe in yourself and
yourself alone. Great men – and very rich men – are those who don’t mind standing alone.
Remember the Japaul story? But even earlier than that, I learnt to believe in myself. I remember
when STB (now UBA) came out with its IPO some years back. I asked my dad for advice and he
was totally against it. Well, I went ahead and bought it at N4 and I can still remember the look on
his face some months later when I informed him I had just sold my shares for N6.80. I really didn’t
know much about stocks then, but I was convinced I was doing the right thing and it paid off
handsomely. Of ‘cos, you might not always be that lucky especially if your decisions are totally
based on pure speculation. But I’ve found that with some research, strong intuition, patience and
belief in ones’ self, anyone can make money in the market.

Just Do It
My most important lesson from the stock market and probably the greatest advice I’ll ever give to
anyone: JUST DO IT! Don’t wait till you have more money; don’t wait for the price to go down;
don’t wait till it’s Christmas; don’t even wait to see if the bulls will return; once you’ve seen the
stock of your heart, just go for it. The money you’re waiting for might never come; the price might
just begin an uphill climb; Christmas prices might just disappoint you; and the bulls may recover
faster than you think. Let Shakespeare’s words motivate you: Fortune favours the brave.

So these are the lessons I’ve learnt from my own meandering experience. Very simple huh? Well
the most important lessons are always the easiest, ask Isaac Newton. Try them out, free of charge,
and your path might just be straighter. Good luck!