FINANCE & INVESTMENT

beginners
guide for
investment
How to start investing from your
"small" income

BY SEYI ABIODUN
BEGINNERS GUIDE FOR INVESTMENT

Chapter 1

INTRODUCTION TO
INVESTMENT

SDA
FINANCE
Beginners Guide to Investment

Chapter 1

Introduction to
Savings &
Investment
By Seyi Abiodun

In this text, I’ll discuss around investing, some of

extensively and in the which are:
simplest form the WHAT,
WHY, WHERE, WHO & You need a lot of money to
HOW of Investment. I’ll use invest:
basic terms and practical While it is true that the
examples to help you more money you put into an
understand and start your investment, the more
journey to building your returns you make, because
own Richer Life. most investment works by
percentages, anyone can
Even though investing is invest any amount and by
how we achieve financial investing a fraction of your
freedom, most people do income, you are creating the
not invest, not because opportunity for potential
they lack the resources, returns in the future.
they don't because of the
age long myths

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Beginners Guide to Investment

Another myth is that, you Although you can

need thorough potentially earn profits daily
understanding of how in certain types of
the market works: investments like equities
Individuals who don’t (stocks) by paying close
possess advance attention to movements in
knowledge of finance, the market, a less-time
money, national or global consuming way to grow
economy tend to be your money would be to opt
hesitant to invest. While for long-term investment. If
you should not just throw you invest in stock and stay
your money blindly into glued to news or market
any investment, the truth is movements, it is one of the
you don’t need to be an easiest ways to have HBP-
expert to be successful in high blood pressure.
your investments.
One of the unspoken rule of
Reaching out to a financial investment is having
advisor that can help you capacity to bear losses if
evaluate your risk appetite they arise.
and draw up an
investment plan based on You're still young and
your needs is the best and have a whole life ahead of
smartest way to get you:
started.
Some people believe that
You need to monitor your one must reach a certain
investment daily: level of maturity and income
This is yet another myth stability before one starts
that prevents people from investing. That's not true,
investing into building you should start planning
their richer lives. your financial future the
moment you turn 18.

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Saving is different from There are three types of

investment, even though savings:
investment is a type of
savings. 1.Expense/goal-based
saving: This is the kind of
You must have heard it savings where money is put
said that you should save aside for specific goals e.g.,
first before spending, the saving to buy a car, for
kind of savings referred to vacation, to pay school fees
here is investment, which etc.
essentially is long term
savings. 2.Emergency savings: This
is savings that is put aside
People save from January for unforeseen
to December, only to take circumstances, you should
all the money just before not get to a level where
Christmas to spend, then you’re working but have
they’re back to the same nothing in your emergency
broke level at the savings. If you lose your job
beginning of each year- for today, can you survive the
how long would you next 3 months while
continue like that? you’re job-searching?

The easiest way to 3.Investment/long term

understand the difference savings: This is the type of
between investment and savings that you put aside to
saving is through the build your richer life on the
element of time. long term, and it is this kind
Investment is long term, that will be discussed fully in
while savings can be this text.
withdrawn anytime.

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BEGINNERS GUIDE FOR INVESTMENT

Chapter 2

INVESTMENT TYPES

SDA
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Beginners Guide to Investment

Chapter 2

Investment
types
By Seyi Abiodun

There are so many types of Starting with the first- what

investments but for the is Equity?
purpose of this text, I will
group them into six Equities is any kind of
categories for ease of investment that gives the
understanding: investor an ownership stake
in a company.
Equities The most common example
Fixed-income is common stocks and
Cash or cash preferred shares.
equivalents
Real Estate When you hold common
Entrepreneurship (own stock of a company you
business or Angel become one of the owners
investing/PE of that company with rights.
Commodities
Shareholder rights
encompass various rights
associated with holding
shares of a company, which
vary depending on the type
of share you buy.

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The following are the rights Nonetheless, the Articles of

that you have by buying Incorporation, the
into the shares of a agreement between the
company: shareholder, or the bylaws
might place some
Rights to vote in all reasonable restrictions on
matters that pertains to the transfer of share.
the company: You can sell your shares any
time and get the cash for it.
Matters like corporate
policy, decisions on the Right to Participate in
makeup of the board of Profit
directors, issuing new When the company declares
securities, mergers or a profit, management has
acquisitions, approving two options:
dividends, and making
substantial changes in the To retain the profit and
company's operations etc. use it for business
expansion.
Right to inspect books
and records of the To distribute amongst
company: shareholders in the form
of a dividend.
You can inspect and obtain Shareholders have a
copies of various company right to receive dividends
documents, records and out of the company’s
registers: Provided profit when dividend is
reasonable notice has been declared. It is the duty of
given. the Board of Directors to
decide what profit
Right to transfer percentage will be
ownership: distributed as dividends

The shares in a corporation

are freely transferable.
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What is the process for You may want to ask, what

investing into Shares in is CSCS in that mix?
Nigeria?
Central Securities Clearing
All shares of public quoted System Plc is the Clearing
companies are sold on the and Settlement House of
floor of the Nigerian stock the Nigerian Capital Market
Exchange. and the Nigerian Stock
Exchange (NSE).
The NSE is an organized
and regulated market, so When you buy shares, CSCS
individuals cannot simply keeps all the records and
walk into it and buy shares, provides you with it on
they need to go through request. If I request for my
licensed brokers also called CSCS now, it will show me
stockbrokers, all the shares I have in
Access Bank, MTN, Dangote
The standard procedure in to mention a few,
Nigeria is:
You can buy shares with any
1. Open stockbroking amount and generally
account with an people make money in two
accredited stock broker ways from the stock market.
2. The broker will also
provide you with the 1. Capital Gain : Let us
Central Securities assume that I bought my
Clearing Systems 10,000 units of Airtel
(CSCS) account opening shares at N100/share in
form 2020, I sold it when it
3. Fund your brokerage has gone up to
account N180/share- in this case, I
4. Submit a trade offer made a capital gain of
once you decide what N8,000,000
you want

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Beginners Guide to Investment

2. Through dividends: The other way to invest into

companies declare the stock market is through
dividend from time to time apps. Several Investment-
& investors get their share tech companies have
of it. created solution to bring the
stock market closer to
Understanding the people.
potential risk in stock
investment is crucial. In the The second type of
last few months, the NSE Investment is Fixed-income
has done fairly well. For
instance, I bought into This class of investment
Transcorp shares and involves putting your money
within a month, the price in low-risk assets that
increased by 100% , If I sold provide a fixed stream of
I would have made 100% income through interest or
gain. dividends. Unlike stocks, this
investment has very
A stock's price is minimum risk exposure.
determined by supply and
demand in a secondary Example is Federal
market. When more Government Bond, Lagos
investors want shares of State Government Bond or
stock, and fewer are Corporate bonds, Treasury
available, prices go up. But bills, to mention a few.
when less investors want to
buy shares, and there are Under fixed income
more shares than demand, investments, investors are
prices fall. paid fixed interest or
dividend payments only at
Factors like company's maturity date, which can be
profitability and good news 60 days, 90 days, 1 year, 2, 3
about a company can drive years etc...
up its price, in the same
vein, negative news can
crash the price.
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When you buy a The other types of fixed

government bond, you are income are commercial
lending money to the papers and certificate of
government in exchange deposits.
for an agreed interest rate.
Investment in fixed income
Governments of different is done through investment
countries use bonds to banks and registered asset/
raise money for wealth management
infrastructure or new companies.
projects,
Like stock, you'll be required
State and local to open an account to get
governments can also raise started.
funds for capital projects
through issuance of Cash & Cash Equivalent
Municipal bond, and
companies can through Cash is money that you have
corporate bonds. at hand, it's possible to keep
your money as an
Treasury Bills is another investment by changing it
kind of fixed income to a foreign currency and
investment- it is the safest saving in a bank. Think of
short-term debt those who have USD in their
instrument that a federal accounts when it was less
government can issue. It is than N500/USD?
easily convertible to cash
and suitable for those Cash equivalents on the
looking for a 12-month other hand are investments
investment period. that can readily be
converted into cash.

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Cash equivalents include because even though you’ve

bank accounts and bought the house, there are
marketable securities, costs like land use charge to
which are debt securities pay yearly (in Lagos),
with maturities of less than insurance, property taxes,
90 days. landscaping costs,
maintenance, and repairs
Example of cash equivalent etc
is Money Market Account:
An asset is anything that
This interest-bearing brings cash into your
account is similar to a account, a liability is
savings account; however, anything that takes money
they often require larger from it. Another argument
minimum deposits and that people bring forward is,
have some minor the property can be sold at
restrictions to the account. a future date for a profit;
while this is true, people
Some fixed income may be rarely consider the cost they
referred to as cash have incurred before
equivalent depending on eventually selling the
the maturity date. property.

Real Estate: You bought the property for

Real estate is one of the N20m, and after 5-8 years of
assets you’d always find in living in it, you few.it for
the portfolio of truly rich N60m, on the face value,
people, and it is something you may be tempted to
everyone aspires to have. assume that you have just
made a profit of N40m,
When thought about as an
investment, the money in
real estate is not in live-in
properties; research has
shown that live-ins are
more of liabilities than
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However, in reality, you alongside your trusted

have not factored in cost of friends to develop
taps you fixed, plumbing commercial properties like
works done throughout shortlets, offices, resorts,
those 8 years, leaky roofs hotels etc).
that were fixed, repainting
that was done, to mention Resort is back into the
a few. spotlight because of the
change to the dynamics of
If we calculated all line work, where more and more
items and costs, the profit people are now embracing
may be around N15m hybrid work- this is
conservatively. according to the 2023
Knight Frank Wealth Report.
The point that I’m making
is that owning a live-in As at today in Lagos,
home is a nice to have, but shortlets goes for N20,000-
not a way to make money N200k per night depending
from real estate. on the location. With a 3-
bedroom fully furnished
I'll show you 4 ways smart apartment, you can make
investors globally are up to N60,000/day, which
leveraging real estates, and gives you plus or minus
you can do the same. N1,2m (assuming the
apartment is occupied 20
1. Through REIGs- Real days in a month).
Estate Investment
Groups Through REIGs, you can
come together with 10,20,
You can create a pool of 30 friends to develop these
funds kind of properties.

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2. Through REITs- Real 4. Private development of

Estate Investment Trust: rental properties for
commercial and residential
Before now, the only way to purposes.
invest in real estate is by
buying or building your
own property, which is Understanding the role of
capital intensive and also government & Law guiding
required a lot of processes. real estate...
With REITs, you can buy
real estate shares in the One of the important things
Stock Market and enjoy the to know is that the Land Use
benefits associated with Act empowers the governor
investment in stocks. to have unrestricted access
to all land in the state.
REITs market in African is
worth $29Billion and "Subject to the provisions of
operates in Ghana, Kenya, this Act, all land comprised
Nigeria and South Africa. in the territory of each State
in the Federation are hereby
According to Mondaq, only vested in the Governor of
3 REITs are listed on the that State and such land
Nigerian Stock Exchange shall be held in trust and
presently, compared to administered for the use
South Africa's 30 on the and common benefit of all
Johannesburg Stock Nigerians in accordance
Exchange (JSE). with the provisions of this
Act.”
3. House Flipping:
This is purely buying and Before you buy a land, you
selling of properties for a need to understand the
profit. It requires good documents to expect, some
understanding of property of which are:
valuation, marketing and it
requires huge capital to
start. SDA
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1. Certificate of 3. Deed of Assignment:

Occupancy (C of O)
This is document is
This document is issued by prepared by a lawyer, and
the government to the signed off by the buyer & his
lessee of the land, to own lawyer, and it shows that the
and use the land for 99 seller has transferred all his
years- renewable. rights and interests to the
buyer.
Only one C of O can be
issued on a land. This DON'T BUY A LAND
means that if an owner WITHOUT A LAWYER!!!
with a C of O wants to sell
the property, another C of This document contains the
O cannot be assigned on details of the transaction
that same land. and description of the
property being sold and is
The buyer would need only considered legit upon
another document that registration in the land
proves he is the new owner registry and obtaining of the
of the land usually through governor’s consent.
the Governor’s consent

2. Governor’s Consent 4. Deed of Conveyance

This is a document signed This document used to be

by the governor to confirm known as proof of
that you're transferring the ownership of a
property to another person property/land until the Land
Use Act of 1978 was enacted.
The amount of things Some old houses in parts of
governor sign, no be small Lagos still have these as
work, in Lagos alone, there their title documents.
are over 19,866 Land For
Sale now according to
privateproperty.com.ng SDA
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Beginners Guide to Investment

More details on C of O Whereas when buying from

families or the popular “omo
Here are some of the onile”, be sure to make
things found on the C of O: findings to ensure that the
property indeed belongs to
1. Certificate of the people claiming
Occupancy number ownership to it.
2. File number
3. Plot number Upon confirming that the
4. Location details seller has legal ownership of
5. Plot size the land being sold to you,
6. Survey plan or graphic you research if the seller
(plot shape) already owns it. You only
7. Date of issue need to change the
8. Lease term ownership title at the land
9. Initial annual ground registry if the person or
rent fees entity you are buying from
10. Land use purpose already has a C of O.
11. Terms and conditions
The second entity that is
The process of applying for legally authorized to sell
a certificate of occupancy your land is the state
varies depending on government. When you buy
whether the land is owned directly from the
by a private individual or government or a reputable
the state government. A real estate company in
buyer of land directly from Nigeria, obtaining the C of O
the state government must would be straightforward
apply for a Certificate of since it will be initiated as
Occupancy as soon as the soon as the sale is
sale of the property is confirmed.
finalized, as there is no
doubt as to ownership or
authenticity of the power
to sell this land.
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To Obtaining C of O for 8. The Letter of confirmation

State-Owned Land, the is issued to the Applicant
steps are: with a plot and block
Number.
1. The Applicant should
obtain a form from the 9. The Scheme Officer
Ministry (Land Use and begins processing the
Allocation Section) or application for the C of O,
download same from signs off on the file, and
their website and forwards the files to the
submit the application Executive Secretary of Land
form with the following Use Allocation Commission.
attached; (LUAC) – 5 Days.
2. Tax clearance or
Evidence of being 10. The Surveyor General
domiciled abroad. provides Scheme Officer
3. Passport Photographs with a digitized survey copy
(3 copies) (2 Days)
4. An official receipt for
application fees of 11. The Executive Secretary
#5,000 for residential to LUAC approves
land use or #10000 for processing and signs a letter
Commercial land use. of allocation.
5. Applicant collects an
acknowledgment slip 12. The Executive Secretary
as Evidence of LUAC signs off on the file.
payment.
6. Applicant collects 13. The Executive Secretary
Letter of allocation. LUAC sends the file to the
7. Applicants pay for Senior Special Assistant
allocated land (In a (SSA) to the Governor, Lands
period not less than 90 (2 days
days)

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14. The Senior Special 20. The Deputy Registrar

Assistant, Lands examines processes the file further,
the entire file and sends it signs off, and send the file to
with a covering memo to the Registrar of Titles for
the Permanent Secretary final registration (2 days)
(PS) Lands Bureau (2 days)
21. The Registrar of Titles
15. Should the file have a registers the C of O, signs off,
query, the message is and request for printing of C
relayed back by of O (1 day)
notification for correction.
Before I leave off this topic,
16. The Permanent let me quickly explain the
Secretary Lands Bureau concept of excision...
signs off on the memo and
sends the file to the Traditionally before the Land
Governor (2 days) use act of 1978, Nigerian
lands were administered by
17. The Governor then communities and traditional
approves the file and families. Since the Land Use
electronically signs the C of Act went into effect, land
O (2 days) has come under the
exclusive jurisdiction of state
18. If the file has a query, a governors.
message is relayed back by
notification. The governor can through
his discretion sign off parts
19. Once the C of O has of land to the original
been approved and signed, owners. To get excision on
the Governor signs off and property can be a good
sends the file to the Deputy thing but is tedious and
Registrar for further comes with rigorous
processing (2 days) processes

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5. Survey Plan Receipt shows that the

seller has received money
This is issued by the State for the sale of the property.
Surveyor General, and it .
shows the boundaries of It is important to note that,
the parcel of land along even though these three are
with its measurement and important evidence of a
description. land or property transaction,
they do not stand as legal
title documents and they
6. Deed of Mortgage cannot be perceived as a
deed of assignment.
This is used in the cases
where loans/ financing is Total cost of a Land
required. It gives the lender
an interest in the property. The cost paid for a land to
If the borrower defaults on the owner is only one of the
repayment, the holder of cost elements, there are
the document can take other fees payable as
possession of the property. follows:

7. Contract of Sale, Letter Professionals and agents

of Allocation, and fees. This is typically
Receipts between 2-7%
Legal fees. These are
The contract of sale shows usually between 2-5%
that the purchase has been Omo-Onile charges.
completed while the letter These are usually
of allocation shows that a incurred when buying
property or land has been land from communities
allocated to an individual, Service charge. This is a
either from the state or a common charge paid in
private developer. planned estates for the
provision of amenities
and facilities.
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Before you commit your Ownership of property by

funds towards purchasing Foreigners:
a property, due diligence is
important.
According to the Act,
You need to check the title Foreigners have the right of
and ownership of property ownership to land in Nigeria,
to ensure there is no however, there are
encumbrance or other restrictions and conditions
claim on the land. imposed by the various state
regulations to be complied
These are the standard with before such rights can
searches to carry out: be exercised.

Lands Registry search Before a foreigner can

Corporate Affairs acquire land in Nigeria by
Commission (CAC) way of assignment,
search mortgage, transfer of
Probate registry search possession, sublease, or
Traditional search from otherwise, the consent of
the community the Governor must be first
Court judgments had and obtained.
Physical inspection.
The Land Use Act empowers
states to make regulations
and the conditions
applicable for the transfer of
proprietary rights to a
foreigner, to give effect to
the provisions of this section

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BEGINNERS GUIDE FOR INVESTMENT

Chapter 3

DIVERSIFIED PORTFOLIO

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Beginners Guide to Investment

Chapter 3

Diversified
Portfolio
By Seyi Abiodun

One of the most important Your portfolio should have a

terms in investment is mix of liquid assets
diversification- it is a otherwise called easy to
principle that says you convert to cash, and non-
should never put all your liquid assets.
eggs in one basket. You
should have a diversified Studies have shown that
portfolio. rich people on an average
have 25% of their money in
Portfolio is like a wardrobe, easy to covert to cash assets
it’s rare to see anyone have examples of which are
only one type of clothes in money market mutual
their wardrobe, people funds, certificates of
would usually have deposits, commercial paper,
different clothes for and treasury bills.
different occasions, this is
how your investment If I can give a formula, I'd
portfolio should be. say:

A diversified portfolio is a Cash & Cash equivalent 25%

collection of different Real Estate 30%
investments that combine Equities 10%
to reduce an investor’s Entrepreneurship 35%
overall risk profile.
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Beginners Guide to Investment

Real Estate
30%
Entrepreneurship
35%

Equities
10% Cash & Cash Equivalent
25%

Why is diversification important ?

The primary benefit of diversification is that it reduces the
volatility of your portfolio; that is, if one investment goes down in
value, another may be going up at the same time so that overall
performance remains positive over time (even if just barely)-
Forbes
If you invest 100% of your money in an investment like stocks,
then when the stock market goes down 10% (a common
occurrence), an entire year’s worth of growth would be wiped
out. Diversification is a safety net for investors, to mitigate risk,
when some assets are falling in value others tend to rise.

Strategies for Portfolio Diversification

Spread the wealth. Do not invest in one place. Look for a

portfolio where the risk matches the returns.
Do not invest where risk and returns do not match. This is
usually the trap wonder banks, MMM set for people, for little
investment, they give a promise of huge returns.

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Consider investing in You can diversify by the size

mutual funds and of the companies (large-,
bond funds medium-, or small-cap
Your investment does stocks), by geography
not have to be limited (domestic or international),
to Nigeria or your and by industry and sector,
country. You can invest
in other countries as If you want to diversify
well. among stocks but don’t
Know the different have the time or inclination
types of financial assets to do so, consider mutual
that are available. There funds or exchange-traded
are almost enough funds. These funds generally
types of investments to hold shares in many
suit every risk profile. different companies. There
Beware of asset are also funds that shift their
bubbles – by following asset allocation away from
government and other equities as it approaches a
regulations. certain target date. These
Diversify within asset target date funds are geared
classes towards retirement
planning where the target
After you’ve diversified by date approximates the
distributing your retirement date of the
investment dollars among investor.
stocks, bonds, cash, and
possibly other categories, Your diversification strategy
you may need to diversify should be tailored to your
again. personal financial goals and
tolerance for risk.
For instance, when it
comes to stocks, the
possibilities for
diversification are vast.

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Chapter 4

BONDS

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Beginners Guide to Investment

Chapter 4

Bonds
By Seyi Abiodun
Most bonds pay a regular
A bond is a debt stream of income
instrument in the Stock throughout their life, also
Exchange market, used by. known as a coupon. Coupon
Governments and rates are typically expressed
companies to raise funds as a percentage of the
(borrow money). principal amount, which is
also known as the “face” or
When you invest in bonds, “par” value. Upon maturity,
you are lending money to the bonds are redeemed
the issuer for a fixed period and you are paid back the
of time and interest. face or par value.

If you are looking to build Typically, you can earn

up a well-diversified returns through:
portfolio, you will usually
be advised to include both Interest income. These
stocks and bonds in your are the coupon
portfolio. While stocks may payments you receive as
offer you the potential for an investor.
capital appreciation, bonds Capital gains. You can
may provide a steady earn capital gains if you
stream of investment sell the bonds at a higher
income, and play an price than the price you
important role of bought them at.
potentially lowering your
overall portfolio risks.
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It is important to note that State or Municipal Bonds:

while the coupon rate is Just like the federal
generally fixed through the government, State and Local
life of the bond, the price governments can borrow
of the bond may vary. money through issuance of
bonds in the capital market
Hence, in deriving a bond’s
return, you will have to Corporate Bonds: Public
consider: quoted companies can issue
bond on the floor of the
The coupon that you will exchange as well.
receive over the life of the
bond Key Terms relating to
Bonds
The potential capital gains Maturity
or losses if the price of the This is the date when the
bond becomes higher or principal or par amount of
lower than the price you the bond is paid to investors
initially paid. and the company's bond
obligation ends.
Types of Bonds:
Therefore, it defines the
Federal Government lifetime of the bond. A
bonds: The government bond's maturity is one of the
bond sector is a broad primary considerations an
category that includes investor weighs against their
“sovereign” debt, which is investment goals.
issued and generally
backed by a central
government like Federal
Government of Nigeria, .
USA, Canada etc

Governments take up
bonds for infrastructural
development- building
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Maturity classification:
the only payment is the face
Short-term: Bonds that value redemption at
fall into this category maturity.
tend to mature within
one to three years Zeros are usually sold at a
discount from face value, so
Medium-term: Maturity the difference between the
dates for these types of purchase price and the par
bonds are normally over value can be computed as
ten years interest.

Long-term: These bonds Convertible bonds are a

generally mature over type of hybrid security that
longer periods of time combines the properties of
bonds and stocks.
How Bond Pays Interest:

Coupon payments are the

periodic interest payments
over the lifetime of a bond,
before the bond can be
redeemed for par value at
maturity.

Some bonds are structured

differently. Zero coupon
bonds are bonds with no
coupon

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BEGINNERS GUIDE FOR INVESTMENT

Chapter 5

COMMODITIES

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Beginners Guide to Investment

Chapter 5

Commodities
By Seyi Abiodun
Investors in the commodity
Commodities are markets are primarily
investments like gold, producers, consumers, and
agricultural products, speculators.
energy products and other
forms of raw materials, Speculation is a financial
traded in an organized term used to describe the
market. act of purchasing an asset
that has a substantial risk of
Commodities are often losing value but also holds
divided into two broad the hope of gaining value
categories as follows: in the near future.
1. Hard commodities
2. Soft commodities. The different types of
commodities that are
traded in commodities
Hard commodities are markets are:
those natural resources
that must be mined or Agricultural
extracted, such as gold, commodities: These are
rubber, and oil raw materials and food
products like wheat,
Soft commodities are corn, soybeans, sugar,
agricultural products or coffee, cotton, and
livestock, like wheat, coffee, livestock.
sugar, soybeans, and pork.

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Beginners Guide to Investment

Energy commodities: 2. Nigerian Exchange

This comprise of crude Group (NGX): This market
oil, natural gas, and offers trading in commodity-
gasoline. linked ETFs and futures
Precious metals: Largely contracts, including
Gold, silver, platinum, contracts for crude oil and
and palladium natural gas.
Industrial metals:
Aluminum, copper, 3. Lagos Commodity and
lead, nickel, and zinc Futures Exchange (LCFE):
This is a commodities
Certain commodities, such market that trades
as precious metals, have agricultural commodities,
been thought to be a good currencies, oil and gas and
hedge against inflation, solid minerals.
and a broad set of
commodities as an
alternative asset class can Are commodities risk-
help diversify a portfolio free?

Like any investment,

In Nigeria, there are 3 commodities can be a good
major commodity markets investment but also come
include: with risks. To invest in
commodities, an investor
1. Nigerian Commodity needs to understand the
Exchange (NCX): This is markets of the commodity
the largest commodity they wish to trade in. For
market in Nigeria and example, oil prices can
West Africa and offers fluctuate based on the
trading in a range of political climate in the
agricultural Middle East, so a trader
commodities such as should be well-versed in
sesame seed, cashew, current events in that area.
ginger, soya beans, The type of investment also
sorghum and matters.
groundnuts, as well as
financial derivatives and SDA
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solid minerals.
Beginners Guide to Investment

ETFs provide more Purchase and storage is

diversification and lower pretty straight forward, you
risks, whereas futures are can buy gold and store in 3
more speculative and the ways:
risks are higher because of
margin requirements. In your home
In a safe deposit box
That being said, with a bank
commodities can be a With professional storage
hedge against inflation, companies
and gold, in particular, can
be a hedge against a **If you're storing in your
market downturn. house, please ensure it is
insured***
Now, let's discuss how to
invest in commodities like Through ETFs:
Gold... You can invest into gold
traded 1funds in the stock
There are 5 ways to Invest market.
in Gold as follows:
1. Purchase and storage of ETFs pool money from
gold e.g. gold bars, different investors into a
jewellery, gold coins basket for different
2. Through Exchange- investment purposes e.g.
Traded Funds (ETFs) bonds ETFs, Stock ETFs or
3. Through Gold Mining Real Estate ETFs.
stocks
4. Through Mutual Funds Remember we discussed
5. Through Future & REITs Real Estate
Options Investment Trusts earlier,
where money is pooled from
different investors and
invested into properties.
Investors then get share of
rentals.

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Beginners Guide to Investment

Through stock of gold

mining companies: Mutual funds give small or
Same way you can buy individual investors access
MTN, Access Bank, Airtel, to professionally managed
Dangote Cement shares on portfolios of equities, bonds,
the floor of the Stock and other securities.
Exchange, you can buy the
stock of mining companies Each shareholder, therefore,
participates proportionally
Through Mutual Funds: You in the gains or losses of the
can invest in gold through fund. Mutual funds invest in
mutual funds that has gold a vast number of securities.
in its portfolio..

We should discuss mutual Mutual funds and exchange-

fund in more details here... traded funds (ETFs) have a
lot in common. Both types
What does it mean? of funds consist of a mix of
A mutual fund is a financial many different assets and
vehicle that pools assets represent a popular way for
from shareholders to invest investors to diversify.
in securities like stocks,
bonds, money market While mutual funds and
instruments, and other ETFs are similar in many
assets. ways, they also have some
key differences. A major
Mutual funds are operated difference between the two
by professional money is that ETFs can be traded
managers, who allocate intra-day like stocks, while
the fund's assets and mutual funds only can be
attempt to produce capital purchased at the end of
gains or income for the each trading day based on a
fund's investors. A mutual calculated price known as
fund's portfolio is the net asset value.
structured and maintained
to match the investment
objectives stated in its
prospectus. SDA
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Beginners Guide to Investment

Through Futures and

Options:
These two are financial Ready to invest in
derivatives that allow commodities? These are the
investors to speculate the steps:
future price of gold.
1. Choose a commodity
The reason for entering a that you are interested in
futures or option contract trading.
is to lock down prices in 2. Choose a licensed broker
order to hedge market 3. Open an account
risks. 4. Fund your account
5. Research and analyze
An option gives the buyer the market conditions
the right, but not the and historical price
obligation, to buy (or sell) trends of the
an asset at a specific price commodity.
at any time during the life 6. Place a trade: Once you
of the contract. While a have identified a trade
futures contract obligates opportunity, use your
the buyer to purchase a broker’s trading platform
specific asset, and the 7. Monitor the price
seller to sell and deliver movements and
that asset, at a specific performance of your
future date. trade.
8. Close your trade when
For example, if two traders you have reached your
agree to a N7,000 per desired profit level or
barrel price on a crude oil want to cut your losses.
in a futures contract. If the
price of oil moves up to
N9,000, the buyer of the
contract makes N2,000 per
bushel. The seller, on the
other hand, loses out on a
better deal.

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BEGINNERS GUIDE FOR INVESTMENT

Chapter 6

ANGEL INVESTING
PRIVATE EQUITY

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Beginners Guide to Investment

Chapter 6

Angel Investing
By Seyi Abiodun
So they search for startups
Angel investing is providing with growth potentials and
initial seed money for invest their own money to
startup businesses, in help develop them further.
exchange for ownership
equity in the company. This kind of investment are
extremely risky. A survey by
Angel investors are not The Angel Capital
creditors neither do they Association estimated that
provide loans to businesses. only 11% of such ventures
They're putting money into end with a positive result.
an idea they like, with the Their investments in each
expectation of a reward venture are relatively
only if and when the modest, averaging about
business takes off. $42,000.

Most angel investors are Most angels keep their

relatively wealthy involvement in startups to
individuals who are looking no more than 10% of their
for a higher rate of return portfolios
than can be found in more
traditional investment Anyone who has the money
opportunities. and the desire to provide
funding for startups can be
an angel investor.

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Beginners Guide to Investment

Angel investors have been 4.LeadPath Nigeria

instrumental in supporting 5. Growth Capital Fund
entrepreneurs and small 6. African business angel
business owners in Nigeria. network (ABAN)

They have played a vital When done right, angel

role in helping to create investing has benefits for
jobs and wealth across the both the investors and the
country, especially when it business owners.
comes to local startup.
By making an initial
Angel investors provide up investment in a business,
to 90% of outside equity angel investors are
raised by startups predicting that their stake in
(excluding friends and the company will eventually
family), according to the be worth more than the
Angel Capital Association, funding they provided.
the largest angel
professional development Meanwhile, startups that
organization in the world. receive angel investing can
Entrepreneurs rely on the use this money to hire more
support of angel investors employees, expand their
to help get their business operations or products, or
concept off the ground. launch new marketing
campaigns.
You can be a solo Angel
Investor and you can join Angel investors take on such
Angel investing Network. In high risk, so it's fair to seek
Nigeria, these are some of high returns. If their
the Angel Investing investment works out, angel
Network: investors could potentially
earn 100 times their initial
1. Lagos Angel Network investment or even more,
2. Abuja Angel Network according to the Corporate
3. Gust Finance Institute.

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Beginners Guide to Investment

Private Equity
By Seyi Abiodun
Unlike mutual funds or
Private equity describes hedge funds, private equity
investment partnerships firms often focus on long-
that buy and manage term investment
companies before selling opportunities in assets that
them. Private equity firms take time to sell with an
operate these investment investment time horizon
funds on behalf of typically of 10 or more years.
institutional and
accredited investors.
A typical investment
When you invest in a strategy undertaken by
private equity fund, you are private equity funds is to
investing in a fund take a controlling interest in
managed by a private an operating company or
equity firm—the adviser. business—the portfolio
company—and engage
Similar to a mutual fund or actively in the management
hedge fund, a private and direction of the
equity fund is a pooled company or business in
investment vehicle where order to increase its value.
the adviser pools together Other private equity funds
the money invested in the may specialize in making
fund by all the investors minority investments in fast-
and uses that money to growing companies or
make investments on startups.
behalf of the fund.
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Beginners Guide to Investment

A private equity fund is Investors in private equity

typically open only to funds should be able to wait
accredited investors and the requisite time period
qualified clients. before realizing their return.

For an institutional investor,

Accredited investors and a private equity investment
qualified clients include may represent only a small
institutional investors, such portion of its diversified
as insurance companies, investment portfolio.
university endowments
and pension funds, and When investing in a private
high income and net worth equity fund, an investor
individuals. usually receives offering
documents detailing
The initial investment material information about
amount for a private equity the investment and enters
investment is often very into various agreements as a
high. Even if you are not limited partner of the fund.
invested in private equity
funds directly, you may be These offering documents
indirectly invested in a and agreements should
private equity fund if you disclose and govern the
participate in a pension terms of the investor’s
plan or own an insurance investment throughout the
policy, for example. fund’s life, including the fees
Pension plans and and expenses to be incurred
insurance companies may by funds and their investors.
invest some portion of their
large portfolios in private The three main strategies for
equity funds. PE are Buyout, Growth &
Mezzanine
Private equity funds
typically impose limitations
on investors’ ability to
withdraw their investment.

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Beginners Guide to Investment

Concluding thoughts about Investing

Investing is a journey that can be started regardless of how
much you earn either as a salaried-person or an entrepreneur.
The discipline is what counts and one of the best ways is to
automate it. If you're single, you should plan to invest more of
your income, because your biggest expenses are in the future,
starting with when you get married.

As a single person earning N500,000 in Lagos, you should aim

to save N200-N250k in the different investments already
discussed in this text. Once you're married it becomes difficult
to save at the same level and pace. Regardless the standard
recommendation for long term savings is 20% of your income.

One of the things to keep in mind is, the only money that is
truly yours from your income is the amount you set aside
to build your richer life.

You should also note that it is not savings or investment if it is

not safe (out of your reach) from you. Therefore, you shouldn’t
treat your investment like a regular savings or checking account.
For investment, you must be ready for long term noting that
withdrawing your money early could negatively affect your
returns.

Ideally, you should have between 3- and 6-months’ worth of

expenses saved in an emergency fund before you start
investing. So, if your car breaks down while the markets have a
wobble, you can use your savings to get it repaired. That way,
you can leave your investments untouched and give the
markets time to recover.

I thank you most sincerely for the time you have invested in
reading this piece.
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