Tag: Investing (Page 3 of 4)

What I Learnt From Checking My Stock Price Everyday

January 8, 2021 / David Alade

There is a kind of psychological satisfaction that you get when you buy a company’s stock now and in the next hour, it has appreciated by 12.5%. You feel intelligent, you trust your judgement more and excited to make another judgement call.

Depending on your purpose for buying the stock, you can either sell it immediately and realize your gain or hold it for long, say greater than 5 years. For the person who bought the stock to sell upon some marginal gain, it makes a lot of sense for them to keep their eyes glued to the screen watching the up and down movement of the stock. On the other hand, it is a great folly for the person who does not intend to realize the gain to also keep their eyes glued to the screen.

I have been given to this folly, that is why I am writing about it. Calling your attention to it so you don’t have to also and if you have, just as I am working on stopping, you would work on stoping as well.

Sometimes, in September, I became fully invested, i.e., I have invested all the cash that earmarked to be invested in the US stock market. So I uninstalled the investment apps on my phone. I did that so that I wouldn’t find it easy to check how my portfolio is doing. So I won’t be given to the folly of always checking the daily movements. Sometimes we have to do that. Here are what I learnt:

It is an unnecessary burden and unproductive behaviour

After checking your portfolio or stock performance for every hour of the day and every day of the week, I wonder what good it did you if it was up 40% today and down 20% tomorrow? You have invested for the long term and these are great companies that won’t go bankrupt overnight so why the watch?

As I mentioned before, if your goal is to take profit and move on, you are justified to keep checking movements, that won’t be folly on your path. But if the goal is to hold for 5 years or let’s even say 1 year, tell me, what is the difference between 10% up today 30% down tomorrow and 40% up another day on and on like that when at the of your holding period what you find in your balance is $1,000 appreciating to $1,350?

At best, you have only burned yourself unnecessarily throughout the periods. When you could just have unlooked and open at the end without any mental anguish. You will smile for having made such gain and move on. That’s what I want and wish for you.

It’s self-inflicted emotional torture

We don’t process loss well as human. Our design is optimized for winning, a linear path and not zigzag. That’s why we would do anything to avoid failure even if it means not attempting a thing. Embracing failure is antithetical to our wiring. So whenever we see a 10% rise in an hour and by the next we see a 12% decline, we suffer emotionally. Which is very unnecessary.

That’s what I don’t want you to go through. Why should you suffer that? Why should you torture yourself that much? It is enough for you to deal with all the ups and downs in your daily life. The stock market shouldn’t add to it. You shouldn’t deliberately add to it either.

As humans, we are not as wired to embrace failure. We detest it. I said from the beginning that a form of psychological satisfaction happens when you make some 10% gains within the hour. But what would happen if by close of trading day that 10% have turned to negative 5%. You can’t tell me you will remain the same. Your psychological framework will have to assume a new feeling for that. That feeling is emotional torture that you don’t deserve.

The nature of the market is zigzag, not a straight line up. However, for any good asset, what happens to them is that they make higher lows. That is, even though they decline, they are declining to lower prices that are higher than the previous lowest price that they declined to. Higher lows are good and it’s a sign of a growing asset. What I want you to avoid is having to witness the zigzags as you are not wired to handle such zigzag properly.

I did this in the past and I paid for it painfully. Reminiscing on the past helped me to put this into perspective.

Join 300+ people who are subscribed to my newsletter via this link to get notified of future posts like this and more.

Victor Asemota, Wealth, Money, David Alade

7 Timeless Lessons On Wealth I Learnt From Victor Asemota

January 6, 2021 / David Alade

“New billionaires are created every 10 years in Nigeria primarily because the government changes…,” Asemota said. “And there are true entrepreneurs who take advantage of this change as they see it coming then adapt.”

Victor Asemota is an entrepreneur with vast experiences across markets and industries. From his Twitter profile, he wants the last person leaving Nigeria to “please switch off the generator.” But really he is our uncle on Twitter who doesn’t hold back to share his experiences so we can avoid his mistakes, build on his insight and thrive beyond our imagination.

Among other topics that he shares a lot about is the topic of wealth. I took time to narrow out some points that I believe we shouldn’t forget and that will help us build sustainable wealth as individuals.

After stating that new billionaires are created every 10 years in Nigeria in one of his interview appearances, there was a follow-up question from a participant. “What can we young people do to position ourselves for the advantages of the next decade?” the participant asked. Asemota replied with a simple phrase “go and work.”

According to him not a lot of people can leapfrog the working for others stage and still succeed as an entrepreneur. And if it is the entrepreneurs who will capitalize on opportunities to become billionaires, then the first lesson I want us to learn is the importance of actual work experience before venturing into the entrepreneurship ocean. Well, that’s for those who desire to become billionaires. Not everyone desires that and not all that desire it will have it. So what can we all apply to lives as we seek to accumulate wealth?

1. Wealth is a mentality and not a destination

Asemota: Wealth is not a destination, it is a lifetime journey to keep living below your means and growing your income exponentially. Wealth is a habit and not just an outcome. Wealth is not the fear of scarcity but the fear of not having enough abundance. It is a drive that is more often than not powered by human ego or belief in a mission much bigger than themselves. Wealth is about optimization amid inefficiency.

We were all born wealthy until we started thinking poor. Asking is not about Jedi mind tricks. Asking is the greatest power man has but we ask for the wrong things. Solomon got wealth because he asked for wisdom. Wisdom is the greatest wealth as it makes you realize that you already have a right to EVERYTHING. No wonder Solomon was the greatest baller that ever lived. Built a magnificent temple and made many women happy.

Commentary: Some think if they are given some million dollars they could overnight become wealthy. The history of lottery winners will have us believe otherwise. And that’s why this first lesson is super fundamental. Wealth is a mindset and except you have it well defined, you can’t have it. It requires constant living below your means no matter how much you have. It requires you to keep growing your income no matter how much it is now. That’s the mindset. It’s not a destination with an arrival.

2. Wealth is created from place and time

Asemota: One of the best things I have ever learned was told to me by our father Professor Gabriel Osuide. He said the two things God gives us are time and place, we do the rest. Time and place are the greatest gifts from providence, most people never fully grasp why “place” is an advantage. Why are we where we are at any point in time? Place is always an opportunity. Either an opportunity to improve or an opportunity to seek improvement. You are not tied to any place, migration is as old as mankind. Man has always sought favourable places but each place has lessons.

Commentary: time and place is an advantage but everyone realizes it. It’s also the fundamental advantage that we all have. It takes having the wealth mentality to realize this though.

3. It takes a village to create a billionaires

Asemota: Wealth does not come as it does from golden eggs and genies granting wishes in fairy tales. It comes from understanding that those in the place where you start must also want prosperity as badly as you want it and are willing to work together to build it. It ALWAYS takes a village. It takes a village of like-minded people to create a billionaire. They must all have a certain desire for an outcome or mission that creates wealth. Some of those people in the village believe in the mission more than others but it remains the force that holds the clan together.

Commentary: it’s fine to think of yourself alone but if you desire to become wealthy, you need to irrationally think of others and how you may help them as well. You become wealthy only by giving to others what they want and they can’t get so they can give you what you want (money, respect, reputation etc).

Also, that is important because, for every billionaire you have, many more millionaires have been made in the process. Extrapolating from Asemota’s point, it will almost be impossible for you to make the billions if those that surround you have no desire to become millionaires (wealthy) themselves. But gather together a team of aspiring millionaires and you are almost sure to become a billionaire yourself.

4. Those who are given to self-pity can’t create wealth

Asemota: I have never seen a clan of complaining people creating wealth from self-pity. That is the lesson I have learned from Thiel’s talks about China’s “Determinate Pessimism.” Things were bad, they also knew that things could be much worse if they did nothing but hope and pray.

Commentary: Asemota picked a lesson from China’s history on how they moved obscured poverty to the powerhouse that they are now. Instructive for us is the idea that wealth doesn’t come from self-pity nor does poverty end on the whims of it. The opposite of self-pity which self-responsibility must then become our watchword if we desire wealth.

Self-pity will condition you to think you are a victim and that the power to rise from your misery does not lie in your hand because of current condition (time and place). But we learnt at least one thing at all from the earlier point, it is that time and place (our condition) are our greatest gift. It gives us either an opportunity to improve or an opportunity to seek improvement. And that’s that we need to build wealth; improvement daily.

Read – Why I Read More Than One Book At A Time

5. Loss teaches more lessons about wealth than anything else

Asemota: I started a business at 22 but didn’t intend to be rich with it. Became rich quickly and lost it all. Trying to get it back again is another exercise in learning about self-discipline. Creating wealth is ultimately about self-discipline and structure. You can’t be disorganized and become or remain rich. An epiphany.

Commentary: Asemota takes us back to the psychology of wealth. It’s a mental state and not a destination with a conclusive arrival. He was sharing something about Naval when he mentioned the quote above. So I’d like to quote Naval here as well.

“A lot of people think making money is about luck. It’s not. It’s about becoming the kind of person that makes money. I like to think that if I lost all my money and if you drop me on a random street in any English-speaking country, within 5, 10 years I’d be wealthy again. Because it’s a skill set that I’ve developed and I think anyone can develop.”

Replica of Asemota’s experience. He lost it all but because he has developed the skill, he could earn it back. Some of us think it’s about the money but these two brilliant and wealthy individuals will have us believe that it’s a skill, a state of the mind and habits.

6. Time and money should be invested in compounding opportunities

Asemota: Someone came to me recently with his life savings of some tens of thousands of dollars and asked for investment advice. I told him to save that money where it will compound and think of something he is passionate about and invest his time and not just his money.

If you have been able to save $30k then you must be doing something right. It is better to find how to expand and grow on that knowledge. Sometimes, we don’t realize what we already have and look towards what others are doing. I told him not to get carried away with public hype. I love training, I started my career and business with training and will retire as a teacher. Teaching has brought me more money than any other endeavour.

We see the things we think others make money from but don’t see their secrets. Nobody really advertises their source of advantage. Never get carried away with publicity. Know what people are doing when they display wealth, it is a means to an end.

Commentary: Oh my my, I like this point. And the entire narrative is loaded. The investment that will give you the highest returns is one where your time and money are invested. If you know me well, you will know that I favour passive investment in the stock market. Thinking about this now I realized it is because I do not expect my greatest return to come from there. The greatest return should come from that thing that keeps me up at night from sleeping, that takes from me my necessary food and that I enjoy doing. For some it could still be the stock market, that’s why we have Mark Cuban, Ray Dalio and Warren Buffett. Do not expect the highest returns from any investment that only cost you money without demanding your time.

7. Where you live is more likely to make you rich than how hard you think you are working

Asemota: Many times, what people think is hard work is just overcoming obstacles to exist. The hardest work is deep thinking and creation. It is not jumping on buses and trains. You need comfort and lack of distraction to do your best work. Each time I am in Palo Alto seeing the simple homes without fences, I remember Lagos homes in supposedly affluent areas.

I took some time off once in San Francisco to go to Napa to get an article written. It was the best work I ever did. Suffering to be productive because of the hardship and limitations in your environment is not a virtue.

Commentary: The hardest work is deep thinking and creation and this is best done if you don’t have to overcome obstacles to exist. By obstacle to exist, Asemota meant among others one, the long hours’ traffic of Lagos, two, the battling with electricity and generator noise and three, expensive basic amenities. If you will have wealth, the scale at which you will have may correlate with how less you have to overcome obstacles of existence.

Also read this – My Investment Journey In 2020

References –

Your Wealth Door – Risevest, Bamboo and Trove

January 5, 2021 / David Alade

There is a story I enjoy telling everyone who cares to listen. It’s about my experience when I first invested in the stock market. Don’t worry I won’t tell you about it here. But if you wish to read it, please check it out here.

I chose to bring the memory of that story to life again because it’s relevant for this article, to show you that everyone has a beginning and the days of baby steps. Wealth is an eternally relevant topic to me. People used to say “I’ve been on both ends of the spectrum and I know which one to go with.” Unfortunately, I’ve only tasted one end of the spectrum in full, poverty, and I know it is not meant for anyone. So I am currently journeying to the end of the other spectrum, wealth.

As I journey, I want to keep on writing about my experiences and tools that are helping me. So today, I bring you the door to wealth. They are doors not key. Key would imply your action. You aren’t going to get wealthy by knowing alone, you get wealthy by acting on your knowledge.

What do the 3 names above have in common?

The 3 platforms allow you to invest in US-based assets all from Nigeria. Let me tell you the implication of that. It means you have the opportunity to participate in global prosperity and invest in assets that have birthed a lot of millionaires over centuries. That’s not just all, there is virtually no financially wealthy individual that I know of that is not invested in the stock market.

The US stock market is significant because it’s home of innovation and the most prosperous companies are located there. It means you can also invest in each of these massively successful companies and share in the global wealth.

Take is three companies for example:

Netflix:

Amazon:

Apple:

The 3 platforms (Rise, Trove and Bamboo) offer you unfiltered access to invest in these companies. The minimum amount to also begin your investment journey with is so very low. Just $10 or less.

How are they different then?

Risevest – is unique among the 3 in that it helps you select what specific asset to invest in. I showed 3 companies above that have performed so well but I must you there are numerous who have performed woefully as well. Knowing which one to invest in and which to not invest in is not a task for the uninitiated and even for the initiated, it can be time-consuming. In light of this, Risevest takes your money from you and invests it in a basket of stocks that are expected to bring positive returns yearly.

Beyond the companies listed on the stock market, Risevest also allows you to invest in Real Estate business in the US and Fixed Income assets. The opportunities are endless. So you could just take your 100 dollars and put some of it in the stock market, some in real estate and the remaining in fixed income and watch your money grow just as others of the centuries have.

Trove and Bamboo – unlike Risevest, both platforms allow you to invest directly in a company of your choice. That where they differ. You think Tesla will do great in the coming years or you Microsoft will be a good investment, then open your account and make an immediate purchase of these companies. Of course, it is expected that you would have done your research before you do this, else you may get your hands burnt and record loss. Thread carefully.

Personally, I believe my generation which is yours as well is extremely blessed to have been privy to this opportunity. I remember when I was young during the 2007 – 08 stock market boom before the eventual crash. I was walking down the street with my mama and she was telling me she wished she had the money to invest in stocks then so that 10 years or more later when I am grown I would have something to my name. Unfortunately, she couldn’t buy it because she does not have the money and because the barrier to buy was high. Now, with just 4 taps on your mobile phone, you can not only buy Nigeria stocks, but you can also buy the stocks of the best companies in the world. If that’s not extremely blessed, you tell me what it is.

Utilize these opportunities as I am also doing and let’s journey together to the wealth spectrum away from poverty.

The Ultimate Bitcoin Resources

January 1, 2021 / David Alade

I often make remarks that I consumed more than 100 hours of resources on Bitcoin not just to understand it but to also build a conviction in it.

Thinking about it now, I’m sure that hours would’ve increased to more than 100 hours.

I want to share all of those high signal materials around the internet with you if at the least, it will help you understand what Bitcoin is all about.

My Favourite Articles

Keep Up With This People/Blogs

Parker Lewis – he is the best. I like it when people know their onions as we like to say. He writes about the fundamental revolution that Bitcoin is catalyzing. He cuts through the noise and presents thought provoking argument in each of his articles. Start here.

Hasu – Hasu is incredibly brilliant. He writes beyond the surface of Bitcoin price as everyone tends to do. He considers the social implication of a world under Bitcoin, he is objective in his estimations and on his many takes. Start here.

Nic Carter – “A most peaceful revolution” is Nic’s most popular essay and it is so deserving. The site is a complete archive of his recent (2017-20) content as it pertains to investing and cryptocurrency. Nic is a general partner at Castle Island Ventures I am a co-founder and chairman of Coin Metrics. Start here.

Ark Invest’s White Paper – This paper lays out the case for Bitcoin.ARK described how the Information Age gave rise to Bitcoin, a novel economic institution designed to challenge legacy financial systems. We explain how legacy financial institutions, which have evolved through a trust-based model, appear to have fallen short of the four economic assurances necessary for a predictable financial system. We then analyze Bitcoin’s behavior in relation to these four economic assurances and explain why we believe it is designed uniquely to satisfy them.

YouTube Resources

Hidden Secret of Money series by Mike Maloney – this series was very important in helping me to understand the history of money and why different money failed in different empires. Though Mike’s conclusion was that the world will come back to using Gold as a form of money, it was still a very important series that aided my understanding.

Real Vision Interviews – This was my curation from the 100s of interviews on Real Vision TV. Some are short videos and some are long conversations. They are all together worth your time. What I like about this series is that there were some arguments against Bitcoin in it. Though they were about confusions on how to value Bitcoin, they are important for your understanding as well.

What Bitcoin Did – this was probably the only Podcast I used to listen to when I started going to the rabbit hole. It is featuring here simply because I want you to focus your attention on the Beginners Guide To Bitcoin episodes. It is well curated from their YouTube channel.

Books

For books, the best place to start I will later learn is the Bitcoin Standard by Saifedean Ammous. An incredible book that goes as far back as the Yap Island to trace the history of money and arrive at what might be the final iteration of money, Bitcoin. If you don’t read any other book that I will put here, please read this one alone.

Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond – this book was written by a Bitcoin convert if there’s anything like that. Chris was once Anti-Bitcoin. He was even on a national TV program to call the end of Bitcoin. He wrote this book beautifully, explaining what makes Bitcoin special relative to other coins and even proposed an innovative way to value Bitcoin. It’s a great read.

The Price Of Tomorrow: Why Deflation Is Key To An Abundant Future – Jeff’s book was my motivation for writing this article. Jeff expanded on the idea of technology as a deflationary force. He explained that inflation is not normal in our world even though we may have accepted it as normal. Bitcoin is the form of money that will later fulfil this audacious goal.

Podcasts

What Bitcoin Did by Peter McCormack
The Pomp Podcast by Anthony Pompliano
Unqualified Opinions by Ryan Selkis

I hope you make do with that for now and if you have a specific interest in a topic, comment under here and I will get you the resources as soon as I become privy to it.

Latest Posts

How to deal with FOMO

December 27, 2020 / David Alade

One of the things you will have to struggle with as an investor is your conflicting emotions. Greed and hope, loss and gain, fear of missing out and fear of being in, the list goes on. Beneath this is a deep-rooted desire to make more money, be on every bull ride, and make the highest return possible in the market. But how feasible are these desires?

When we look at asset prices retrospectively, especially those on a bull ride we tend to see a continued rise in price alone. We don’t think about why it is rising, when will it stop rising, and even if it continues to rise, why we are buying it. FOMO is fundamentally responsible for this.

FOMO is what we have when we want to be on the bull ride of all assets and “fear of being in” is what we have when we don’t want to be in on a bear ride of an asset.

FOMO is real though and we need not deny it, we just have to know how to deal with it. In a recent podcast with Mark Cuban, he was asked the best way one could invest their money, say $15m, and his answer was of this nature:

“Put around $2m in an index fund and allow it to compound. That you do for safety and security in case all other things that you do turn on their head.”

The answer went on but I hope you got the gist. Everyone must give a priority to safety even if you have up to $15m.

So how can we better deal with FOMO?

First, ensure you have your safety net. Preferably, have that invested in a low cost and less volatile asset. Going by the advice of Mark Cuban, I will say an S&P 500 ETF. This should be where the larger percentage of your investment goes into. With this, you have peace of mind and little worries.

Once you have that covered, about 2 – 10% of your investable amount can be deployed into trending assets of the day. When it’s Tesla, get on it, and ride with it. When it’s Bitcoin, you join the wagon again.

That percentage is high enough to give you the feeling of being among (which is what we really seek plus the money) and low enough to ensure that if you lose a part of it or all of it, it won’t significantly affect your lifestyle.

Another thing you will have to deal with though is you raison d’etre; why you are participating in the bull ride. If you don’t settle on this one, you tend to always get your hands burnt. Are you in to make some quick 50% return or there to hold onto it forever or there to hold until it reaches its peak price? Whatever your “why” is, know it beforehand and follow through with it.

And that’s it. That’s how to better deal with FOMO.

What you should never do is bend to the will of FOMO by participating with a sum you cannot afford to lose. Example may include, a sum kept with you by someone else, or your school fees or your rent or any other kind of money of such nature. Beware.

My Investment Journey In 2020

December 26, 2020 / David Alade

This is a story I enjoyed writing not because it’s full of glamour but because it includes, what I will call my mistakes and/or what is typical of every human being who will care enough to admit it. I also enjoyed writing this story because it cut through the noise we make on Twitter and laid down my unabridged, concise and direct lessons.

I cannot recollect the exact time and period when I first became fascinated by the world of investing. However, I can tell that my interest in it is a very enduring one. It has stayed through many ups and downs.

As I wrote in this article, my first ever experience buying a stock was in 2017. I registered with a stockbroking firm and to purchase any stock, I will fill a form called a mandate, sign it and deliver it to my stockbroker to execute on the next trading date for them. I said “for them” because they don’t trade every day. Lol. I enjoyed the experience but it wasn’t long before the friction became unbearable and the subpar experience tiring. So I retired. I liquidated all my funds and just left it in a savings account.

In 2018, I was privileged to be introduced to a WhatsApp group where top finance professionals in Nigeria dominated. One of the frequent topics we usually discuss is how we can get the opportunity to invest in the foreign market seamlessly. So you can imagine the kind of joy that filled my heart when someone said “check out Trove” on one of those days when the conversation came up again. I checked it out immediately and a new story began. By the way that was in 2019. I wrote about Trove immediately.

I didn’t start using the platform until 2020 though. Yes, I can be that patient. I told myself none of such activity will start until January of 2020 and so was it.

Even though I wasn’t going to invest until 2020, I followed one company religiously; Stock A. I knew Stock A was a great company that a lot was ignoring because of temporary friction with deliveries and production. Stock A was redefining a new normal and I was determined that come January, that will be the first stock I will be buying. Did I buy it? Oh yes, I did. And I loved that I did.

I’ve told this story to a lot of people in the year. I bought Stock A when the price was $531 pre-stock split. Unfortunately for me, the following day after that, the price started going down. I couldn’t believe my eyes. Oh, I should mention that it was my first time having to execute a trade myself and watch it go up and down, remember I came from the world of feeling a mandate. The feeling wasn’t great at all seeing my hard-earned money “losing value” in my eyes. I couldn’t sell because that would utter stupidity. Bear in mind that this is a high conviction stock for me, having followed it for more than 6 months from the previous year.

It got to a point, I started praying for the stock to go up and I promised myself I will sell immediately once there is at least some gain. I wouldn’t deceive you, that was my story. That one experience though will go on to teach me some of the most important lessons that I will carry on forever on this journey.

Volatility is a feature, not a bug

I was naive and if I had learned this lesson before venturing into the game, I would have understood that stock prices don’t go up in perpetuity in the short term. They are volatile and Stock A even more. I will spend the rest of the year, reminding myself of this lesson. In fact, I capitalized on the volatility in the year, as I tend to buy more when there is a significant pullback and I have the cash to spear.

Great sleep at night is my target, not the highest return on the market

Truth be told, I will like to have a 1000% return on my investment in any given year. A friend put on his WhatsApp status that “in a bull market you have the choice between being right and making money” As much as that sounds great and to which I agree with it, I will like to add a third choice of “having a great sleep at night.” Where did the idea of great sleep at night come from? During the short period of holding Stock A, I checked my Trove app quite impulsively, every hour, I’m on it to see what’s going on with my investment. Poor me. I will later learn that “in the short term, the stock market is a voting machine and in the long term, it’s a weighing machine” – Warren Buffett. So I had to decide there and then that any stock that I cannot close my eyes on and have a good sleep will not make it into my holdings.

Know your game, play your game

This is in two parts:

One, if you are on Twitter like me, FinTwit is a very exciting place to be and a lot of advice and stories flying around. If you allow those stories to get to you, you are almost bound to continually make mistakes. Knowing your game and playing your game is a guiding mantra that you must follow.

Types of games:

Some don’t know their game nor do they play it but come online to yab
those that play a kind of game that is not suitable for you (won’t give you a good sleep at night)
those that trade in stocks
those that buy only Index Funds and nothing more
those that only do stock picking.

Different people do different things in the market. You need to define why you are there and focus exclusively on that. Oh, I should not fail to mention another kind of game… some may have $100k in the market but that sum is not even up to 0.1% of their net worth so they can afford to gamble or play around with that sum. Yet, there are some that their whole life saving is $500. Those two are not logically meant to be playing the same game at all.

The other is divergent between being someone that manages someone’s money and you that manages your money. You are not playing the same game at all. You are worlds apart. While you can buy an asset that you believe to be of good quality and hold on to it for years, even if it doesn’t return excellently, the asset manager, on the other hand, has a threshold of return that he must have else, investors will pull their money away from him. You have the luxury of time and patience. Use it to your advantage.

Owing to this knowledge, the retail investor has no business with metrics like “stocks we are watching this week,” what metric would do a greater good is “stock we are watching for the decade because of this and this.” You may not find it readily available though.

The point of deliberately choosing your game and playing it cannot be emphasised enough at all. Yet, it’s a must you know it, else, you have no business being in the stock market at all.

It’s amazing what one failure can teach anyone if we took our time to reflect deeply on our steps, thought process and decision-making process. Let’s continue.

Psychology matters

“Money decisions are made on the dining table, not on spreadsheets” Morgan Housel would say. I am a good definition of this and I admit it. This doesn’t mean I don’t do my research before taking actions, it just means I am human and I must always factor that in all my decisions. When I sold Stock A, it was simply because my emotions couldn’t handle the volatility anymore. Maybe if I had gone back to my “spreadsheet”, it would have calmed me down and helped me to make a more rational decision. But that’s why I’m human, given a path with both fear and opportunity and another with safety, my instinct will always choose safety. Take the time to understand your mind especially as it relates to investment, it will help you a lot and make you successful. This point was what the author of “What Works On Wall Street”, Jim O’Shaughnessy noted that made him conclude that the only sustainable edge left in the market is human behaviour arbitrage.

I sold Stock A with a 50% gain but Stock A did 700% YTD. I have no regrets. What I learnt from selling are invaluable nuggets that will carry me for decades while I remain not only in the market but in many more endeavours.

Some more lessons

Stock B! Another stock that taught me invaluable lessons. I bought, sold and bought again. But what was going on in my mind and why did I buy the same thing that I sold?

I must intimate you at this point the kind of game that I play in the market. To start with, the sum that I put in the market is close to 50% of my net worth. That said, my principle is to buy assets/companies that I can hold “forever”. Why? I don’t have the time nor the interest to research a company and then keep up with it forever to determine if it was time to sell or not. I don’t have that luxury of time or interest. So I do my research once and determine if I can hold this asset for long enough. Once I certify that I put a sum in it and watch it grow.

Same was for Stock B but more.

I saw Stock B dominating an industry that I referred to as “here to stay industry”. And Stock B was on its part to declare profitability until Covid-19 happened to them. So the price was falling way too quickly, I couldn’t take that considering I had bought the stock at an ATH (I usually don’t mind this since my holding time is forever). So I sold while it was falling to cut my losses. Beyond holding Stock B though, I was also interested in the business model. However, I noticed that the moment I sold, I wasn’t paying attention to them again. I didn’t like that, so I bought the stock again at a very low price. Little did I know that I was buying at the bottom.

As providence will have it, my position in it is almost returning 100% YTD.

What’s the lesson here?

It won’t be great if you had seen Stock B in my portfolio and chose to buy without knowing why it was there. I had it because I loved the business. Yes, the company is trying to do all things great but the return does not justify the effort when I bought it. It might have been a different story as well.
Even though my holding period is forever, it is occasionally wise to cut losses and move on. Peter Lynch said “people would say, it’s gone down this much already it can’t go any lower”, well history taught us, it can go a lot lower. Knowing when to pull out despite your thesis and especially when your thesis has been threatened is a needed skill.

This year was the first time for a whole lot of us in the [US] stock market and if the only lesson you can remember learning in the market is the 50% or 500% return on an individual stock you own, you have been doing it wrongly.

The most important lesson of the year

Probably the most important lesson I picked this past year was the importance of a managed fund or passive fund as a goal of achieving the ultimate investment goal of a great sleep at night. A Vanguard Total Stock Market (VTI) fund will be the perfect example of this.

While you will not have a 500% ROI in any given year, buying and holding it would mean you are making a bet on human ingenuity and quest for efficiency.

What does that mean?

VTI is an ETF that represents the whole US market and beyond the US market, it has some of the best companies around the world listed on it as well. The implication of that is that the companies in the fund have the best of the best around the world working daily to ensure the companies thrive. Well, so do we have mediocre companies in it. However, if history is any indication of which side thrives more over the other, then, we may conclude that the good companies are always great enough to cover up for bad companies.

What’s the implication?

It simply means you can buy the ETF and have a good sleep at night. You need not worry if the price is down today nor should you worry if it will be up tomorrow. You are betting that humans will continue to get better, optimize for efficiency and ease and your bet will pay off. We are humans, after all, we can’t settle for less.

While I’ve used a market fund in this example, other funds may help you fulfil such a quest for investment return under a philosophy of good sleep at night as well.

It was a one long year of ups and downs in the market. I am grateful for the early failures that took to heart enough for me to pay attention to what matters beyond the returns. A lot of investors who have grown in wisdom and wit have similar stories of early misjudgement to tell. In this, I find solace and welcome myself to their fold (lol).

Run! Naira Is Reducing You To Poverty

November 22, 2020 / David Alade

I’m tired.

I want to use my head to think of something else.

I’m tired of having to always think of a way to game the system I’m unavoidably part of.

I should be using my head and time to think about how to compound wealth. Unfortunately, most of my time is spent on thinking of a way to outsmart my country’s currency; Naira.

2020 has been a very rough year that we all can’t wait to get out off. For my home country Nigeria, it’s even more devastating. Amidst that, we woke this morning to the very bad news of entering another recession. If my counting is right, this is the 3rd or 4th of its kind during this administration that’s only just above 5 years into their government. Okay, it’s actually the second recession.

It got me worried. And while I could have used my time to think about the education of an Angel investor this day, I am here to sound an alarm about wealth erosion and write about how members of this community can protect themselves from an economy that’s bent on sapping every vitality from their hard work.

Naira punishes you for doing nothing

In just under 12 months, we have all gone poorer by an alarming percentage of 33.3%. We were told to save, and we saved. We were told to invest and we invested. We were told to be frugal and we have been. All these in an attempt to help us build wealth. However, it seems all that effort is worth nothing seeing Naira has decided to keep us in perpetual poverty.

It doesn’t matter how much you earn or save or invest nor does your frugality matter. Over the past few months, you have robbed of 1/3 of your wealth if that wealth is domiciled in Naira.

https://cdn.substack.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fdfe808fd-6f51-4317-87b4-4b9af758b13a_591x389.png

Inflation is the cruellest tax that there is. It saps the vitality of your wealth away subtly and slowly without your knowledge. You may be happy with the N10m in your bank account until you try to exchange that currency with value and you realize that the value of your N10m has been reduced to almost nothing in the market.

That’s why I said Naira doesn’t give room for doing nothing. You must act. Act always and act consistently.

Guide to escape the wealth erosion spree

You work every day and at the end of the month, you get paid some amount of money. Or it could be that you work and earn every day or infrequently. Whatever your case might be, I can bet that as you earn any income, you set apart a portion of it to save and another portion to invest. Something I’ve preached a countless number of times.

Naira is the problem. Not your work. So to escape wealth erosion, you’ve got to leave Naira alone as much as possible.

Here are things you can do with the money you are putting aside for savings and Investment:

Ordinarily, I believe you should have your money divided as follows:

A portion that you spend will have to spend in a month
A portion that is for emergency sake
A portion that is invested for your long term wealth

That’s just to keep things simple.

There’s nothing you can do about the first portion, it must still be domiciled in Naira because you spend mostly in Naira. So leave that in Naira. Buy your foods and have your fun. Don’t let Naira give you a headache as it gives me sometimes.

The portion that you set for your emergency needs more attention.

An emergency fund is a bank account with money set aside to cover large, unexpected expenses, such as unforeseen medical expenses, home-appliance repair or replacement, major car fixes and, costliest of all, unemployment.

It all depends on how much this amount is in your bank account currently. However, if it’s already running in the mid 6 digits (> N400,000), I will generally advise that you save it this way:

50% should be kept with PiggyVest’s “Flex Naira”. For a simple reason, they offer easy access to your fund at the highest ROI (8%) in the market that I’m aware of.

50% should be saved in a dollar wallet. PiggyVest’s “Flex Dollar” is still an awesome choice for this. Especially because they still offer a 7% ROI on a flexible account. Otherwise, I will recommend you use an Eversend especially if you are the type that does a lot of crossborder payment or has some of your expenses domiciled in another currency other than naira, says dollars. Eversend also issues free virtual dollar card that is active on a lot of e-commerce sites. There other platforms that offer dollar wallets, if the two options above are not satisfactory.

Protecting your long term wealth

Alright, that’s about those. Let’s get into the real deal. The portion that was originally marked for longer-term investment; e.g. saving to build a house in some 5 years time, go to school in some 4 years time or funds for your children future education etc.

My answer for this is actually very straight forward. Avoid all naira denominated investment by all means. I seriously mean that. It’s that serious and crazy.

No matter the return that you might get on any naira investment this year, I bet that you do not have any real return. I will break it down a bit.

If you invested N100k in January 2020 and got 30% ROI (very rare) after 12 months ended December 2020, you would be happy that you made more money and indeed you made. However, Your new N130k can now only afford to buy $271 (@ N480/$). Whereas your 100k in January could have bought $278 (@ N360/$). That’s a negative return to start with.

You may puzzle and say but I don’t need dollars and I don’t have to buy dollars. Yes, that’s true. The reason I am fond of converting your income to dollars is basically to serve as a proxy for a store of value. It is not to say you have to convert your money to dollar. Another example would have been me using the price of a bag of Rice, the food we all eat.

Here’s NBS data on food inflation. An alarming 17% increase year-on-year. Which invariably reduced your real return by that percentage and you are left with a little percentage above 10%. However, note that that’s just food inflation. You don’t spend on food alone. To avoid the complication of having to talk about different inflation rate is one of the reasons why I normally resort to using dollar as a proxy.

I hope that scares you a bit? Please let it scare you.

To realize that 7% return on an investment denominated in $$ would have outperformed a 30% ROI on a Naira investment should be enough to scare anyone away from anything Naira related investment.

Where will you get 30% from?

Yet, you can almost get a guaranteed 10% in $$.
— David Alade (@DavidAlade__) November 21, 2020

I am not an alarmist and my message has not changed. Flee any investment in Naira. Here are places you can flee to:

RiseVest – All assets offered by this startup is denominated in dollars. I believe that any asset class that you go with will definitely outperform any type of Naira investment in the short and long term. RiseVest gives you exposure to Real Estate assets, Fixed Income and US Stock. You can’t have it any better.

Subscribe to any asset class on @Risevest

It doesn't matter which one, you will do much more better than any Naira based investment available to you.

I wanted to say over a long period but realized it's even now true for the short term as well.
— David Alade (@DavidAlade__) November 16, 2020

Buy US Stocks or ETF yourself – if you know how this works, do it. Trove Finance and Invest Bamboo are equally great to check them out. By stocks that are of good quality and buy ETFs like QQQ, VTI, VTG ARKK, ARKW. Any of those ETFs are good and I recommend them (at your risk of course, lol).

Buy Cryptoasset – this is riskier but having 10% of your investable amount in it is a good start. Ok, I mean Bitcoin now when I say Cryptoasset. This is not an article to tell you the economics of that and the potentiality. I just have to mention it in term of alternatives that’s all. As a community, I know we’ve had a conversation about this before and if you have more question about it, you may chat me up.

All that I’ve said so far is just an opinion piece and advice. What you do with your money is still largely dependent on you. But I urge you that you should not do nothing. It’s a sin the book Naira Chapter 1:1 to do nothing.

Naira punishes you for doing nothing.

Yes.

Doing nothing is a sin in the book of Naira Chapter 1:1
— David Alade (@DavidAlade__) November 21, 2020

3 Wrong Believes About Your Relationship With Money

June 28, 2020 / David Alade

As we think about money and our relationship with it, it is important that we face some salient truth about our relationships with money.

I will discuss 3 aspects of our relationship with money and how such knowledge can improve the relationship.

You are not a rational decision maker when it has to do with money
You are not rich: I will say you rich, your environment only made you poor
Money must be worked for

You are not a rational decision maker when it has to do with money

That statement seems unbelievable until you discover it to be true yourself.

When you go out to buy a something, you will negotiate the last Naira out of every purchases. But not quite on all purchases.

Buying something of N250, you can spend another 30 mins negotiating for a price reduction by a mare N20.

However, while buying something of N250,000, you tend to let go of as much as much N10k. You ordinarily will just feel it is okay.

That’s rational right? No.

How does knowing this help you? I am calling it out here to bring your consciousness to it so you can reverse your order of thinking. When you are buying the item of N250k next, check comparable price, both online and offline before making the purchase. You will save more doing that than squeezing every N20 out of your N250 purchases.

When it comes to money, rationality isn’t cheap.

You are not rich: I will say you rich, your environment only made you poor

Nassim Taleb in the book Fooled by Randomness recalled the story of a couple – Marc and Janet.

Marc works as a corporate lawyer in New York city and earns $500k/month. They live in a high end neighborhood but cannot live up to the standard of the neighborhood.

Marc’s decision to live in the high end neighborhood may be justifiable though. The demands of his work means he has to live close to his office.

Nassim Taleb said:

But the costs on his wife, Janet, are monstrous. Why? Because of their relative nonsuccess—as geographically defined by their neighborhood. Every month or so, Janet has a crisis, giving in to the strains and humiliations of being snubbed by some other mother at the school where she picks up the children, or another woman with larger diamonds by the elevator of the co-op where they live in the smallest type of apartments.
Why isn’t her husband so successful? Isn’t he smart and hardworking? Didn’t he get close to 1600 on the SAT? Why is this Ronald Something, whose wife never even nods to Janet, worth hundreds of millions, when her husband went to Harvard and Yale and has such a high IQ and has hardly any substantial savings?
Marc and Janet’s case provides a very common illustration of the emotional effect of survivorship bias. Janet feels that her husband is a failure, by comparison, but she is miscomputing the probabilities in a gross manner—she is using the wrong distribution to derive a rank. As compared to the general U.S. population, Marc has done very well, better than 99.5% of his compatriots. As compared to his high school friends, he did extremely well, a fact that he could have verified had he had time to attend the periodic reunions, and he would come at the top. As compared to the other people at Harvard, he did better than 90% of them (financially, of course). As compared to his law school comrades at Yale, he did better than 60% of them. But as compared to his neighbors, he is at the bottom! Why?
Because he chose to live among the people who have been successful, in an area that excludes failure. In other words, those who have failed do not show up in the sample, thus making him look as if he were not doing well at all.

I hope you get the message now. You are rich. You are only living in the wrong environment or you are comparing using a wrong sample size.

Money must be worked for

Another misconception about money is that you must work for it, work to make it and work to have it.

While that might be true up to some level, you need to work towards a stage in life when money starts to work for you.

For money to work for you, you need to start accumulating assets that generates cash with or without you.

The assets are such that all they required from you is your initial capital (money and/or time). Once you pay such price, you can earn money on them for life.

An example might be

Someone who puts a N100m in a fixed income asset that pays a 10% interest per annum. Such will get N10m every year and that might be enough to cover all living expenses.
Someone who creates a digital product that people want to buy and that s/he sells every now and then. You create such digital products once and you earn on it for life.
Someone might also build a business that can exist without her or him and that pays dividend yearly for his upkeep.
Someone might also invest such money in the stock market in companies that pays dividend.

Basically, options abound for you to make money work for you.

Fixing those wrong believes has improved my relationship with money and I really hope it will improve yours as well.

Short Nigeria, Never Long It

June 9, 2020 / David Alade

What has become of the dream country, the giant of Africa?

We were having a usual conversation in one of the most cherished groups I belong to on WhatsApp recently. The conversation at this time was about the transportation industry, diving into electric cars, autonomous cars, and all that’s between that. You can guess we did mention Tesla in our conversation.

We concluded the conversation on a very optimistic view of the future. Few hours down the line a member of the group shared the image below with the accompanying comment.

Comment: “While the rest of the world is working on Advanced AI, Blockchain, and 5G. Nigeria is innovating Kilishi. You can’t make this shit up lol.”

This comment plus the picture motivated another member of the group to make another comment that connects the dysfunction state of Nigeria with the random conversation we were having about the transportation industry earlier.

“Talking about the auto industry this afternoon got me thinking about how most of the technologies that are being (or will be) deployed in the auto industry in the next decade or two (connectivity, autonomous driving, car-sharing/pooling, electric…) will move the world farther away from crude oil.
Yet, instead of the leaders of my 200+ million people Nation to start making serious plans for the future, they’re innovating kilishi. Issokay…”

Funny but not funny is that comment I must confess because it is both true and despicable.

Well, that motivated me to comment “short Nigeria and you will always win”.

For the uninitiated, “short Nigeria” simply means take a bet that Nigeria will lose its value over time and you will always make a gain.

The evidence of that is not far fetched I continued with my comment with the following lines:

Short Nigerian Naira, you will win
Short Nigeria All Share Index, you will win
Short, Nigerian Government Bonds, you will win
Short Nigeria Governance, you will win
Short anything that reflects Nigeria as a whole, you will win.

This is a rather saddening reality. When on earth can I (anyone) Long Nigeria?

When can I take a bet of prosperity on Nigeria?

Last year when Nigeria clocked 59, I wrote an article titled “Nigeria would have been our pride,” and in the article, I said, “but Nigeria has turned to what we must escape”.

The issue that became of this country is not something I like to much delve into. That is because talking won’t solve much of our problems if it will, we should be the most prosperous country on earth by now. We can talk.

So to my question “when can I take a prosperity bet on Nigeria?” I’m sorry to say this but maybe not in my lifetime.

Excuse me, we are debating killisi innovation when Impossible Meat is innovating with a plant-based substitute for meat that will still give the same nutrient. And you expect me to Long a country like that?

Or like my friend from the group said, “when the world is preoccupied with 5G technology, Artificial Intelligence and the Blockchain” and we are debating Killishi innovation on the floor of the highest legislative house (the Red Chamber). You really want me to take a long position on such people?

Or like my other friend said, “all technologies from IoT to autonomous driving to AI will be a catalyst for the future of transportation as we know it”, yet it doesn’t bother us as people to solve Lagos traffic responsibly and innovatively. No, you won’t want me to take a bet on such a quagmire that Nigeria has become.

The truth about this article

Listen, I started this article not knowing what direction it will take but with the hope that it will take a direction that will favour Nigeria. Unfortunately, it couldn’t. I can’t Long it. At least not in the light of the present and foreseeable future.

Because of the direction it took, I had to change my inconclusive tittle to a conclusive title of “Short Nigeria, Never Long It.”

Because of the direction it took, my short position is even more grounded.

Isn’t it alarming that nothing that tracks Nigeria can be taken a bet on? Pathetic. 😩.

I am not a messenger of doom

Here’s what I believe can be done as an individual of all races and sentiment.

Be the best you can possibly be under whatever circumstance you may find yourself.

Yes, your influence by being the best you could possibly be might seem insignificant on a national level. However, when you realize that Nigeria rejoices today to be associated with Ngozi Okonjo-Iwela, Chimamanda Adiche, Charles Soludo, and the likes, you will realize that being your best might just be enough contribution.

You will be proud of yourself, feed your family, and more, and you will become a national pride. Then you will agree with me that your best might just be enough.

Remember Africa as a whole claimed Elon Musk as their own when he launched Falcon 9. That’s how much reaching for your best can contribute to helping the country.

So I’m not a messenger of doom and while I can’t long Nigeria, I can Long Lagos Young Professionals Innovation Club, I can long David Alade (I have faith in me to be my best)😀, I can long brilliant and hardworking individual Nigerians that I know, I can Long the great startups that are solving real societal problems.

I have a long list of “Nigeria” that I can long but I am not sure I will Long Nigeria.

Cheers.

What Goes On Behind Buy/Sell Mandate? A Beginner’s Guide to Stock Investing

July 16, 2019 / David Alade

Investing in the equity market is as seamless as saying buy/sell this for me. The real work lies behind the call to buy/sell. Why did you sell or buy or hold? What were your considerations? Your strategy?

Behind every buy/sell order lies 4 fundamental things. Liquidity consideration, Profitability consideration, Overall Company Financial Health consideration and Capital Gain/Dividend consideration. You really do not want to buy any stock without first considering these four things, but that doesn’t mean these are the only considerations, they are just fundamentals, remember.

Liquidity

For anyone looking into equity investing the first thing you really want to consider is how liquid the stock is? What does it mean for a stock to be liquid – it is simply how easy it is to buy and sell the stock without affecting the asset value? A stock will be regarded as perfectly liquid if you can buy it for N7 and sell immediately for N7. To stress that point, it is the availability of the market for the stock.

As you go into equity investing, your first consideration will be liquidity. Your next question is how to know which stock is liquid? The answer to that is to check the Exchange website for top traded stocks. You may want to do this for like 2 weeks to be able to capture all stocks that are liquid. Create an Excel Sheet to save your findings, equity investing is not a play, Microsoft Excel will come helping a lot.

Do that and you have your liquidity question answered. The next you want to consider is your strategy which will follow below.

Capital Gain and Dividend Consideration

This is really about your strategy, do you care for capital gain or dividend?

Capital gain is the increase in the value of the stock you own. Capital gain would be said to have occurred if a stock you bought for N7 has appreciated to N10. That will be about 48% increase in value.

Dividend is the money companies’ payout to investors that own a share of their stocks. This is typically paid yearly (some bi-annual). If you own 10,000 units of a stock, and the company declared a dividend of N2 per share, you will receive N20, 000 as a dividend.

Now the question is which do you care for? Capital Gain or Dividend?

History has it that young people tend to value capital gain over dividend. That’s because really, it’s about growing your wealth not about having more cash, dividend put cash in your hand, and capital gain increases the value of your investment.

Once you decide on your strategic need; dividend or capital gain or both, your next concern is how do I know stocks that pay a dividend and those that don’t?

To answer this as well, get your Excel Spreadsheet ready you will do a bit of work, remember equity investing is not a play. You have earlier determined which stocks are liquid, those stocks I encourage you to go to their websites and navigate to “Investors Relation” there you will find the company’s financial statements. Download it up-to-the last 5 years (2018, 2017, 2016, 2015 and 2014). 5 years is just good enough, but not less so you can see the historical pattern of dividend payment.

Go to the page where the Income Statement is and below you will find the dividend declared for that year. If nothing, the company probably didn’t pay dividend for that year. Keep your 5-year record to know how much they historically payout in the dividend. Now you should have your questions on dividend answered.

If your focus is capital gain, just on the Exchange’s website (or Bloomberg), find the stock and view it’s 5 years historical trend at least. What is the pattern? Growing? Declining? Static? This should inform whether you should choose the stock.

Company Financial Health

This is a deep and somewhat complicated point. It will take more than an article to scratch its surface. Basically, you want to look at the whole financial statements, Balance Sheet, Income Statement, Cash Flow, Management Composition, and Corporate Governance. You see it’s a lot. So no deep diving on this.

Profitability

To be candid you don’t want to invest in a company that is not making a profit (yet). On a global scale, a lot of technology start-ups have been listing on NYSE with no profit but only Part to Profitability (PtP). But stocks like these takes more effort to understand, in that beyond the surface level analysis, you must understand its operations, and vision and the very PtP. If you don’t understand the business model, be wary of investing in such stock, I recounted my experience making similar mistake here.

But really, you may want to start with companies that are profit-making. And to know them, go on the financial statements you downloaded, and from the Income Statement, you will see their Profit after Tax (PAT). Use that to determine profitability, and going as far back as 5 years is also key.

What goes on behind buy/sell mandate?

The above is just a tip of an iceberg regarding what a typical equity investor will consider before giving a mandate to his/her Stock Broker. Do you still want to go into equity investing?

Disclaimer: this is not investment advice nor is it a call to invest, it’s basically for knowledge sake. Also, opinions are mine and do not represent that of any organization I am affiliated to.

Originally published here