| Secrets of successful
investment
By Afoke Hope Orivri
Saturday, April
12, 2008
 |
ADEDIRAN
Photo: Sun News Publishing |
| |
As the bandwagon effect of stock investment catches in on
more Nigerians, it is observed that a good number of people
are at a loss as to what they should do with regards to making
profitable investments and see their dreams of growing their
money come true.
In a chat with Ademola Adediran, the executive consultant
financial services, accountancy and business development,
Nectar Consult and Management Services, he revealed that building
an investment portfolio that is professionally managed can
help investors achieve desired objectives for investing their
money.
Adediran said that beyond his background as a chartered accountant,
and chartered tax practitioner, his on-the-field experience
as a banker, auditor, and a former financial controller with
Tastee Fried Chicken, has given him a broad space to understand
the need of investment portfolio management.
Building investment portfolio
It is wise to know the meaning of investment and portfolio.
Investment is an act of sacrificing present consumption to
have greater consumption in future. Like someone parting with
part of his income for saving and expecting an interest over
a period that the savings will last at the end of which he
will get the savings plus interest accrued.
A portfolio is ordinarily, a basket of investments. You cannot
have just one item in that basket. Likening that to a basket
of investment (portfolio), you can have investment in shares,
deposit (savings), treasury bills (monetory instruments)and
real estate which though may be long term. One can now have
an idea of what an investment portfolio is. Meaning that to
build an investment portfolio over a period, one must have
forgone consumption of monetary resources in time past which
were then used or invested in acquiring any of these items
that constitutes the basket of investment.
Professional management?
Yes. To achieve satisfactory desire of having an investment
portfolio (wealth creation), you should use professionals
who are trained as chartered accountants, chartered brokers,
and to some extent, economists or lawyers that have experience
in the field of investment.
As a professional, the work is done in a way that a customer
will always be satisfied with the work of a professional and
always wants to go back. This is because the professional
would have done his work to reflect the skills acquired during
his training, required for his profession among which include
the technical challenges of investment portfolio management.
Take for example forcastinig stock growth which an untrained
investment advisor or investor may do based on what he sees
or rule of thumb, which may not have any ground. Meanwhile,
a professional will apply methods based on scientific approach
or quantitative approach e.g scattered diagram, regression
analysis, linear programming or simulation using previous
data in respect of company stock to be forcast.
Gains of the portfolio
It is to mitigate (reduce) or avoid risks associated with
investment, such as loss of money invested or not meeting
the clients’ desired objectives of having the portfolio.
The world is dynamic, so also the sectors that constitute
the economy of a country. Apart from having investments in
different categories highlighted above, such investments will
also be spread among different sectors of the economy such
as manufacturing, insurance, food and beverage, construction,
banking etc.
The economic downturn that will affect investment may not
affect all the sectors at the same time. It may catch up with
one sector today and another tomorrow, or no one at all.
Assessing success
Managers of undertakings that investors invested in must run
such undertakings profitably to ensure that the wealth of
owners is improved upon, such that their wealth at the beginning
is far less than their wealth at the end of the period. Performance
of companies are measured over a period - monthly, quaterly,
and generally over a year. This is what informed the statutory
requirement of quoted undertakings to have annual general
meetings where the score card of performance of the company
is discussed with the owners. A performing company may have
good image and reputation among investors, and as such, increase
in the value of the company and its shares, while the reverse
is the case for a non-performing company.
Where an investment portfolio is now concentrated on non-performing
undertaking, it will lose its value, and the purpose for such
portfolio - the wealth will become depleted. If nothing is
done to arrest the situation, the wealth could be lost |
