What The Normal Person Does Not Understand About Investing (2)

How to Understand An Investment

Let’s take a look at the 3 investment channels and understand what drives the gains or losses of these investments:

1. Private Businesses.

A. A Business Idea. Let’s say an amazing friend of yours bring an idea to you for you to invest. Do you allow sentiments or emotions to guide you? Or you allow logic? Let’s say you allow logic. How do you prove if it’s worth it or not? Will you take a look at the business plan or check to see the office or online sketch? There’s truly no easy answer. What I can offer you is 60 minutes of my time to help you decide. If you’re interested, you can schedule a session here.

B. A Building. It’s important to note here that if you buy a building or build a house, it’s not necessarily an asset. (You should know that basically an asset is what brings in money while a liability is what takes money from you. It can be an investment but not an asset.) Here are some questions you should ask and get answers: How do you know if a building has a good rental value? Here are some factors to consider: location, utilities, neighbourhood etc.

C. Independent Forex Traders. I’m classifying this group here because more and more traders are seeing the opportunities in this field and are looking for investments from individuals. How do you know the right forex trader to work with? Before you sign an agreement with any trader, you need to see their books. How do they organize their process? What’s their cash flow? How long have they been trading? Where are the independent testimonies? How can you learn while they are trading your money? Don’t get carried away with the promise of lucrative returns within a short period and be quick to jump the process. It’s your money. Put a value on it by getting answers to your questions.

2. Capital Market. The capital market, also known as the stock market is a publicly traded and regulated market where companies sell their shares to the general public. The dividends and rise in share value are the key benefits of this market. The products and services of the listed companies are the bedrock of the value of the company. It’s important to consider the services of a stockbroker before playing in this field. The stockbroker is equipped with the required information from reports, research and analysis to guide an investor.

In Nigeria, the Nigerian Stock Exchange (NSE) manages the local capital stock market and it’s regulated by the Securities and Exchange Commission (SEC).

3. Money Market. The money market includes bonds, treasury bills and diverse kinds of funds provided by financial institutions and regulated by the Securities and Exchange Commission. The value of the funds is determined by the profits and losses of the funds. Most of these funds are invested in the capital market, corporate bonds, economic bonds, treasury bills and similar investments.

These funds are made available to the public by capital holding companies like FBN Holdings and Stanbic IBTC Asset Management.

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