THE JOURNEY TO FINANCIAL FREEDOM
Table of Content What is your investment dream? 2 What should your investment plan be? 3 Financial Planning 4 Asset Classes 5 Inflation 6 Reducing Investment Risk 7 Value of Long Term Investing 8 Value of Using Investment Managers 9 Value of Using Funds 12 Starting Out 14
What is your investment dream? Successful investing is all about your financial planning to your hopes and ambitions. In other words, once you are clear about what your financial goals are, you can work backwards to create a financial plan that gets you there. That means choosing the most appropriate investment products and making sure your investments are as tax efficient as possible. Why not take a little time to jot down a few thoughts about key events in your life going forward where you want to be, and when you need to get there? Naturally, your priorities will change depending on your age, your family situation and lifestyle, but here s an example of the sort of things you might be thinking about... 5 years time: Building your first home 10 years time: Sending your children to the university 20 years time: Helping children with their marriages 30 years time: Comfortable retirement: Secure ongoing monthly income Passing it on: Leaving your property to your family when you die: optimising your inheritance
What should your investment plan be? Everyone is bound to have aspirations for self and family- we want to go abroad on holidays, buy houses in highbrow areas, pay children s fees, build a retirement fund, leave a Legacy. Whatever your wants or aspirations are, you will need to draw up a financial plan which will require you to engage an investment adviser. The cycle below will guide you in creating your own path. To make the most of your money at every stage of your life, you need to find the right savings and investment plans to generate the necessary funds.. Help children with deposit for house Enjoy retirement. Need to generate secure income Pass on wealth to family. Need to plan inheritance Grow wealth for early retirement Guard against unforeseen occurrence. Different investments for different goals Pay yfor child s fees or further education Matching your investments to your goals is fundamental to success. If you are saving for a long-term goal such as your children s education or your retirement, t then equities may be an appropriate strategy t and shortterm fluctuations in equity prices may be of little consequence to your overall plan. If your goals are more immediate, such as a holiday or a new car, then equities may not be appropriate for your needs and you may wish to consider investing primarily in bonds or cash. In view of the fact that everybody s situation is unique, the best course of action is to discuss your options with your Financial Adviser.
Financial planning Financial planning is the long-term process of wisely managing your finances so you can achieve your goals and dreams, while at the same time negotiating the financial barriers that inevitably arise in every stage of life. Remember, financial planning is a process, not a product. 1. Investment Objectives 4. Assets Allocation Your financial needs, values and investment objectives are unique to you and you need to identify them. 2. Investors Risk Profile You need to consider your risk tolerance, investment profile, Time horizon all of which are relative to your investment objectives. 3. Investment Policies i Developing investment policies that best suit your investment needs. Define classes of assets and allocate according to your risk profile and reward preference. 5. Implement Investment Strategy Implementing the appropriate investment strategy that best suits clients. 6. Review Strategy Regularly review investment performance.
Asset Classes There are various asset classes one could invest in though each class has its unique levels of risk and returns. Most mutual funds managers invest into one, or a combination of these four major classes: Cash, Bonds, Property and Equities. The table below shows the uniqueness of each class. Risk Vs Return Lower Return Potential Low Risk Takers Fixed Deposits T-Bills Bonds Savings Accounts Cash/Checking Accounts Moderate Risk Takers Equities & Equity Mutual Funds Balanced Mutual Funds Aggressive Risk Taker Real Estate-backed securities Higher Return Potential The volatility in the stock market is unlikely to be of much significance to an investor whose funds are majorly put into cash or bonds. On the other hand, if the bulk of an investor s funds areplacedinequity,thenanystock market fluctuation may impact the short term performance of holdings. It is pertinent that an investor considers whether his investments are in line with his risk appetite, time horizon and objectives. Low Risk High Risk
Thinking about Inflation What happens if you do nothing with your current savings and just leave your money un-invested? This may sound a risk-free strategy with absolutely no downside. But that would ignore inflation. Unless your money grows at the same rate as inflation or more, it actually loses value. In other words inflation means you can buy less with your money as time goes by. So, even if your money grows by exactly the same rate as inflation, its actual value remains the same. Inflation doesn t always occur and prices may actually fall during periods of deflation. Assuming you have NGN10,000 invested in the stock-market and allow it to grow over the years at say between 15% - 35% p.a. return: % Return 3yrs 5yrs 10yrs 20yrs 15% 15,208.75 20,113.57 40,455.58 163,665.37 20% 17,280.00 24,883.20 61,917.36 383,376.00 25% 19,531.25 30,517.58 93,132.26 867,361.74 30% 21,970.00 00 37,129.30 30 137,858.49 1,900,496.38 35% 24,603.75 44,840.33 201,065.56 4,042,735.89 In summary, deciding on what is the right level of risk for you is a key factor in determining what kind of investment products to choose. If you re unsure, consider getting some advice.
Reducing investment risks There are three vital principles i thatt can help make your levell of risk ikmore predictable, and help you achieve your investment goals: 1. Invest for the long term 3. Invest a little amount on a regular basis As long as you don t depend on simple savings account, the value of your investment can either inch up or down. For example: if you had invested in stocks over the last 10 years, in the worst year your investment would have dropped by 46%. In the best year it would have risen by 75%. Past performance is not a dependable pointer to future results. When you invest for the long term, the highs could even out the lows. 2. Diversifyif your investments t Diversification is a possible way of spreading your investment risk which goes beyond not putting all your eggs in one basket. By holding investments that have a low correlation to each other, in other words all investments have different levels of risk and perform differently under different market conditions, you can reduce the overall level of risk of your portfolio and performance will tend to be less volatile. For example, you can have a blend of shares, fixed income, property and cash in your portfolio. It s very hard to time the market, to know when the market is low ( a good time to buy) and when it s high so more expensive. That swhyitcanbeagoodideatoputalittleamount into investments at regular intervals. Putting aside little amount of money on a regular basis can average out the highs and the lows making the overall performance less volatile than investing all at once. This approach means that you automatically take advantage of investing when the market is low and also avoid the risk ikof investing all your money at the peak. So, provided you invest the same amount of money every month, you can actually potentially benefit from the up/down swings. This is because when the market is low, your money will go further and you can buy more shares. Equally, when the market is high your money will go less far and you ll get fewer shares. Ultimately this means you buy more shares at a good price and fewer at a high one. Exactly where you want to be! As an example, you could set up a monthly Direct debit into your Stock broking account whichalsohas the advantage of instilling a certain discipline to your investing!
Good things come to those who wait In the short term, investing can often seem a largely random exercise, where success or failure is determined by a combination of factors many of which are beyond our control. Over the longer term, successful investing can be achieved by adherence to a few guiding principles such as diversification and obtaining expert advice. The cardinal golden rule for investing is the knowledge of how time can impact investment risk and performance, and allowing sufficient time for your investment strategies to achieve their potential. Research has shown that the longer you retain your investment the less likely you are to lose money and the greater thechancefor you to make money. Of course, its worth remembering that past performance is not a guide to what might happen in the future and the value of your investments can go south as well as north. Secrets to successful investing Be long term in outlook - give your money as much time as possible to grow - at least 10 years is best. You'll also benefit from 'compounding', which is when the interest or income on your original capital begins to earn and grow too. Maintain investments - therewillbetimes of market volatility. Market decline are a natural feature of stock market investing. During these times it is possible that emotions overcome sound investment decisions - it is best to stay focused on your long-term goals. Don't try to time the market -resistthe temptation to change your portfolio in response to short term market movement. "Timing" the markets seldom works in practice - and can make it too easy to missoutonanygains.thegoldenrule to investing is allowing your investments sufficient time to achieve their potential.
Value of using investment managers Certain things are generally seen as exclusively for the rich ; using an Investment Manager is one of those. Little does the average Joe know that employing the services of a professional in managing their investments makes a whole world of difference. Surprisingly, the big fear for most management fees is insignificant. Here are just ten reasons you should consider using an Investment Manager. 1 Achieve your investment targets All roads lead to the market-place they say. Yes, different roads could lead to the market but there s always the best route. Involving an investment manager in your financial intentions means getting a road map from a professional who knows the most efficient way. Leveraging on their experience and investment know how, investment managers can help fulfill whatever objectives are set, using available resources and working within specified time-frames. 2 Build the right asset-mix Theriskappetiteofaninvestorformsoneofthe bases for asset allocation. An investor who is very much risk averse for example, might not find the equity-space most appropriate. However, with the help of a professional, a tailor made combination of investments classes suitable for your investment objectives can be stringed together. 3 Have a diversified portfolio that hedges risks It could be suicidal to literally put all of one s eggs in a basket. Even with legitimate t investments, t concentrated investment could backfire. An investment manager aims at reducing the risk of losing your wealth/portfolio by widening the spread of your investments. 4 Obtain objective reviews Perhaps you have noticed that every new product or investment opportunity comes with a lot of publicity which propagates it as the most excellent on the block but that does not mean it is the best for you. Investors have been taken in by marketing gimmicks not investigated fully. An investment manager has a broad based knowledge of different markets and can advise on the merits and demerits of various products. You are better informed on what investment products to buy and those to ignore when you engage the services of an investment manager.
5 Actively manage your portfolio Most investors take investing as a pastime; it is usually not their primary concern. Investors might (based on their level of the experience and knowledge) make faulty calls which could be costly. There s a need to employ the expertise and techniques of a professional investment manager, whose prime function is to maximize the returns on your portfolio. 6 Track your investments It s not just enough to get on the programme; you need to keep an eye onyour investments. Investments, and indeed markets, are dynamic. As such, a close tab should be placed on one s portfolio; constantly checking the performance and relevance of the constituents and rejigging the make-up when necessary. These require a levell of dedicationdi and prompt reaction the average investor cannot afford which of course, on the other hand, is a basic job function of an investment manager. 7 Helps you develop and imbibe a savings culture For most people, it s always a struggle to put aside resourcesfortherainyday.therecouldbetheissue of your income not being enough or not knowing what to do with the spill-over. Atalkwith a financial advisor will help provide guidance in developing this crucial habit. Regardless of whether you currently have N10,000 or N10mn, an asset manager will look at your situation and find the best starting point for you; helping you commit part of your resources into securing your future. 8 Secure assets for future benefit of your family An investment manager can also provide advice on estate planning through the vehicle of a Trust. This enables you plan for the future transfer of your wealth to members of your family. Whatever your needs, an investment manager can help design a seamless transfer to the beneficiaries of your estate.
Value of using funds The question that many people ask is: But why should I invest in funds? There are many good reasons. 1 Diversification Because the pooled money is invested in a range of underlying investments, such as shares, bonds, property, fixed deposits and so on, the risk is spread and reduced. Funds are generally less risky than investing directly in single shares. 2 Expert management Your money is in the hands of experienced, professional managers who are there to try and make sure that the fund delivers on its objective. 3 Access to new markets Certain funds allow you to get into markets that might be difficult to access through normal share trading, such as emerging markets. 4 Choice There are many funds available you re sure to find one that suits your investment objectives and risk profile. You will often have the option of income or accumulation units in your chosen fund. 5Liquidity Should you wish to redeem your fund at short notice at the current market price, you can. But you should remember that funds are generally viewed as a medium to long-term investment and you could get back less than you invested. 6 Simplicity Funds can remove a lot of the complexity involved in an investment decision and combine this with ease of access and ease of use.
What are funds? Funds are a form of collective investment that... lets you invest indirectly in company shares or other securities. With collective investments, any money that you and other investors put in is pooled together and invested on your behalf by professional fund managers. That pool is generally spread across a wide range of underlying investments, some of which you might notnormallybeabletogetholdofeasily such as investments outside of Nigeria. Collective investments are available to any type of investor whether you are a beginner or have experience in the markets. For those who aren t confident about making their own investment decisions, funds can be a great place to start because the investment decisions are made by experts. Just remember, funds should be viewed as a mid- to long-term investment. If you re not prepared to invest in a fund for at least five years, then it might not be the right investment for you. The price and value of investments fluctuate and you may get back less than the amount you invested. Funds can be a great place to start because the investment decisions are made by experts
Taking your next step Build your investment portfolio Once you ve established the level of risk you re happy with, and have thought about how to manage it, you need to construct a portfolio of investments designed to deliver the returns you ve set your sights on. A Financial Adviser can help you build a portfolio which suits your unique requirements. For most people looking beyond a simple savings account or pension, this usually means investing in managed funds. A managed fund is where lots of investors money is pooled and a professional dedicated investment manager makes the investment decisions on behalf of the group. Managed funds form the basis of most people s portfolios. Alternatives to managed funds include using a dedicated investment manager via our Investment Partnership Scheme or you can make your own decisions on which share to buy and sell, using a Stock Broking account. Managed Funds Some managed funds are all-in-one portfolio solutions they use a diverse range of investments structured to achieve a certain level of risk. For example, the is designed to be a diversified portfolio for someone who wants a medium level risk. It therefore holds a mix of equities, bonds, and property in the hope of providing a balanced growth on the investment. The suitability of these sorts of funds will depend on your circumstances and your attitude to risk. Dedicated Investment Manager IPS our Investment Partnership Scheme is a discretionary managed portfolio service, which means we make the day to day decisions, whilst taking an up to date collective investment approach to managing your money. Self managed investment Stockbroking Account- if you prefer to make your own decisions on which individual shares or funds to buy and sell, you could open a stock broking account.
What s stopping you? We are here to help you realize all of your investment goals and aspirations. Please contact us if you d like some more information about investment products and services. Call- 01 448 8888-01 4480847-8 Email: enquiries@gtbassetmanagement.com Email: enquiries@gtbassetmanagement.com www.gtbassetmanagement.com