Life mgt workshop (investment)


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Life mgt workshop (investment)

  1. 1. INVESTMENT Christopher Boachie
  2. 2. Course Content <ul><li>Introduction </li></ul><ul><li>What is investment? </li></ul><ul><li>What are some principles that govern ? savings/investment? </li></ul><ul><li>Why should one invest? </li></ul><ul><li>What kinds of investments exist? </li></ul><ul><li>How does one make a good investment decisions? (with practical illustrations) </li></ul>
  3. 3. Against the Future? <ul><li>The rich invest their money and spend the rest </li></ul><ul><li>The poor spend their money and invest the rest </li></ul>
  4. 4. Introduction <ul><li>The future is always uncertain, e.g. in today's global climate which spells uncertainty wherever you turn. </li></ul><ul><li>Just look at the credit crunch crisis </li></ul><ul><li>Because people were not prepared for a turbulent future, many have suffered the consequences. </li></ul><ul><li>This is the same for your finances. </li></ul>
  5. 5. Introduction <ul><li>Financial/ retirement planning actually work hand in hand and are assets that must be invested in or at least considered in the course of anyone's life. </li></ul><ul><li>Securing your future and making your money work for you are two valuable commodities for anyone. </li></ul>
  6. 6. What Is Investing? <ul><li>An investment is an asset or item with value that is purchased for income or capital appreciation. </li></ul><ul><li>It means putting fund into financial assets, sowing seeds on the financial farm, putting your money to work. </li></ul>
  7. 7. What Is Investing? <ul><li>The truth is there’s no magic to investing—and virtually anyone can learn to do it with just a little effort. For the sake of your lifelong financial well being, it’s important to make that effort. </li></ul>
  8. 8. Who is an Investor? <ul><li>Person who is not consumption oriented (Central disposition to Invest) </li></ul><ul><li>Somebody who thinks about and prepares for the future </li></ul><ul><li>Anybody who puts money (or assets) into something offering profitable returns, as interests, income or appreciation in Value. </li></ul><ul><li>benefits </li></ul>Who is an Investor?
  9. 9. Who is an Investor? <ul><li>In financial markets, an investor buys financial assets such as stocks, treasuries, mutual funds, fixed income securities etc </li></ul><ul><li>A person who makes a deliberate effort to grow money (asset) for future use </li></ul>
  10. 10. Principles governing investment <ul><li>To succeed as an investor isn't hard, but it takes planning and discipline. </li></ul><ul><li>What if you're not disciplined by nature? </li></ul><ul><li>Put together an investment plan and set it in motion. </li></ul>
  11. 11. Principles governing investment <ul><li>1. Plan Ahead Early retirement planning is the best option when preparing for your golden years. </li></ul><ul><li>Retirement is not going to just happen, at least not the way you dream of, so it is important to plan ahead and map out the road to a successful retirement that is similar to what you have always dreamed of. </li></ul>
  12. 12. Principles governing investment <ul><li>If you plan ahead and set goals, you will reach retirement with a nest egg that is the right size for your retirement needs, possibly even more. </li></ul><ul><li>Social security payment is usually not enough to depend on, so you have to plan ahead early in life to ensure your retirement needs will be met. </li></ul>
  13. 13. Principles governing investment <ul><li>2. Take Advantage Of Employer Provident Funds Good retirement planning includes taking full advantage of employer provident fund. This is free money that can add up to a very significant amount when compounding interest is taken into account. </li></ul>
  14. 14. Principles governing investment <ul><li>3. Diversity Is The Key </li></ul><ul><li>A quality investment planning guide should consider investment portfolio diversity. </li></ul><ul><li>Your portfolio should include a number of different investment types, to ensure that if one section of the market is performing poorly, you have other investments in areas that are doing very well. </li></ul>
  15. 15. Principles governing investment <ul><li>This will even out any losses and generally give you small investment gains each year, protecting your portfolio from large losses. </li></ul>
  16. 16. Principles governing investment <ul><li>4. Take Advantage Of All Tax Benefits Using good investment advice means taking advantage of all the possible tax benefits as well. Many returns from mutual funds are tax free. </li></ul>
  17. 17. Principles governing investment <ul><li>5. Start As Early As Possible </li></ul><ul><li>Early investment/retirement planning is crucial for a retirement lifestyle you will enjoy. </li></ul><ul><li>The costs of living will continue to rise, and many individuals want to retire early these days. </li></ul>
  18. 18. Principles governing investment <ul><li>Starting your retirement planning and investing as soon as possible will allow you to be flexible and have several different options when you get close to retirement age. </li></ul><ul><li>Starting early will let you receive more benefits and income from compounding interest, so you will end up with more in your investment accounts when the time comes to start using these funds. </li></ul>
  19. 19. Principles governing investment <ul><li>6. Be Realistic About Your Investment/Retirement Needs </li></ul><ul><li>A common investment/retirement planning mistake is to underestimate the actual costs of your retirement, education, housing, car, etc. </li></ul><ul><li>By ensuring that your costs are accurate or even a little inflated, you can guarantee that even with inflation your retirement needs and costs will still be met. </li></ul>
  20. 20. Principles governing investment <ul><li>7. Use Low Risk Long Term Investment Strategies Retirement planning advice and tips includes using low risk long term investment strategies for your retirement portfolio. </li></ul>
  21. 21. Principles governing investment <ul><li>Because these are funds that are needed in the future, you do not want to invest them in a high risk venture, regardless of how attractive the investment may seem to be. </li></ul><ul><li>Using low risk investments will protect you from the loss of your retirement funds. So your risk return analysis must be very sound. </li></ul>
  22. 22. Habits of an Investor <ul><li>Makes a conscious and deliberate effort to put money (asset) aside. </li></ul><ul><li>Is consistent in his investments </li></ul><ul><li>Regards small beginnings and can afford to set small amounts of money aside consistently </li></ul><ul><li>The astute investor is patient (No need to panic during short-term market fluctuations) </li></ul><ul><li>Updates his knowledge of the market (reads reports, listens to the business news etc) </li></ul>
  23. 23. Purpose of an investor <ul><li>Securing the future (by growing his assets) for </li></ul><ul><ul><li>Education </li></ul></ul><ul><ul><li>Marriage </li></ul></ul><ul><ul><li>Automobile </li></ul></ul><ul><ul><li>Retirement </li></ul></ul><ul><li>Building capital for entrepreneurial objectives </li></ul><ul><li>Leave an inheritance for his children’s children (the legacy mindset) </li></ul>
  24. 24. Characteristics of an astute investor <ul><li>Successful investors have clear objectives </li></ul><ul><li>They define their time horizon and determine what amount to contribute systematically. </li></ul><ul><li>All astute investors assess their risk tolerance and take calculated risk </li></ul><ul><li>Are consistent with their investments </li></ul><ul><li>Discipline is very important for all successful investors </li></ul><ul><li>Patience – don’t be a hurry to sell your investments </li></ul>
  25. 25. What should an investor look out for? <ul><li>Successful fund managers with a good track record </li></ul><ul><li>Yield on products (comparative returns etc) </li></ul><ul><li>Management fees </li></ul><ul><li>Trends in broad environment (macro-economy etc) </li></ul><ul><li>Diversification – don’t put all eggs into one basket. Look for products with good risk diversification </li></ul>
  26. 26. What an Investor should know <ul><li>The cycle of markets; how the market works etc </li></ul><ul><li>The risk-return trade off </li></ul><ul><li>Difference between real and nominal returns </li></ul><ul><li>Basic terminologies of financial markets </li></ul><ul><li>The financial products available and how they work </li></ul>
  27. 27. How do you Start? <ul><li>Where is the Money? </li></ul>
  28. 28. SHOW ME THE MONEY <ul><li>Bar – Beer Drinkers (Friday How Far) </li></ul><ul><li>Hairdressers – Once a month ? </li></ul><ul><li>Foreign ATMS </li></ul><ul><li>Bank Service Fees </li></ul><ul><li>Changing Cell Phones every year </li></ul><ul><li>Mobile Phone Units </li></ul><ul><li>Cigarettes </li></ul>
  29. 29. SHOW ME THE MONEY <ul><li>Summer Holidays </li></ul><ul><li>Walk , Bike, Tro-tro, Taxis </li></ul><ul><li>Soft Drinks </li></ul><ul><li>Car Wash </li></ul><ul><li>Shoe Shine </li></ul><ul><li>Late Lunch - Skip Dinner </li></ul><ul><li>Girl Friend (s)/ Boy Friend (s) </li></ul>
  30. 30. SHOW ME THE MONEY <ul><li>Night Clubbing </li></ul><ul><li>Coins, Small Change </li></ul><ul><li>Clothes – Levis and “T” Shirts </li></ul><ul><li>Funeral Cloth – One per year </li></ul>
  31. 31. What kinds of investments exist? <ul><li>Today’s Investment Channels </li></ul><ul><li>Treasuries, Currencies, Mutual Funds, Stocks, Bonds, Real Estate, and Business Venture </li></ul><ul><li>Others are: </li></ul><ul><li>T’BILLS (Short Term), MFUND (Short Term) </li></ul><ul><li>EPACK (Medium Term), SHARES (Long Term) </li></ul>
  32. 32. Banks Products and Services <ul><li>Databank </li></ul><ul><li>Ecobank </li></ul>
  33. 33. EPACK <ul><li>Epack – A Mutual Fund that Invests in Shares of Companies. </li></ul><ul><li>Simple strategy of investing in good companies who know what they are doing and at the right price. </li></ul><ul><li>Gains through, Price Appreciation, Capital </li></ul><ul><li>Gains & Dividends. </li></ul>
  34. 34. EPACK <ul><li>Long Term - 3 years </li></ul><ul><li>Opening Deposit – 500K Cedis </li></ul><ul><li>50K for 10 Months </li></ul><ul><li>Early Withdrawals Penalties Apply </li></ul><ul><li>Not guaranteed but average rate of return </li></ul><ul><li>over 10 years – 60% </li></ul><ul><li>Current rate – 25% </li></ul><ul><li>Major Projects – House, Car, Business </li></ul>
  35. 35. MFUND <ul><li>Money Market </li></ul><ul><li>Short Term – 6 weeks </li></ul><ul><li>Opening Deposit 500K – Can break down to </li></ul><ul><li>50 K per month for 10 months </li></ul><ul><li>No withdrawal penalties </li></ul><ul><li>Current rate of return – 14.21% </li></ul><ul><li>Alternative to Passbook savings accounts </li></ul>
  36. 36. Stocks <ul><li>Shares of Companies </li></ul><ul><li>Example, Unilever, BAT, SCB, Enterprise Insurance. </li></ul><ul><li>Prices differ </li></ul><ul><li>Advise to research companies before purchasing </li></ul><ul><li>Databank Brokerage – Most </li></ul><ul><li>Prominent Broker on the Exchange </li></ul>
  37. 37. Treasury Bills <ul><li>Money Market Instrument </li></ul><ul><li>Borrower – Government </li></ul><ul><li>Debt As opposed to Equity </li></ul><ul><li>Returns Guaranteed – Backed by the </li></ul><ul><li>Strength of the Government </li></ul>
  38. 38. How does one make good investment decisions? <ul><li>Practical examples </li></ul><ul><li>1. Capital Investment </li></ul><ul><li>A final year student in CUC is considering a capital investment in a project, where the estimated cash flows are as follows: </li></ul>
  39. 39. How does one make good investment decisions? <ul><ul><ul><li>Year Cash flow </li></ul></ul></ul><ul><li>GH¢ </li></ul><ul><li>0 (i.e. now) (100) </li></ul><ul><li>1 60 </li></ul><ul><li>2 80 </li></ul><ul><li>3 40 </li></ul><ul><li>4 30 </li></ul>
  40. 40. How does one make good investment decisions? <ul><li>The company’s cost of capital is 15%. You are required to calculate the NPV of the project and to assess whether it should be undertaken. </li></ul>
  41. 41. How does one make good investment decisions? <ul><li>2. Shares </li></ul><ul><li>A company listed on the Ghana Stock Exchange has just paid a dividend of GH¢0.25 per share. The return on equities in the risk class is 20%. Find the value of the shares assuming: </li></ul><ul><li>(i) No growth in dividend </li></ul><ul><li>(ii) Constant growth of 5% </li></ul>
  42. 42. How does one make good investment decisions? <ul><li>3. Treasury Bill </li></ul><ul><li>A Treasury bill maturing in 45 days sells at GH¢24,800 what is the face value of the T/Bill if the interest rate is 30% per annum? </li></ul>
  43. 43. Conclusion … <ul><li>A sower went out to sow his seed: and as he sowed, some fell by the way side; and it was trodden down, and the fowls of the air devoured it. </li></ul><ul><li>And some fell upon a rock; and as soon as it sprung up it withered away because it lacked moisture </li></ul>The Parable of The Sower Luke 8 : 5-8
  44. 44. The Parable of The Sower (cont’d) Luke 8 : 5-8 <ul><li>And some fell among thorns; and the thongs sprang up with it and choked it </li></ul><ul><li>And others fell on good ground and sprang up and bore fruit, one hundredfold. And when he said these things, he cried out and said, he that hath ears to hear, let him hear. </li></ul>
  45. 45. Thank you