Ojijo's investments club manual

Ojijo’s Investments Club Manual

Ojijo

Is it not time I got my money working for me?

Ojijo’s Investment Clubs Manual!

139
Page
Dedicated to the Ojijo Family , and to the families and friends who wish to find financial
freedom through investing together!

Book Title: Ojijo’s Investment Clubs Manual

Copyright © 2010, Ojijo. All rights reserved. This work is copyrighted by the author. No parts

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of this publication maybe reproduced, stored in a retrieval system, or transmitted in any form,
without permission of the publisher.

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FIRST EDITION, 2010

For enquiries or orders, Email ojijop@gmail.com or Call (256) 701 100 059

BOOK TITLES BY OJIJO

Ojijo’s Personal Development Books

How to Identify & Develop My Talent, My Profession & My Career
The Gift of E11even Moves to Make Me Wealthy
Open Religion: My Religion is the Best Religion!
Seventy-7 Moves of a Sexy Woman
99 Ways to Make People Happy!

Ojijo’s Financial Literacy & Investment Books

Ojijo’s Guide to Alternative Investments (Property/Fixed Assets, Insurance, Forex, Private Equity,
Collective Investment Schemes, Collectibles & Commodities)
Making My Child Financially Intelligent: Money Lessons by Age Group (from 4-18 yrs)
Ojijo’s Guide to Financial Instruments & Financial Investments
Ojijo’s Guide to Entrepreneurship & Raising Capital
Ojijo’s Investment Club Manual
Ojijo’s Other Books

Stupid & Unintelligent: The Inferior Mindset of Black Leaders to Whites and the Role of the New
African President!
The Luo Nation: History, Culture & Conversational Phrases of the Luo Peoples of Africa
Tuongee Kiswahili Conversational Phrasebook (with Audio CDs & DVDs)
Ojijo’s Guide Book To Travel & Experience the World!
Fireplace Stories: Ojijo’s Performance Poems
The Mungiki


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About Ojijo’s Investments Club Manual

This is an essential reference for all investment clubs - both new and established - to
ensure that they are run correctly and efficiently. A successful investment club needs to
run smoothly with a great amount of reliability and confidence among its members.
When all members of the club expect and meet the same requirements, everyone works
together in a way that induces success and profitability. Ojijo’s Investment Clubs Manual
is the investment clubs’ bible and tells me everything I need to know about joining,
starting or running a successful investments club. The vast majority of investments clubs
in East Africa region swear by this guide.


Contents!

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WHAT IS AN INVESTMENT CLUB?................................................................................6
INVESTMENT CLUB IS AN ORGANIZED GROUP............................................................................................................6
INVESTMENT CLUB HAS THE SAME DREAM, VISION AND OBJECTIVES ................................................................................6
AN INVESTMENT CLUB IS A LEGAL ENTITY ..............................................................................................................9
INVESTMENT CLUB INVESTS, IT IS A BUSINESS, NOT WELFARE CLUB ..............................................................................11
TYPES OF INVESTMENT CLUBS ..........................................................................................................................46
WHY AN INVESTMENT CLUB? ................................................................................50
NETWORKING .............................................................................................................................................50
LEARNING ..................................................................................................................................................52
EARNING ...................................................................................................................................................54
HOW AN INVESTMENT CLUB WORKS/CLUB ADMINISTRATION......................58
NETWORKING/MEETING..................................................................................................................................58
LEARNING/EDUCATION....................................................................................................................................71
INVESTMENT/EARNING ...................................................................................................................................73
JOINING AN INVESTMENT CLUB.................................................................................86
HOW IS IT ORGANIZED/ADMINISTRATION? ...........................................................................................................86
IS IT NETWORKING?......................................................................................................................................87
IS IT EARNING?............................................................................................................................................87
STARTING AN INVESTMENTS CLUB (THE 7 STEPS)..............................................89
STEP 1: THINKING BIG (DEVELOPING THE IDEA TO FOUND THE CLUB) ............................................................................89
STEP 2: FINDING MEMBERS FOR MY INVESTMENT CLUB............................................................................................92
STEP 3: THE INAUGURAL CLUB MEETING (1ST MEETING) ......................................................................................93
STEP 4: INVESTMENT PRINCIPLES & CLUB ADMINISTRATION (2ND MEETING)....................................................................99
STEP 5: APPROVAL OF DOCUMENTS & BEGINNING OF RESEARCH (3RD MEETING)............................................................101
STEP 6: THE FIRST INVESTMENT/TRADE (4TH MEETING)........................................................................................101
STEP 7: JOINING AN INVESTMENT CLUB ASSOCIATION..............................................................................................102
...........................................................................................................................................104
SAMPLE INVESTMENT CLUB DOCUMENTS............................................................104
SAMPLE INVESTMENT CLUB PARTNERSHIP AGREEMENT.............................................................................................104
SAMPLE CLUB RULES & REGULATIONS...............................................................................................................112
SAMPLE INVESTMENTS CLUBS STRATEGIC PLAN...............................................124
...........................................................................................................................................................126
FINANCIAL LITERACY & PERSONAL DEVELOPMENT BOOKS .........................133
MAIN READING TEXTS..................................................................................................................................133
ADDITIONAL READING TEXTS ..........................................................................................................................133


WHAT IS AN INVESTMENT CLUB?

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INVESTMENT CLUB IS AN ORGANIZED GROUP

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People are becoming keener about taking advantage of available opportunities to
pool money for investment. Groups are emerging as a good vehicle to collectively
achieve investment goals and create discipline to save and invest in ventures that
an individual cannot manage. The members do not need to have any prior
knowledge. Groups offer the structure and support that many people need to get
started investing, and groups make it possible to get into the market without a
big initial investment. The fact that a group can accumulate large investment
amounts from small individual investments also helps reduce the exposure to
risk for individual investors. Groups formed for investment purposes are called
investment clubs.

An investment club is an organized group of individuals, usually comprised of
friends, coworkers, church members, neighbors or family members, who meet on
a regular basis to network, learn and pool their spare cash and invest in the stock
market and/or other investment opportunities.

When I am part of an investment club, each club member contributes a certain
amount of money regularly, mostly each month, which is deposited on a joint
investment bank account. Then, using the account, the members of the club agree
on where to invest our savings: purchase of land with intention to sell at a profit,
shares, rental property, businesses etc.

INVESTMENT CLUB HAS THE SAME DREAM, VISION AND OBJECTIVES

¥ The Dream, Vision & Mission
• One Dream

An investment club must have a dream, and the members must share in this dream.
Sameness of dream creates harmony in club operations. The Bible beautifully
captures the importance of harmony in the team thus; ‘can two walk together unless
they agree?’Our dream is the ultimate goal of our coming together, the where we
are going, and the destination we seek. It will be the basic building block of our
success in investing. Our dream is that which we want so badly, that we are
willing to pay any price to achieve it. It is that which lingers in our mind 24 hours
a day. It is something we think about every moment. Zadok Rabinowitz correctly
said that ‘A man's dreams are an index to his greatness.’ Konrad Adenauer was
correct when he said that, ‘We all live under the same sky, but we do not have the same
horizon.’ Muhammad Ali, the boxing legend, and three-time World Heavyweight
Champion, confessed that ‘Champions are not made in gyms. Champions are made
from something they have deep inside them; a desire, a dream.’ Before we start an

investment club, we must find our dream and stand by it. ‘A man who stands for
nothing will fall for anything.’ said Malcolm X, the African-American Muslim

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minister, public speaker, and human rights activist. Carl Sandburg, the American
writer and editor, best known for his poetry, said that ‘Nothing happens unless first

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a dream.’

Our dream is the compelling reason why we will wake up and read about
investments, carry out research and responsibilities in the investment club, and
come for meetings early enough and consistently. It is the reason why we wake
up early, go to meetings, and save for investments. Our dream is more important
than what we do, or how we do it. Thomas Edison dreamed of a lamp that could
be operated by electricity, began where he stood to put his dream into action and
despite a thousand failures, he stood by that dream until he made it a physical
reality. The power of a dream! Thoreau phrased it well; ‘dreams are the touchstone
of our character’. Angelo D’Amico was in agreement when he wrote that, ‘if the
dream is big enough, the facts do not count.’ The dream of every investment club member
is financial freedom; financial independence.

• One Vision

Our vision is the picture of our dreams realized. Our dream is based on our vision.
Helen Keller, the blind, deaf and dumb motivational speaker and teacher who
was the first such disabled person to earn a bachelors degree was once asked,
‘what would be worse than being born blind’, and she responded, ‘to have sight but no
vision’. The vision is the key that will keep us focused. Hubert H. Humphrey said,
‘What you see is what you can be.’ Indeed, half the battle in life of getting what we
want is worn when we know what it is that we want; the other half is worn when
we do what we must do to get it. Napoleon Hill advises us thus, ‘Cherish your
visions and dreams, as they are the blue print to your achievement.’ The vision of an
investment club is a state of financial independence.

• One Mission

The mission of an investment club is to provide a program of sound investment
information, networking, education and support that helps create successful
lifetime investors and financially free individuals. By becoming confident and
knowledgeable investors, the members are empowered to build better financial
futures for themselves and their families. A mission statement for an investment
club is a simple way for club members to stay focused and aware of the goals that
they have set out for their investment club. The mission statement will outline
clearly how the investment club is going to be organized and how it will or is
going to reach the goals. The mission statement should be written down by each
member of the investment club, and any future members should have a copy of
the mission statement. The mission of the investment club is to make each member
financially independent.

¥ The Goals & Objectives

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• One Objective

The main objective of the investment club is to pool money to invest in another

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venture to make more money. Investment clubs are a collection of like-minded
people who share a common objective, making smart investment decisions for
mutual economic benefit of members. It is very important to have common objectives
in order to measure achievement and create a healthy team atmosphere.
Everything is shared-from research to investment choices to successes and
failures. The investment club will take my money and use it to make more money
for me. As club members, we agree on financial strategy and mutual financial
objectives that are strictly adhered to. This makes it easier to select opportunities
that are right for the club. The club hence serves to pique the interest of members
with regard to investments, the world of finance, and the current events in the
world around them. The club also emphasizes cross-disciplinary skills such as
research, report writing, leadership skills development and public speaking. In
addition, club involvement also leads to an increasing financial awareness related
to common sense saving, budgeting; long-range planning, social networking and
goal setting that will benefit the club members in the future.

• The Three Goals of an Investment Club

Most Clubs have three stated goals: First, to learn about investing generally, but with
specific reference to financial instruments, chief amongst them being stocks;
Second, to give the members a real-life experience in trading stocks and other
investments and hence make a return on their investments and become rich; and
Third, to provide opportunities to network with fellow investors, industry leaders
and successful investors. If the club has a definitive game plan and the members
on board all share the same goal then it has a much better chance of success. All
members of the club should have the same philosophy about investing.

If some members of the group are only interested in making a profit, instead of
learning more about investing and the details involved, there will be a divided set
of goals. Each member of the investment club needs to have the same goal in
mind and the same methods of achieving that goal. Members of the investment
club should be clear on what the long term goals of the club are all about. It is
through constant focusing on the above three goals that the club will attract them
and be successful. When these goals are clear, then they will drive, push, and pull
the club, even when the weather is sickly, even when the papers are negative,
even when the ‘friends’ are laughing at members, even when there is no feeling of
moving on.

Then the club should create benchmarks or milestones that members can use to
measure the progress and know whether the club is on track. The club’s success
will be the result of actions taken every day. The club needs to meet deadlines

and goals. Members should keep in mind that the ultimate aim of an investment
club is to provide more enjoyment in their life rather than taking away what is

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already there. This is supposed to be an exciting venture so members must make
sure that they enjoy every second of it. If it simply becomes yet another source of

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stress, then it ultimately is not something worth holding onto. In achieving the
goals, the club should apply the Pareto Principle, to give 80% of the club’s energy,
time, skills and money to the 20% of the most important tasks, the priorities. The
club should set goals that exploit the strengths and minimize the weaknesses of
the members. This will allow the club to realize and make full use of its
opportunities, and control the threats of failure. There should be an equal
amount of growth and stability that is agreed upon.

AN INVESTMENT CLUB IS A LEGAL ENTITY

¥ Why the Legal Entity?

An Investment Club ought to be a legal entity. A legal entity is an organization that
the law treats as if it were a person, capable of entering into contracts and of
being sued and in includes, but is not limited to, an individual (adult and sane),
partnership, association, company, corporation and trust.

Unlike independent individuals investing directly into the stock market, an
investment club pools money from each member, and hence the need for clarity
of rights and duties of the members. The legal entity enables the investment clubs
to have rules and a constitution to ensure smooth running and for the protection
of its members by defining rights and duties of each member. Further, once it is
legally established, standardized accounting records can be easily kept for
it. Additionally, the legal entity also provides the investment club with a solid
structure to ensure the club's agenda is carried out efficiently and without
friction.

¥ Types of Legal Entity: Partnership, Corporations, Cooperatives or
Association

An investment club can be registered as a corporation, cooperative, partnership or
association.

A company/corporation is a form of business organization/association that is
separate and distinct from its owners. Corporations have the right to enter into
contracts, loan and borrow money, sue and be sued, hire employees, own assets
and pay taxes. The most important aspect of a corporation is limited liability, that
is, the shareholders are not held personally liable for the company's debts. A
corporation is created (incorporated) by a group of shareholders who have
ownership of the corporation, represented by their holding of common stock.
Shareholders elect a board of directors (generally receiving one vote per share)

who appoint and oversee management of the corporation. While an investment
club could incorporate, the double tax treatment on corporate distributions makes

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the corporate structure less desirable than a partnership.

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A partnership is a business organization in which two or more individuals manage
and operate the business. Partners (owners) share amongst each other the profits
or losses of the business in proportion to their shares. Typically, a general
partnership does not generate any tax liability on its own; instead, any tax
liability is passed through to members each year. An investment club can register
as a partnership and then when the portfolio has evolved over the years (and is no
longer limited to stocks and shares but has expanded to include other investment
opportunities to incorporate the skills and interests of all members), the club can register
a limited company arm for the purpose of pursuing business ventures and
alternative investments outside the stock market.

Further, an investment club can be registered as a cooperative. This is especially
relevant when the members are more than 20, in which case we cannot register as
a partnership. Further, it works where we are more than fifty members, in which
case we cannot register as private limited company anymore.

An investment club could also be registered as an association with the institution
where the members are enrolled, for instance, at a university. An association is
any group of people who have joined together for a particular purpose, ranging
from social to business, and usually meant to be a continuing organization. It can
be formal, with rules and/or by-laws, membership requirements and other
trappings of an organization, or it can be a collection of people without structure.
An association is not a legally-established corporation or a partnership.


INVESTMENT CLUB INVESTS, IT IS A BUSINESS, NOT WELFARE CLUB

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Investment clubs are formed by people in the business of investment. "The Social

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Responsibility of Business is to Increase its Profits" so said Milton Friedman, the great
economist. He repeated that, ‘The business of business is business.’ The purpose of
clubs is to make money, not welfare. An investment club is a business. It is not
just a hobby but an actual business venture where I will be working together with
other people on investing our money. An Investment club is formed by people in
the business of investment; people who want to make money. The clubs provide
venues for training and education of members in the ways of the business world.
Club members help each other out, and so they enjoy more security in their
investments.

Some investments that members engage in include purchase of land with intention
to sell at a profit, shares, rental property, businesses etc. Investment clubs are run
in a democratic fashion. Members, as a collective, elect their officers. They also
vote on stocks, bonds or securities that they want to purchase, how many they want
to buy, whether or not they want to sell, whether or not the interest rate is
conducive to a comfortable amount of growth. There should be an understanding
established of what amount of the profits that are realized from investments are
going to be held and which amount is going to be reinvested immediately back
into the stock market. Investment clubs are dedicated for those who are looking
for a secondary income or for those, who want to get FINANCIAL FREEDOM
and FINANCIAL INDEPENDENCE.

¥ What Is Investing?

To invest is to purchase an asset (something that has value that will produce income or
appreciate in value and when liquidated, will realize more than was spent in acquiring it).

Investing is the commitment of money or capital to purchase assets in order to gain
profitable returns in form of interest, income, or appreciation of the value of the
instrument. To invest is related to saving or deferring consumption, BUT with the
aim of that money so saved and not consumed being used to bring more money.
Robert Kiyosaki taught that, ‘to invest is to mind my own business.’

• Investing Is Not Gambling

Investing is not gambling. Gambling is putting money at risk by betting on an
uncertain outcome with the hope that I might win money. True investing does
not happen without some action on my part. A "real" investor does not simply
throw his or her money at any random investment; to be a real investor I must
perform thorough analysis and commit capital only when there is a reasonable
expectation of profit. Yes, there still is risk, and there are no guarantees, but

investing is more than simply hoping Lady Luck is on my side. Investing is not a
get-rich-quick scheme.

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¥ Two Types of Investors & Investing

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There are two broad types of investing and investors: There are two basic types and
broadest forms of investing. Investors can be loaners or owners. It is either an equity
investment or a debt investment.

€ Loaners invest in debt instruments. A debt investment is where I loan my
money to someone else for an amount called interest. These may take the
form of a bank savings account, a certificate of deposit, Treasury notes or
corporate bonds among others. A debt investment is unique in that the
borrower is obligated to the debtor to pay the money back. Debt investments
give me a lower return than equity investments.

€ Owners invest in equity instruments. An equity investment is where I loan my
money to someone else for a share of the profits he receives from the way he
uses the money. These investments involve ownership of all or part of
tangible or intangible assets such as real estate, intellectual property or stock
in a company. An equity investment differs from a debt investment in that
there is no obligation on the part of the debtor to pay me back. Debt
investments are also lower in terms of risk than similar equity investments.

¥ Investment Vehicles

There are many different ways I can go about making an investment. There are a
wide variety of different types of investment products and new ones are
emerging all the time. These options are referred to as "investment vehicles," or
“investment products”, which is just another way of saying "a way to invest." Each
of these investments is something I purchase or place my money into in return for
the interest that is generated over time and paid back to me. These vehicles are
grouped according to the type of asset invested in. There are nine general
categories of such investment vehicles, based on nine categories of assets as
classified by Ojijo in his all time classic, The Gift of E11even Moves to Make Me
Wealthy!

These nine areas are referred to as The Ojijo 9; and they are divided into three broad
categories, namely, Personal Development/Self-Help; Traditional Assets; and
Alternative Assets:

1. Personal Development/Self-Help, which is the greatest form of investment,
involves engaging in activities which enable me to identify & develop my

talents and skills; realize my potential; and achieve my dreams & aspirations
so as to enhance the quality of my life and contribute to the community. Two

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guides to personal development are Ojijo’s The Gift of E11even Moves to Make
Me Wealthy, which teaches me the eleven areas that I need to develop to enjoy

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the complete and wealthy lifestyle, which are health, relationships, riches/money,
career, adventure, happiness, dreams & goals, positive attitude, controlling the day,
helping people and being peaceful); and Ojijo’s Guide to Identify & Develop My
Talent, My Profession & My Career.

The traditional assets/investment products include,

1. Financial Instruments, also called securities, are a real (hard copy) or virtual
(electronic) documents representing a legal agreement/contract involving a
monetary value. They include those which indicate that someone owes me
money (Debt Instruments/Bonds), or that I own part of some business process
(Equity Instruments/Shares), or cash investment, whose values are determined
directly by the market (Bank Deposits/Bank Accounts) or those that which are
linked to a specific asset or indicator/variable and are used to trade financial
risks (Financial Derivatives- options, futures, forwards and swaps). A practical
book to read for further knowledge in investing in financial assets is Ojijo’s
Guide to Financial Instruments & Financial Investment.

Alternative Assets, which are assets other than traditional investments (stocks, bonds
or cash). A practical book to read for further knowledge in fixed asset investing
is Ojijo’s Guide to Alternative Investments (Property/Fixed Assets, Insurance,
Forex, Private Equity, Collective Investment Schemes, Collectibles &
Commodities). Alternative assets include;

1. Collective Investment Scheme (CIS), is a pool of money from various investors
for investing in various assets. It can be a professional scheme, managed by
handled by an individual, fund manager, group, bank, or company, called
investment company, and such professionally managed schemes can be closed-
ended (limited number of shares issued once), open ended /mutual funds (open for
new investors to buy shares). A practical book for identifying and investing in
investment companies is Ojijo’s Guide to Alternative Investments (Property/
Fixed Assets, Insurance, Forex, Private Equity, Collective Investment
Schemes, Collectibles & Commodities). Collective Investment Schemes can also
be self-managed by the members pooling the resources together, called
investment clubs, which allow members to also learn and network. A practical
book to read for further knowledge in forming, joining and running an
investment club is Ojijo’s Investments Clubs Manual.
2. Property/Fixed Assets, which includes long-term tangible/physical assets (such
as machinery, land, buildings, equipments, vehicles), or intangible/technological
asset, which is a tool, technique, craft, system or method of organization in

order to solve a problem or serve some purpose. Technology Assets can also
be in software or computer application form, in which case they are called

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Information Technology/IT Assets (commonly referred to as software).
Collectibles, which are objects regarded as being of value or interest, either

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3.
because they are old/antiques, or they are specially manufactured to be
collectibles, including art, antiques, coins and stamps;
4. Commodities, which are naturally occurring/raw/primary products, and
include agricultural products, also called soft commodities (soya, grains,
vegetables, etc); energy products (oil, gas, electricity and green energy); base metals
(copper, aluminum, iron, etc); and precious minerals (gold, silver, diamond,
uranium, palladium and platinum.
5. Private Equity, which involves injecting working capital to start-up or
operating private companies and owning equity/shares for a period until
returns are collected and is done by venture capital firms, private equity funds
or angel investors through leveraged buyouts, venture capital, growth capital,
distressed investments and/or mezzanine capital;
6. Insurance Assets, which are insurance products that have both a protection as
well as an investment component such as endowment plans, pension plans and
investment bonds; and
7. Forex Investments, involves is trading currencies from different countries
against each other. The foreign exchange market, which is usually known as
"forex" or "FX," is the largest financial market in the world.

It does not matter which method I choose for investing my money, the goal is always
to put my money to work so it earns me an additional profit. Even though this is a
simple idea; it is the most important concept for me to understand.

¥ Why Bother Investing?
•
• Investing Makes Me Rich

People invest because they want to increase their personal freedom, sense of security
and ability to afford the things they want in life. Investing allows my child to take
the money he has saved, and grow it, by creating his own financial portfolio.
Investing is about making his money work for him.

When people invest, they spare money to offset the effect of inflation on idle cash as
well as to benefit from an additional source of income and capital appreciation.
Everybody wants more money. Investing allows him to take the money he has
saved, and grow it, by creating his own financial portfolio. The only way to be
rich is to invest and have assets. King Solomon knew it several millennia ago
when he wrote, ‘the rich man’s strength is in his city’. The rich man’s city is his
assets. An asset is any item, of value, usually purchased, or equivalently a deposit
is made in a bank, in hopes of getting a future return or interest from it. An asset
is expected to give returns without any work on the asset. The rich do not work

for money. The rich work to build assets that will make money work for them.
Riches protect the rich from pestilence of poverty. All rich people have assets.

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Whether they inherited it, married into it, won it, borrowed it, created it, or (God
forbid) stole it, they all have assets. Assets leverage time and effort, so that money

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comes passively, even when the investor is not working.

• Investing Makes My Money Work For Me!

To become rich and financially secure, I need to mind my own business; I need to
invest. I need to have my own business. Without my own business, I have no
financial foundation. And without financial foundation, I will be poor, broke and
miserable. Investing is the science of money making money. As Benjamin Franklin
rightly noted, "Money makes Money, and the Money that Money makes, makes more
Money."

Investing is about making my money work for me. Investing means putting my money to
work for me. Essentially, it is a different way to think about how to make money.
Growing up, most of us were taught that we can earn an income only by getting a
job and working. And that is exactly what most of us do; but there is one big
problem with this: if we want more money, we have to work more hours using
more effort. However, there is a limit to how many hours a day we can work, not
to mention the fact that having a bunch of money is no fun if we do not have the
leisure time to enjoy it.

• Investing Leverages Time and Effort

Since I cannot create a duplicate of myself to increase my working time and effort; I
need to send an extension of myself - my money (and hence time and effort) - to
work for me. This is called investing, ‘putting my money to work for me’. ’That way,
while he is putting in hours for my employer, or even mowing my lawn, sleeping,
reading the paper or socializing with friends, he is becoming rich because my
money is making more money for me elsewhere. Quite simply, making my
money work for me maximizes my earning potential whether or not I receive a
raise, decide to work overtime or look for a higher-paying job. This leverages my
time and effort, giving me more hours and effort I would have had alone.

• Taking Control of My Finances

Taking control of my personal finances will take work, and, yes, there will be a
learning curve. But the rewards will far outweigh the required effort. Contrary to
popular belief, I do not have to allow banks, bosses or investment professionals to
push my money in directions that I do not understand. After all, no one is in a
better position than I am to know what is best for me and my money.

Investing is one of the major 'missing pieces' in many financial education programs. I
am taught about saving but not about investing in assets that will produce

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passive income for me. Saving to purchase an item he really wants is not as
difficult as it may seem at first if I use a system, and it feels great when I do reach

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my savings goals. I will always have money for continued education. I am less
likely to develop the habit of feeling guilty for spending my own money; an
emotion many adults suffer from.

¥ The Ojijo 9 (The Nine Fundamental Principles of Investing)

Investing is guided by certain core principles which when followed, will lead to
successful investing and becoming rich and financially independent. The
principles, herein referred to as The Ojijo 9, or The Nine Fundamental Principles of
Investing, are as below:

• Principle 1: Dreaming, Thinking Big & Goal Setting!

To invest is to make my money make money for me. Before I start investing, I must
be clear of how much money I want to invest, and how much money I want to
get in return. I must know exactly how much I want. It is through constant
focusing on what I want in this life that I will attract it. It must be crystal clear in
my mind; what it is I seek. Then it will drive me, push me, and pull me, even when
the weather is sickly, even when the papers are negative, even when the ‘friends’
are laughing at me, even when I do not have the feeling of moving on. After all,
the good life I am seeking is right here. Whatever I am seeking is seeking me. I
create my own reality. This is my dream; the dream. Napoleon Hill, the American
author and one of the earliest producers of the modern genre of personal-success
literature, in his famous work, Think and Grow Rich, advises us to constantly keep
in our minds that, ‘The starting point of all achievement is desire. Weak desires bring
weak results, just as a small amount of fire makes a small amount of heat.’ My dream
must be big, a big dream. And I must hold on to it. As Benjamin Franklin said, ‘I
will not be like other men, who die at age 25, because they stop dreaming.’ Why should I
not dream? I am encouraged by George Bernard Shaw when he wrote, ‘You see
things that are; and you ask ‘Why?’ But I dream things that never were; and I ask ‘Why
not?’

Life in itself knows no limits or boundaries. Life is infinite and free and contains
within itself all possibilities. Life is meant to be abundant in all spheres. The
concept of life as limitation represents ignorance of self and fear, and it is this fear
that is the cause of all dis-ease in my life. ‘Life is phenomenal, a magnificent trip’, Dr.
Norman Peale says. Life is free and so am I. This is my life I am writing down. I
am the Michelangelo of my life, I sculptor my image, the image I want of myself.
I will paint my own reality, I will choose the colour of the eye shades I want to
wear, and I will see this life as I want.

• What Is My Dream?

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My dream is the vision, the ultimate goal of my life, the where I am going, and the
destination I seek. It is the basic building block of my success. Helen Keller, the

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blind, deaf and dumb motivational speaker and teacher was once asked, ‘what
would be worse than being born blind’, and she responded, ‘to have sight but no
vision’. The vision is the key that will keep me focused. Hubert H. Humphrey
said, ‘What you see is what you can be.’ Indeed, half the battle in life of getting what
I want is worn when I know what it is I want; the other half is worn when I do
what I must do to get it.

My dream is what I want so badly, that I am willing to pay any price to achieve it. It
is that which lingers in my mind 24 hours a day. It is something I think about
every moment. Zadok Rabinowitz correctly said that ‘A man's dreams are an index
to his greatness.’ Konrad Adenauer was correct when he said that, ‘We all live
under the same sky, but we do not have the same horizon.’ Muhammad Ali, the boxing
legend, and three-time World Heavyweight Champion, confessed that,
‘Champions are not made in gyms. Champions are made from something they have deep
inside them a desire, a vision, a dream.’ Today, I must find my dream and stand by
it. ‘A man who stands for nothing will fall for anything.’ said Malcolm X, the African-
American Muslim minister, public speaker, and human rights activist.

My dream is the compelling reason why I do what I do every day. It is the reason
why I wake up early, go to school or go to work every day. Why I do something
is more important than what I do, or how I do it. Thomas Edison dreamed of a
lamp that could be operated by electricity, began where he stood to put his
dream into action and despite a thousand failures, he stood by that dream until he
made it a physical reality. The power of a dream! Thoreau phrased it well;
‘dreams are the touchstone of our character’. Angelo D’Amico was in agreement
when he wrote that, ‘if the dream is big enough, the facts do not count.’ Napoleon Hill
advises us thus, ‘Cherish your visions and dreams, as they are the blue print to your
achievement.’ My dream! Carl Sandburg, the American writer and editor, best
known for his poetry, said that ‘Nothing happens unless first a dream.’

My dream gives meaning to my actions; it explains my activities the whole day. My
dream is the painting of what I want my life to be like in all segments, whether it
is in my relationships, my money, my career, my business, my talents or my
spirituality. Henry David Thoreau said that ‘…if one advances confidently in the
direction of his dreams, and endeavors to live the life he has imagined, he will meet with
success unexpected in common hours…’ I have got to have a dream I am willing to
work hard for, and fight for.

When I know what I want, and how badly I want it, then I will focus on it, work
towards it, and subsequently achieve it. I will never have anything until I
discover what it is I want. My dream will make me passionate and positive about

my goals and to do’s, and this will rub onto other people around me as they see
the energy in me. Indeed, if I will move confidently in the direction of my

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dreams, and endeavor to live the life that I dream, I will meet with the life that I
imagine in common alleys.

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• The Potential To Achieve My Dream Lies
In My Thought!

My dream is a result of my thoughts. It is a creation of my thoughts. The Buddha
said that, ‘we are what we think. All that we are arises with our thoughts. With our
thoughts, we make the world’. Thoughts become things, as all that I see today, were
at one time imaginations in people’s minds, imaginations which became realities.
W. Clement Stone, the businessman, philanthropist and self-help book author
said that ‘whatever the mind of man can conceive, it can achieve’. Our realities are a
product of our thoughts.

What I am today is a result of what I thought and imagined yesterday. ‘Man, alone,
has the power to transform his thoughts into physical reality; man, alone, can dream and
make his dreams come true’, said Napoleon Hill. Indeed, ‘an invasion of armies can be
resisted, but not an idea whose time has come’, so said Victor-Marie Hugo, the French
poet, playwright, novelist, essayist, visual artist, statesman and human rights
activist. The strength of an idea is also reflected in the fear it had in the minds of
past dictators. ‘Ideas are more powerful than guns. We would not let our enemies have
guns, why should we let them have ideas.’ said Joseph Stalin, the first General
Secretary of the Communist Party of the Soviet Union's Central Committee and
leader of the Soviet Union after Lenin. It is in my mind, through my ideas, that
the solutions to my problems shall be found. Bantu Steve Biko, the martyr and
symbol of black resistance to the oppressive Apartheid regime and the founder of
the Black Consciousness Movement in South Africa, noted that, ‘The most potent
weapon in the hands of the oppressor is the mind of the oppressed.’ All I need is just one
idea. One idea!

Jakob Böhme, the German Christian mystic and theologian correctly stated that, ‘our
body is the product of our own thoughts’. To gain insight and understanding of self, I
have to realize and acknowledge that both negative and positive forces co-exist
within me. That which I call good or evil is nothing more than a product of my
own imagination. My life will unfold and evolve through thought or
consciousness. The creative thinker dwells within me, forever revealing itself to
me in manifested form. Henry Ford, the American founder of the Ford Motor
Company and father of modern assembly lines used in mass production was
right, ‘Whether I think I can or I cannot, either way I am right.’ Bryan Tracy said that
‘All successful men and women are big dreamers. They imagine what their future could
be, ideal in every respect, and then they work every day toward their distant vision, that
goal.’

Today, I will become a no-limit person! I believe in Mark Twain, ‘it matters not the
size of the dog in the fight, it's the size of the fight in the dog’. I can change my life by

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changing the way I think about my potential. Robert Nesta ‘Bob’ Marley, the
Jamaican reggae singer-songwriter and musician, who spearheaded the

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Rastafarian movement to the worldwide audience, asked that we, ‘Emancipate
ourselves from mental slavery. None but ourselves can free our minds.’ Bruce Lee, the
great karate teacher, actor and legend, once remembered a lesson given to him by
his master thus; ‘if you learn to adapt, you will never lose a fight’. Charles Darwin
wrote that, ‘It’s not the strongest of the species that will survive, or the most intelligent,
but the ones most responsive to change.’ And Mohandas Gandhi agreed with him
that, ‘a man is but the product of his thoughts; what he thinks, he becomes.’

Today, I will open new doors to unlimited possibilities and put myself on the road
to a better, more fulfilling professional and personal life by thinking positive
thoughts. Napoleon Hill rightly noted that, ‘more gold has been mined from the
thoughts of men than has ever been taken from the earth.’

• I Will Visualize My Dream Lifestyle!

‘Without a vision, a people perish’ the Bible reminds us. Today, I will visualize the
dream lifestyle I want. I will close my eyes, relax, smile, and calmly visualize
myself having achieved the dream of my life. I will see my goal as though it were
already a reality. Dr. Norman Peale said, ‘When you visualize, you materialize’. For
a minute, several minutes, I will see myself with my dream, and then the whole
day today, I will talk, walk, sit and act as if I have achieved my dream. The more
I do this, the more my mind gets tuned to this lifestyle, the more I develop a
positive attitude, positive thoughts and positive emotions. This state of positive
and vibrant and happy moods will make it easier for me to get what it is I want;
to acquire what it is I need. W. Clement Stone can be quoted yet again, ‘whatever
the mind of man can conceive and believe, it can achieve’.

• I Will Believe In My Dream!

John Stuart Mill, the great jurist and philosopher said that ‘one person with belief is
equal in force to ninety-nine who only have interest’. He was right! And so was Fidel
Castro, leader of the Cuban Revolution and the President of the Council of State
of Cuba when he said that, ‘I began revolution with 82 men. If I had to do it again, I’d
do it with 10 or 15 with absolute faith. It does not matter how small you are if you have
faith and plan of action.’ Today I will believe in my dream and my goals. I will set
my goals and then have faith that I am going to achieve my dream. I must believe
I will achieve it, after all, I am meant to live a great and happy life; we all are
meant to live great and happy lives. I will believe I can have the dream lifestyle I
want, I will believe that I deserve it, and I will believe that it is possible to live a
good life. Warren Buffet once said that, ‘I always knew I was going to be rich. I don't
think I ever doubted it for a minute.’

To believe my dream, I will set realistic, believable goals. Goals I can believe in. My
dream is only my dream if I believe I am going to achieve it, otherwise, it is just a

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wish. Eleanor Roosevelt noted this and wrote, ‘the future belongs to those who
believe in the beauty of their dreams’. I will believe that I can achieve it, and I will

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believe that I deserve it.

Today, I will believe that no one, not even me, knows what will happen in the next
minute, no one knows whether I will be successful or not in the next venture, in
my business, in my relationships, so, I will be positive and think I am going to
succeed. After all, if I do not know the outcome, why suppose it will be negative?
Napoleon Hill taught that, ‘no one is ready for anything until he believes he can
acquire it’. The state of mind must be belief, not merely wish or hope. Belief is a
powerful and important tool to achieving my dream. Adolf Hitler said that, ‘It is
always more difficult to fight against faith than against knowledge.’

• I Will Write My Dream!

To achieve any of my dreams, I must do the first act. The first step is to write down
my dream, where I want to go. If I do not know where I am going, then any road
will get me there. Writing makes things come to life. I will write the values that I
need to reach my goal, the new thing that will make me achieve my goals, for
instance, to be the kindest person today; to be the most time efficient person
today; to be the most reliable worker today; to be the most honest person today.

I will write a clear, concise statement of what it is I intend to acquire in life, the time
limit for its acquisition and what I intend to give in return for it. I will list
everything I need to do to achieve what I want, and then I will take action every
day. This is my plan, and it will help me to acquire what it is I want. Then I will
read my plan every day, aloud, when I wake up, and when I go to sleep.

• I Will Define My Goals!

A goal is a target I want to achieve. It is the ‘what I want to do or be’. My goal is the
place I want to go to; the life I want to live; the career I want to practice; the
money I want to earn; the health I want to have; and the adventure I want to
experience. ‘It is not enough to do your best; you must KNOW what to do, and then do
your best.’ said W. Edwards Deming, American statistician, professor, author,
lecturer, and consultant. Today, I will define and describe my goals.

Goals give results; and results are the main reason for any activity. I will decide
what I want in my life, my dream. I will identify what I want in all aspects of my
life, in my relationships, my financial status, my career, my health, my happiness
and adventure, in helping someone and the ability to control the day. I will write
down when I want to achieve it, and how I want to achieve it. Then I will write
down the reason why I want it. I will then write down what it would feel like

when I have achieved it. And after describing my dream and defining my goal, I
will figure out exactly what it will take to get it. I need to be realistic so that I can

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believe it. I will break my big plan, my big picture, my painting, into 5 year goals,
3 year goals, 2 year goals, 1 year goals, 9 month goals, 6 month goals, 3 month

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goals, one month goals, weekly goals and into daily activities for every seven
days. ‘Goals allow you to control the direction of change in your favor.’ Brian Tracy
said.

William H. Hunsen, the eloquent poet advised that, ‘he who seeks one thing, and but
none, may hope to achieve it before his life is done, but he who seeks all things must reap
a barren harvest of regret’. I do not want to reap regret today.

The progressive achievement of my goals, when I am working gradually, step-by-
step toward something that is important to me, will generate within me a
continuous feeling of success and achievement. Indeed, success is the progressive
realization of predetermined goals. I will feel like a winner, and I will soon
develop the psychological momentum that enables me to overcome obstacles and
plough through adversity as I move toward achieving the goals that are most
important to me. I will feel more positive and motivated. I will feel more in
control of my own life. I will feel happier and more fulfilled. It is proven that 95%
of achieving anything in life is knowing what it is that I want. ‘People with clear,
written goals, accomplish far more in a shorter period of time than people without them
could ever imagine.’ Brian Tracy wrote.

I There are so many financial goals, and it is important to classify them in priority.
The goals could be for emergency fund, or savings to buy a house, or car, or to
send children to college. Either way, I should have them very clearly stated. And
I should make all my financial goals S.M.A.R.T

¥ Specific-knowing exactly what I want, i.e., $1 million investment portfolio
¥ Measurable - ability to track progress
¥ Actionable- knowing the steps needed to achieve the goal, i.e., by saving and investing
my money
¥ Realistic- being in the realm of possibility, i.e., $1 million is within my saving and
investing abilities
¥ Timely- knowing when the goal will be achieved, i.e., 2017

• I Will Work Towards My Goals!

Angelo D’Amico wrote that, ‘I will accomplish my dream of tomorrow by acting today’.
My success tomorrow will be the result of my actions today. Indeed, as I do what
others don’t do today, so will I have what others won’t have tomorrow. An unknown
philosopher rightly said, ‘I only become what I am becoming today.’ Indeed, my
success is the sum of my past experiences. Without the foundation of my

yesterday, my today would be pillared on nothingness; hopeless. ‘We are what we
repeatedly do. Excellence, then, is not an act, but a habit.’ said Aristotle. As was noted

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by an anonymous writer, ‘there are two things which are most difficult to make people
to do; to think and to do things in order of priority.’

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Today, I need to meet my deadlines, my goals. I will keep in mind Parkinson’s Law,
that ‘if I have only one letter to write, it will take a whole day; but if I have 20 letters to
write, I will still get them done within one day.’ I can work towards and achieve my
goals today. I can and I will.

I will take my big dream, and break it down into smaller, more manageable goals. I
will then write my goals in a time related way. Where do I want to be at the end
of ten years from today? Where will I need to be in five years to be able to reach
the ten year goal? What should I do by the third year, by year one, and by the
half year, by the next 3 months, and what must I have done by the end of this
month to reach my 10 year goal. What must I do by the end of this week, to make
me reach my 10 year goal? What must I have done by the end of today to make
me reach my goal?

Today, in setting my daily activities, I should be reminded of the Wizard of the OZ,
when Dorothy asked, ‘but how do I get to Emerald City?’ and the Good Witch of the
North replied, ‘It is always best to begin at the beginning, and just follow the Yellow
Brick Road.’ Dale Carnegie was right, ‘Most of the important things in the world have
been accomplished by people who have kept on trying when there seemed to be no hope at
all.’ The 13th century mystic must be quoted again, ‘you can only start the journey
from where you are; and not where you are going’.

I will set goals and posts, so that when I move closer to it, I know, and when I move
away from it, I will also know. With this, nobody can stop me, nobody can slow
me down, and nobody can wear me out. ‘The secret to success is constancy to my
purpose’, Benjamin Disraeli, the British Prime Minister, parliamentarian,
conservative statesman and literary figure wrote. And having set the major goals
in my life, I will identify the first step in each. I will not forget the words of Lao-
Tzu: ‘A journey of a thousand miles begins with a single step.’ Angelo D’Amico was
right, ‘it you do not start, you will not finish’. I will make sure it is a very small step,
perhaps taking no more than an hour to complete! Then I will start working
towards my goals.

I will ask myself, ‘What can I do today to get one step, however small, closer to achieving
my goals?’ I will then take daily action towards my goals and dreams. Mike
Murdock was right, ‘my future is hidden in what I do daily’. After all, ‘there is no
such thing as something for nothing’, Napoleon Hill reminds us. The Egyptians
were right, ‘There grows no wheat where there is no grain.’ I must make the first step
to begin my journey of a thousand miles. Indeed, ‘a goal without an action plan is a
day dream!’ writes Steve Chandler.

Today, in achieving my goals, I will apply the Pareto Principle, invented by the
Italian Economist, W. Pareto (also called the 80/20 principle) restated by Richard

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Coke in his classical book, ‘The 80/20 Principle-The Secret To Success By Achieving
More With Less.’ I will give 80% of my energy, time, skills and money to the 20%

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of the most important tasks, my priorities. This will give me the greatest output.
Today, it will not be about how hard I work, but how smart I work. I will apply the
Universal Law of ‘Planned Neglect’; to deliberately neglect everything else and only do
that which will make me progress towards my success. I after all, I cannot have it all.
Life is like mountain climbing; I must leave behind all unnecessary weight and
only carry the equipment necessary for the climb. The Pareto Principle is about
prioritizing my goals. I will prioritize my goals today. To achieve my goals, I
must learn to say NO to the GOOD in order to say YES to the BEST. Robert J.
McKain wrote, ‘The reason most major goals are never achieved is that we spend our
time on the second best things first.’

To achieve my goals, I will do one thing at a time. The world's greatest achievements
were made by people who gave the task in front of them their undivided
attention. I will ask myself, ‘Is giving each task 30% of my attention for three hours as
effective as giving each task 100% of my attention for one hour each?’ If something
does not deserve my undivided attention, maybe it is not worth doing at all. I
will set goals that exploit my strengths and minimize my weaknesses. This will
allow me to realize and make full use of my opportunities, and control the threats
I face.

Then I will create benchmarks or milestones that I can use to measure my progress
and know whether I am on track, off-track or not moving at all: stagnating.

Today, I will decide what to do and do it, and decide what not to do, and not do it. Taking
action or conation towards our goals is considered to be one of the four divisions
of the mind, according to Sir William Rowan Hamilton, the Irish physicist,
astronomer, mathematician and the father of electromagnetism and quantum
mechanics. The other one being desire and volition, and the other two being
perception and feeling. This active mentality differs from velleity, the wish without
the effort. The Taking Action part of the mind is the part of our mind that says, ‘I
Will’. ‘I will’ is more important than intelligence. ‘I will’ is more a driving force
than ‘I wish.’ ‘I will’ is a distinct aspect of the mind - the power of creative instinct
or will – it is separate from thinking and feeling. I will quote Mohammed Ali, the
king of boxing; ‘The Champions need the skill and the will. But the will must be
stronger than the skill.’

This active mentality, the ‘I Will’, was accepted as a given by thinkers such as Plato,
Aristotle, Augustine, Spinoza, Hobbes, Descartes, Kant, Hume, Freud, and
Piaget. It is the ‘executive’ brain. It is the source of all striving, longing, ambition,
and self-expression. It is the root of a person's persistence against obstacles, the
very essence of the person, for it is through conation that we strive toward goals

or self-actualize. Fidel Castro captured this essence when he wrote that, ‘If
Mohammed can't go to the mountain, the mountain will go to Mohammed.’ And it is

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through this active mentality that one is productive, for as Hume pointed out,
‘intellectual awareness alone cannot move us to do anything’.

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The power of the human will was embraced by Joseph Vissarionovich Stalin, the
Soviet politician, head of state and first General Secretary of the Communist
Party of the Soviet Union, who launched a period of rapid industrialization,
when he told his soldiers that, ‘I believe in one thing only, the power of human will.’

• I Will Get A Dream Team!

Lyndon Baines Johnson, the 36th President of the United States, often referred to as
LBJ, was quoted as saying, ‘There is no problem that we cannot solve together, and
very few that we can solve alone by ourselves’. Team support is very important in
achieving our dreams. TEAM means Together Each Achieves More. ‘When two
people walk together, they can go a long while.’ The Luo of Kenya believe. And ‘When
two people sleep together, they give each other warmth.’ The Bible says. The Swedes
believe that ‘Shared joy is a double joy; shared sorrow is half a sorrow.’ This is true! I
will get a dream team, a support team.

This dream team will help me be in line, keep me in check and always ask after my
progress. The dream team will be my boards-of-advisor who will help me gather
intelligence required to help me reach my dream. This is the team that will ask
me about my progress with my dream. They will ask me where I am, what I did
today, whether or not I woke up early, and if or not I read about my books on
career, role models, and industry leaders. They will help me reach where I want
to go, encourage me, push me, pull me and tell me I will do it, because as my
dream team, they believe in me. From time immemorial, the Turks have believed
that, ‘no road is long with good company’. The dream team will fight for me when I
am down and low. Ernesto 'Che' Guevara, an Argentine Marxist revolutionary,
physician, author, intellectual, guerrilla leader, diplomat, military theorist, and
major figure of the Cuban Revolution captured the essence of the team when he
wrote in his diaries that, ‘I don't care if I fall as long as someone else picks up my gun
and keeps on shooting.’

The team can be the models in my field, and from them I will learn how they did it,
what they did and when they did it. From them I will know the books they read.
The team may be my fiancée, my friends, my family, or my colleagues from high
school or college, my colleagues at work or in my club. The team must be people
with whom I share the same desire to prosper. The team will make sure I do not
remain down when I fall.

The dream team is premised on the ‘mastermind principle’; that ‘two minds are better
than one’. This is soundly described in the classic Think and Grow Rich by

Napoleon Hill. A Luo proverb says, ‘Alone a youth runs fast, with an elder slow, but
together they go far.’

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It is possible for a group of two or more people to cooperate in such a way that the

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productivity of each enhances the productivity of the other. The Bible is right, ‘A
rope of two cords is stronger than that of one cord’. In the team I will find security of
thought and action. The Quran teaches that ‘there is safety in the multitude of
advisors.’ A group can be capable of more output than any individual within the
group; than me. This team will not be an easy crowd. Rather, it will be a group
with high expectations for me and from whom there will be high demands to
perform exceedingly well. The Bible beautifully captures the importance of
harmony in the team thus; ‘can two walk together unless they agree?’

My dream team will have a lawyer for all my legal needs, especially incorporating
my investment vehicle; a financial investments adviser to advice on financial
investment issues; a fixed assets broker for realty and other fixed assets; an
accountant for my tax planning; and a sales and marketing expert to connect me
to the world of clients and customers.

My team must be people who mind their own businesses. All my professional
advisers must be people who have excelled in their own lives, financially free
people or people on their path to financial success. As the old adage goes, ‘a blind
man cannot lead a blind man.’ I want advisers who are not only preaching wine, but
also drinking it. I want advisers who are minding their own businesses. These
professionals are my eyes and ears in the market place. They are there every day
so I do not have to be there. After all, as Robert Kiyosaki says, ‘I would rather play
golf.’

Getting the right professionals will not be easy. The fairy tale shall be a good
inspiration for me, ‘I will kiss several frogs before I get my prince.’ When Henry Ross
Perot was building his computer company, he hired the best people he could
find, and his motto was, ‘Eagles don’t flock. You have to find them, one by one.’

• Principle 2: Budgeting!

Budgeting helps me to plan my finances: To become rich, I must budget. Budgeting lies
at the foundation of every financial plan. It does not matter if I am living
paycheck to paycheck or earning six-figures a year, I need to know where my
money is going if I want to have a handle on my finances. Unlike what most
people might believe, budgeting is not all about restricting what I spend money
on and cutting out all the fun in my life. Budgeting is understanding how much
money I have, where it goes, and then planning how to best allocate the money.
‘A budget tells me what I cannot afford, but it does not keep me from buying It.’ said
William Feather, the American publisher and author.

Budgeting helps to save: Budgeting is vital to any savings strategy. It helps me to
identify where my money is going. Wasteful consumption patterns can be

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controlled through successful budgeting.

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Budgeting needs financial IQ: To draw up a good budget, I need to understand some
basics of financial management. This knowledge is called financial intelligence, or
financial IQ, and it will be the foundation of my financial success. The basics of
financial management can be grouped into four 4 categories as below:

¥ Income - This is the money that flows into my hands. My revenue sources consist of
my salary, my wage, investment income, and all other money that people give me as
gifts or payment/consideration for work done.
¥ Expenses - This is the money that flows out. My expenses consist of taxes, housing
expenses including utilities, transportation, food, clothing, insurance, health-related
expenses, entertainment, etc.
¥ Assets - These are moneys that I own in various shapes and forms. My assets include
my house, cars, savings, investments, and other items of value.
¥ Liabilities- This is money that I owe to other people. My liabilities include my home
mortgage, car loans, and credit card debt.

Then I also need to understand how to analyse my financial life and determine if I
am living precariously, or living like an investor. For this, I need to know the
difference between good cash flow and bad cash flow.

¥ Good Cash Flow - If I manage my money well, i.e., keep my revenue higher than
expenses - I will have excess cash. I can save this money and buy more assets that can
appreciate and generate more income.
¥ Bad Cash Flow - If I do not manage my money well, i.e., my expenses exceed my
revenue -I will add to my debt, or have to sell some assets to cover the expenses. Either
case, I am eroding my wealth and its growth potential.

Budgeting needs a budget: And finally, the hardest part of creating a budget is sitting
down and actually creating one. When I budget, I am spending on paper, on
purpose, before the month begins. When I am spending my money on purpose, I
will be on my way to financial freedom. ‘The way to wealth is as plain as the way to
market. It depends chiefly on two words, industry and frugality.’ said Benjamin
Franklin, one of the Founding Fathers of the United States, a noted polymath,
leading author and printer, satirist, political theorist, politician, postmaster,
scientist, inventor, civic activist, statesman, and diplomat.

To live within my means is dignity. Francis Moore, the American author of 18 books
and co-founder of three national organizations that explore the roots of hunger,
poverty and environmental crises, wrote that, ‘The most substantial people are the
most frugal, and make the least show, and live at the least expense.’ Budgets are plans.
Budgeting is planning. Budget planning entails identifying the sources of income
and taking into account all current and future expenses, with an aim to meet

financial goals. The primary aim of a budget planner is to ensure savings after the
allocation for spending. It allocates future personal income towards expenses,

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savings and debt repayment. There are several methods, plans and tools available
for creating, using and adjusting a personal budget.

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The Ojijo 10% Budget Plan: To create a budget, I will use The Ojijo 10% Budget Plan.
The Ojijo 10% Budget Plan gives me guidelines of how to allocate the amount of
revenue I have, after removing taxes, expenses and the other costs of getting the
revenue, including kick-backs, commissions, interests, etc. The Ojijo 10% Budget
Plan requires that I divide my revenue into TEN equal and separate areas, which
all get 10% of the revenue allocation. The equality is premised on the fact that all
parts of my daily living are equally important.

The Ojijo 10% Budget Plan

1. Giving to help the needy, whether directly or indirectly; as tithe or charity; or
through the church, mosque, temple or any charity organization like Red Cross,
etc.;
2. Rent & Utilities, including security & gardeners, mortgage, home insurance,
lease, etc;
3. Saving-2-Invest in various assets;
4. Entertainment, including vacations, gifts, club membership fees, hobbies, etc;
5. Education, both personal and for children, including seminars, talent
development programs and education insurance plan, etc;
6. Food & Kitchen appliances and wares, including chefs, utensils, etc;
7. Transport & Communication, including vehicle insurance payments;
8. Clothes & Personal Hygiene, including leg wear, sprays, jewellery and bathing
items, etc;
9. Household & House Maintenance, including house help expenses, furniture
and fixtures;
10. Emergency & Insurance Fund, which should be able to take me for up to 3
months from the day I lose my source of income. This amount is the sum of all
the ten percents (10%) for numbers 1-9, multiplied by three months. The
Standard Is Rent. So, if my rent is USD$ 500, then all the other costs will be
equally USD$ 500 each, and hence the emergency fund shall be USD$500*9*3
(months), hence, USD$ 13,500. Part of the emergency fund shall also be the
payment for health and life insurance, since disease can and will strike at anytime;
and death, however certain, is always an emergency.

The rule of thumb is that any excess money that remains from any of the categories
will be added to category 3 and invested to make me financially independent.

• Principle 3: Saving-2-Invest!

139
How do I start investing money? By saving! The key to investing is savings. An
effective savings strategy coupled with a smart investing strategy will help me to

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meet my financial goals. Every dollar saved now helps me to control my current
consumption by which the size of the income that I think will be required for
retirement is lowered. Also, through the power of annual compounding, it
increases the size of the nest egg I will have for retirement.

I should save 10%. Using an automatic payment plan, I can save and invest 10% of my
paycheck every month. Today, out of every amount of money I earn, I will save
10% and invest it. Saving what I earn is the first step to acquiring assets. In his
masterpiece, The Richest Man in Babylon, George Clason, the soldier, businessman
and writer, advises income earners thus; ‘pay myself first.’ To save is to pay myself.
Savings are used to create more money, not to pay bills. Benjamin Franklin, one
of the Founding Fathers of the United States and a noted polymath, a leading
author and printer, satirist, political theorist, politician, scientist, inventor, civic
activist, statesman, soldier, and diplomat was right, ‘A penny saved is a penny
earned.’ This is one area where the Universal Law of Accumulation works. Saving
and investing means that I invest my money. I should be wary of borrowing
money to invest. I must invest my own money. I should remember the wise
words of legendary investor Warren Buffet, ‘If me don’t have it, don’t invest it.’ The
simple truth is that those who borrow almost always pay a higher rate of interest than the
rate received by those who save.

To pay myself first, I will find out from my employer whether I can direct my
paycheck to different accounts. If I do not have such a service, I can set up an
account that will take the money automatically out of my checking account each
month. I will let the amount be directed to an investment account. This is re-
enforced savings which implies I save first and spend the rest from my paycheck.
My goal should be to save at least 10% of my total before tax earnings. This
should be the minimum. Most millionaires live far below their means as they are
disciplined and highly focused on their financial goals from the beginning. They
are millionaires because they have decided to be so.

I need discipline to save: To achieve any goal in life, one needs to be disciplined.
Similarly, saving to invest requires discipline. A disciplined approach helps me to
remain focused on my financial goals. I will formulate a plan and review it
periodically to ensure that I am on the right track. I will conduct a careful study
of my consumption patterns. I will then identify items of expenditures that I can
do without or explore opportunities to reduce my costs without unduly
sacrificing the item. And then I will divert any cash savings automatically to an
investment account.

• Principle 4: Long Term Investing!

139
‘Always invest in the long-term’, Warren Buffet advises. I need to invest long term. I
should not be influenced by short-term fluctuations. These are inevitable in all

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economies as well as businesses experience the boom and bust cycle. I should not
try to time the market. I need to get in and stay in. I should review my plan
periodically, and whenever my needs or circumstances change. If I am not
confident that my plan makes sense, I will talk to an investment advisor or
someone I trust. A long-term view helps me to safely invest in 'riskier'
investments, such as stocks, which the market rewards in general. This requires
patience and discipline, but it increases returns. This approach reduces my
choices to two: stocks and stock mutual funds. In the long run, they are the
winners. The additional risk is worth it due to the power of compounding. 10% a
year for 20 years is 570%, but 7% a year for 20 years is only 280%. I should not
procrastinate.

I should begin now because an early start can make all the difference. An early start
provides a long time horizon for compounding to show its true benefit for the
investor. For average people, investing is not so much a helpful tool as the only
way they can retire and maintain their present lifestyle. By investing long term, I
am planning ahead. By planning ahead I can ensure financial stability during my
retirement. ‘It never was my thinking that made the big money for me. It was always my
sitting. My sitting tight!’ said Edwin Lefevre. This blunt warning is treated by
many financial advisers like the Bible. Once I arrange my assets into my ideal
allocation, I should not tinker.

I will rebalance once a year to keep my mix on track, but otherwise, listen to
Livermore and sit tight. I will remember that even if the market tanks it always
recovers for long term investors, and when it is low I will snatch up a lot of shares
at bargain prices. As long as I am dollar-cost averaging I will always be buying
shares at a cheaper price.

The market can remain irrational longer than I can remain solvent. Bubbles occur.
However, investors should never attempt to short them because, while bubbles
eventually burst, they can grow larger and last longer than investor resources.
This requires patience and discipline, but it increases returns. The additional risk
is worth it due to the power of compounding. To invest long term, I should not
procrastinate. I should begin now because an early start makes all the difference.
An early start provides a long time horizon for compounding to show its true
benefit for the investor.

Further, I should invest long term since the liquidation value (if I said, 'get me out of
this Club and give me my money back'), I will often get less than my original capital
contributions during the first two years. That is to say, investing in the stock

market is a long-term proposition, and I may only see my contribution increase in
value after the second year or so of investing.

139
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• Principle 5: Portfolio Diversification!

Portfolio diversification is the golden rule of successful investment: This simple strategy is
overlooked by 85% of investors. Diversification is a fundamental aspect of
financial planning. In a nutshell, it is the old adage to not put all my eggs in one
basket. If I have all my eggs in one basket and something happens to the basket
then I am in big trouble. But instead, let me say I keep some of my eggs in the
refrigerator. Then if something happens to the eggs in the basket I still have the
ones in the refrigerator. The practice of diversification says that I should have a
little in each of these to diversify myself against risk of the stock market and
whatever else might happen in life.

I will diversify - by company, by industry, by company size and by geography. In
stocks and bonds, there is safety in numbers. No matter how careful I am, I can
neither predict nor control the future. So I must diversify. “In stocks and bonds, as
in much else, there is safety in numbers.” If I own the right number of stocks, bonds
and funds and they are allocated across several categories, industries and
geographies, I can substantially lower the risk of losses to our portfolio and
increase returns at the same time. If I diversify properly; I can lower risk AND
improve returns at the same time, making this a no-brainer. Diversification is the
process of finding the investing sweet spot where I can optimize risk vs. return.

Diversification is about mixing: Another critical piece is the diversification mix. I want
to invest in a wide variety of industries, categories and geographies to ensure that
when one specific area goes south, it does not tank my whole portfolio. My
portfolio should be spread across a wide variety of categories and geographies,
most of which will not correlate at all with anything going on in telecom, some
may even be inversely correlated (meaning they do well when telecoms do
poorly).

For example, if I own a telecom and suddenly the industry is getting bad press due to
invasion of privacy lawsuits, the rest of our portfolio can cover the losses of that stock. Why?
If we're diversified, that is probably our only telecom investments, the rest are in unrelated
industries and will not be directly affected by these lawsuits.

Diversification is about diverse asset allocation: As an investor, I should have a diverse
asset allocation. This means I spread my money between various types of
investments, not buying only stocks, bonds or funds, but buying a combination.
Portfolios should include allocations to the asset classes of large-cap and small-
cap stocks, value and growth stocks, real state, international developed markets,

emerging markets, and the appropriate amount of bonds. Diversification is the
closest thing to a free lunch there is in investing. To make the alchemy work, I

139
must load up on assets whose up and down cycles do not run in sync: stocks
(local and foreign, as well as large-company and small), bonds (of varying

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maturities), cash, real estate and commodities. Investment centers on
diversification.

Different securities perform differently at any point in time, so with a mix of asset
types, my entire portfolio does not suffer the impact of a decline of any one
security. When my stocks go down, I may still have the stability of the bonds in
my portfolio. Diversification is always working. The reason I want a blend is
because each type of investment behaves very differently. The rule of thumb is
that the further I am from retirement the more I should allocate to more
aggressive investments like stocks, and the closer I am to retirement the more I
should allocate to shorter term lower risk investments like bonds.

Stocks, for example, have the highest potential return of any type of investment but
they also have the highest risk of losses. Bonds, on the other hand, cannot provide
the types of returns a stock can but they offer stability since their returns are often
guaranteed. A blend of different asset classes is just another way to diversify and I
can choose from a wide variety of allocations.

Diversification reduces risk: Diversification is important. If I spread my investments
across various types of assets and markets, I will reduce the risk of catastrophic
financial losses. Diversifying investments in a portfolio helps to manage risk. The
safest port in a sea of uncertainty is diversification. As most successful investors will
tell me, diversification is king. A diversified portfolio not only reduces unwanted
risk, but also contributes to a winning portfolio. And having a well-diversified
portfolio does not necessarily mean just buying more than one stock; branching
out into other areas of investment could be a viable alternative.

‘It is the part of a wise man to keep himself today for tomorrow and not to venture all his
eggs in one basket.’ said Miguel de Cervantes. Nothing can break the law of risk and
reward, but a diversified portfolio can bend it. When I spread my money properly
among different asset types, a rise in some will offset a fall in others, muting our
overall risk without a commensurate drop in return. Diversification reduces risk
without reducing expected returns. Once investors diversify beyond popular
indexes, they will be faced with periods when popular benchmark indexes
outperform their portfolio. The strategy to get rich is entirely different than the
strategy to stay rich. One gets rich through inheritance or by taking risk. One stays rich
by minimizing risk, diversifying and not spending too much.

To diversity, I need a portfolio.

PORTFOLIO: A combination of different investment assets mixed and matched for the
purpose of achieving an investor's goal(s).

139
Items that are considered a part of my portfolio can range from real items such as art

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and real estate, to equities, fixed-income instruments and their cash and
equivalents. There is not just one strategy that can be used to invest successfully.
Ideally an investment portfolio should have both equity and debt instruments.
Using this guideline I can allocate my money as best fits my personal situation.
This strategy does not even rely on my ability to pick stocks. It relies on the
principle of diversification. I should divide my money between these types of
investments.

Risk of non-diversification: There are horror stories of people losing all their money on
the stock market. The main reason this happens is that people do not place their
money in a variety of investments. Doing this spreads the risk of losing my
money. I will not be the person who complains about how I lost all my money on
the stock market. I will be one of the success stories who knows how the market
works and how I make money, by having a diversified portfolio, focused on the
long-term. Even if I love shares, I should not buy only stock in one asset class like
utilities or banks or tech stocks. Industry stock prices move together so when one
bank stock goes down the others all go down too. Most investors are comfortable
allotting all their money to one investment. If that stock goes up, great; if not they
are back at square one. I should diversify against risk. If I follow a diversified
investment plan I reduce my overall risk as compared to being invested in only
one type of security. Diversification will help offset the volatility I may have
with stocks. If my stocks go up then I realize larger overall gains.

• Principle 6: Dollar Cost Averaging!

Dollar cost averaging is buying at intervals: Dollar cost averaging is a technique by
which an investor divides the given investment over a period of time and invests
that amount on a regular basis as opposed to buying in all at once. When an
investor buys the same stock or mutual fund at regular intervals and with a fixed
amount, he or she is said to be using the dollar cost averaging method. If the market
price of the selected stock or mutual fund declines, the investor will buy a greater
number of shares. On the other hand, when the market price of the selected stock
or mutual fund increases, the investor will buy lesser number of shares.

Dollar cost averaging reduces risk of price fluctuations: By putting in, say, $100 each
month (rather than a large amount once a year), I sometimes buy when the prices
of the units of the fund are higher, and sometimes when prices are lower. In the
end, the purchase prices average out. I can hence reduce some of the risk that
poor timing and potentially adverse price fluctuations will have on my

investment decisions. Just about any fund company or bank will let me invest like
this with an automatic payment plan. However, dollar cost averaging will not

139
protect me in a steadily declining market. Further, if I discontinue with a dollar
cost averaging plan, I will lose money when the market value is less than cost of

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the shares.

Dollar cost averaging encourages automatic savings: The best thing about dollar cost
averaging is that it gets me into the habit of saving every single month. Dollar
cost averaging permits systematic contributions to an investment portfolio
periodically, hence encouraging savings Dollar-averaging (continuing to invest
the same amount of money every month) really works.

This investing strategy will, over a period of time, result in the investor buying the
selected stock or mutual fund at an average cost per share that will be less than
the average price per share.

For example, assuming that a person invests $100 per month for 12 months in a
Mutual Fund; as can be seen from the below table, the average cost per share is
lower than the average price per share.

Month Dollars Invested Price per share No. of shares purchased
January 100 12.76 7.84
February 100 13.25 7.55
March 100 15.25 6.56
April 100 18.76 5.33
May 100 20.26 4.94
June 100 18.85 5.31
July 100 15.62 6.40
August 100 17.85 5.60
September 100 16.62 6.02
October 100 13.26 7.54
November 100 14.5 6.90
December 100 16.76 5.97
Total 1,200 193.74 75.94

Average price per share = 193.74/12 = $ 16.15
Average cost per share = 1,200/75.94 = $ 15.80

• Principle 7: Risk Tolerance!

Risk is a necessary element of life. There is always the chance that something will not
work out for me and this chance is called risk. There is a risk in everything I
choose to do in life including my financial life. The holder of any debt is subject

Ojijo's investments club manual

Ojijo's investments club manual

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