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HOW TO INVEST SUCCESSFULLY IN FINANCES…. austin.makani meritmanagement@ 2011. Austin Makani. Corporate Relationship Manager, KCB Bank Tanzania Managing Partner, Merit Management Consultants Pursuing MSc MM, MU, DBS PGDEED Holder, UDSM ADBA – Marketing, CBE (Dar Campus). God Fearing
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HOW TO INVEST SUCCESSFULLY IN FINANCES… austin.makani meritmanagement@ 2011
Austin Makani • Corporate Relationship Manager, KCB Bank Tanzania • Managing Partner, Merit Management Consultants • Pursuing MSc MM, MU, DBS • PGDEED Holder, UDSM • ADBA – Marketing, CBE (Dar Campus) • God Fearing • A proud father of Trinity Teresa Makani • Single and not ready to mingle
Teaser “if money does not grow in trees, why do banks have branches?”
Money defined… • A generally accepted medium for the exchange of goods and services, for measuring value, or for making payments. Investment defined… The purchase of a financial product or other item of value with an expectation of favorable future returns. In general terms you can say that investment means the use of money in the hope of making more money
What is Money Investment? • Refraining from consuming – saving!! • Interest Rate • Future Gains • First step of entrepreneurship development…
How to invest money is a question on everybody's mind, who want to make money fast. However, most are at a loss as to how to take an intelligent investment decision. There are various ways by which money can be invested and profit can be earned.
Why invest in money? • Money is kept for the future for contingency purposes. This can be the result of the anticipation that cash might be needed in the future and his future earning might not conform to those needs. • The want to increase the amount of wealth or grow money.
What does it take? • Investing requires a lot of thinking and research. Investment means assignment of money in order to yield more money. If investment is done in a well informed or judicious manner, the financial objectives of an investor can be accomplished without any hassles. • If one is not acquainted with the proper channels of investment, the want of becoming wealthy in the future might lead to huge risks. • However, if one knows how to invest money in an intelligent way, it is possible to increase the earning, as well as increase the asset valuation of an investor.
The X-factor • One is not always sure how to become an investor, and succeed in it. In order to become an investor, it is not at all necessary that an individual has to be wealthy. • Investment of a little amount can yield significant returns in the long run, particularly when done on a regular basis.
Things to note • It is crucial for an investor to decide how to do investment, that is: what is the amount of money he is able to invest and where should he invest it. • For taking an intelligent investment decision, an investor requires the knowledge about the options that are available and what are the risks involved in various types of investments. • If an individual desires to invest money, he has a number of opportunities. The selection of the best investment is dependent on the financial objectives of the investor, as well as the overall market conditions.
The right kind of investment depends on the three following factors: • Liquidity or how much accessibility the investment has • Safety or what are the risks associated with the investment • Return or what are the potential yields from the investment
Where to invest • Investment can be done in many ways. However, any investment portfolio comprises of three fundamental instruments and they are: • STOCKS • BONDS AND • MONEY MARKET INSTRUMENTS
Stock • A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. There are two main types of stock: common and preferred. • COMMON STOCK usually entitles the owner to vote at shareholders' meetings and to receive dividends. • PREFERRED STOCK generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated. Also known as "shares" or "equity".
Bonds • A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and governments to finance a variety of projects and activities. • Bonds are commonly referred to as fixed-income securities and are one of the three main asset classes, along with stocks and cash equivalents..
Money Market Instruments… • A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. • The money market is used by participants as a means for borrowing and lending in the short term, from several days to just under a year. • Money market securities consist of negotiable certificates of deposit (CDs), bankers acceptances, Treasury bills, commercial paper, repurchase agreements (repos), etc.
Choose to be RICH… • What do you want to be when you grow up? • Your answers will be very right because that is what our school system prepares us to be. • In the past we used to have special skills school which were equipped but now non of those schools make any sense, equipments sold, great teachers are hardly there, most of them have left their professionals. • What do we hear everyday on media, teachers needed in schools but we also hear their cries that they are now well remunerated? Who will care and nourish the skills? No one! • What do our parents tell us? Go to school, get good grades, great job and make money and when you retire your company will take care of you
Two ERAs • The Past, the socialism, formal systems: Scholastic: Cared for your ability to read, write, do simple maths, 2. Industrial Age: Professional Education Go to school (working for money) Get great grades Get highly paying job Stick in there; Secretary, doctor, lawyer, etc NOW: Financial Education, you need to know how to make money work hard for you.
Rich Vs. Poor… • Difference between the poor and the rich (not smarter, not different, not better than anybody else) -Think -Learn and -Do things differently Being rich is a mindset, the rich just think differently!! “if you want to see different results, do something different” Anonymous.
Whose choice is it? Its YOURS!! • You can choose to think as a rich person, middle person or a poor person. • The rich think exactly the opposite the middle class or the poor class • You can choose, get a job / learn to invest (different priorities at home) • Do it! The rich are not different, they just do things differently. (why do you do same things the rich are doing but get different results). Most of the time they are not very smarter than anybody else. • Its your choice to be rich, poor or middle class.
Lessons: • The rich don’t work for money, they learn how to make money work hard for them • Importance of financial literacy. Read financial statements vs. books. If you want to be rich you have to read numbers. People do not know the difference between an asset and liability. • Asset is something that puts money in your pockets whether you work or not • Liability is something that takes your money out of your pockets whether you work or not. • In other words, When you stop working, the assets feed you, liability eat you!!
Money is just an idea... • Ideas form reality. So whatever idea you think is real, becomes your reality • Some say, I will never be rich, it becomes your reality • Money will be anything you think it is. • Investing is risky (you never see the opportunity that lies before you) • What forms your reality is what you think is smart and what you think is risky • Having a safe secured job is smart? Building a business is risky! The reverse is true
The rich don’t work for money, the rich invest in money and their money works hard for them • Many people spend their lives saving money because they think its smart • The action and the thinking between saving and investing are the same • Don’t save money for things that go down in value but on assets that put money in your pocket and go up in value
Your choice, your reality… • Money is just an idea. Which reality do you want? • Money doesn’t make you rich. Money has the power to make you rich or poor with the same magnitude • Choose your idea well for they become your reality • Don’t say I can’t afford it, ask yourself, how can I afford it
Is money all it takes? • There is two kinds of money problems. The problem of not enough money or too much money. • If you do the right thing you will have a problem of too much money. • Everybody has money problem. What ultimately makes you rich or poor, starts with your idea. If you manage your money well more money will make you richer, vice verse is true.
The right attitude “When I wake up every morning and I read the list of top five rich people in the world and I don’t see my name, I go to work”
Rich man: invests and not saves • Selling your time and freedom – longer hrs, don’t see children, relations, etc. • It traps you. The harder you work, the more you pay • You are taxed on interest on your saving • You are loosing money the longer they stay in bank through depreciation • Being cheap, limiting your expenditure, etc (the world hates cheap rich people) but you are still cheap even when you get rich
Smart thinking… • You should not ask yourself where do I want to be when I grow up but if God gave you 20 extra years and you are to look back, what trace / legacy / success do you want to follow you? -Mc Donald’s example. Financial intelligence: “Is not so much how much money you make but how much money you keep, how hard that money works for you and for how many generations you pass it on to”.
World’s #3 richest man…Warren Buffet..Carlos Slim - Mexico, Gates - USA • "I always knew I was going to be rich. I don't think I ever doubted it for a minute" • "I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing"
Thank You • You determine your own success • The earlier you start, the better • Be the man / woman you want to see in the future • Make the right choice • JHU: - Think Big - Start Small - Act Now and Fast
