Invest in Your Education Before You Commit Your Money

Lesson 1 from Lessons From Our Last Nigerian Stock Market Fiasco

Before entering into any investment whatsoever, you have to look before you leap and conduct due diligence before you commit your funds. This is common sense, but unfortunately, it is not very common. Human beings, especially the Nigerian variety look for shortcuts to avoid work. They prefer packaged investments where someone tells them what to do, rather than personally checking each investment out themselves and determining whether to invest or not.

Whether real estate, stock, trading, or whatever investment you want to undertake, if it is a road not well trodden by you, the first step is to invest in your education on that subject. It makes much more sense to invest N50,000 to study an investment than to jump in blind, commit N500,000 of your savings, and get your fingers burnt. N50,000 for a seminar or N5,000 for a book may seem expensive, but losing N500,000 is plain penny wise, pound foolish.

There are no risky investments, only risky investors. A risky investor is a newcomer who jumps in without mastering the terrain, in other words, a bad gambler. The more you study the investment, the more you understand what it is you intend to do, and the less risky it becomes. Even a good gambler knows when to enter when to hold on, when to walk away, and when to run for dear life, and according to Kenny Rogers, you never count your money when you are sitting at the table (counting your chicken before they hatch). There is time enough to count it when the deal is done (when you have exited the investment, and taken your money off the table into your pocket or bank account).

Tens of thousands of Nigerians rushed into the stock market green, when they heard news of the boom. Precious few studied how the market works, how to enter an investment, how to hold, and exit strategy. They depended on hot tips and advice from their brokers, broke staff of stockbroking firms who are paid to give advice, but who have not used the advice they are giving out themselves to become rich. Hence they are called brokers, because they are broke (well, I am quoting Rich Dad, so don’t attack me). But on a serious note, how can you depend on someone living from hand to mouth to teach you how to become rich through stock market investment? Beware of the man that promises you a shoe while he goes barefoot…

After the stock market massacre, many have fled for safety in the real estate market, again without taking time to study real estate investing and attending seminars facilitated by (not brokers), but by people who made it big in real estate investing (giving what they have, not theory). Not having learned this key lesson, many run from the “risky” stock market to the “safe” real estate market, where all you need to do is buy land, and it will start appreciating. A lot of people have fallen into the hands of crooks, or bad investments because they never bothered to conduct due diligence. Instead of investing in their education, they are looking for shortcuts to recoup their losses in the stock market. Rather than use their heads, they are thinking with their emotions, something a good investor does not do.

It bears repeating, that there are no risky investments, but risky investors. A risky investor can take a good business and turn it bad. Give a risky investor a profitable hotel for example to run, he will start posting losses in two years. Give a seasoned investor a loss-making business to run, he will start posting profits in two years. The issue is not the investment, it is the investor. That is why rich parents turn over their companies to children who are not well trained to handle it, and they wreck it in a few years.

Whether you want to buy and sell, invest in stocks, real estate, forex trading, fish farming, or interior decoration, just name it, the first thing to do is to invest in your education, before you commit your funds. Learn the ropes, learn under masters of the trade, and equip yourself properly before you embark on your expedition.

A half-baked investor is an accident waiting to happen, and a hazard to investment capital. A fool and his money will soon part ways. There is no foolproof investment. If you are a risky investor, you will fail where others sail. The path to excellence is a lonely and rough road, and only a few are willing to pay the price. Rather, they look for ready-made answers, pyramid schemes, and someone to tell them what to do.

Your most important lesson from the recent stock market misadventure?

Invest in your education before you commit your money…

Don’t invest blind. Study to “shine” your eyes, so that you can see the pitfalls, and steer well clear of them

It is not too late to start right…