In continuation of my response to questions arising from the article ‘How to cultivation a savings habit‘, I will focus on how to invest in the money market with low funds. You don’t need a lot of money to start investing. The entry-level is as low as N5,000 for the money market. For the stock market, the amount required for opening an account varies from stockbroker to stockbroker. When you are just starting out, your knowledge is limited. This is why it is very important to crawl first before you attempt to walk. In terms of taking risks, it is better to start with zero risk while learning the ropes.
I cannot emphasize enough that your first investment should be in your financial education. You need to know what you are doing before you start doing it. The best way to know is to learn, and one of the best forms of learning is reading. If you are currently not reading any book on personal finance or personal growth and development, you must be joking about your financial future (including health, career, relationships, etc).
Reading one book is not enough. You have to read until you get to the tipping point when your mindset begins to shift; you start to think differently, see differently, and ultimately act differently. This is where sustainable change happens. It is not just about formulas or steps, as useful as they are. If you know the steps but have no strength to climb them, you are as good as a person who does not know.
So if you are just starting out, maybe you have say N5,000 to N100,000 and you want to start investing, I normally advise you to put some money apart for your financial education and invest the rest in the money market (fixed deposits, treasury bills, bonds, money market funds, etc), the reason being that you put your money to work while you learn how to invest.
If you are interested in the real estate market, also learn first. Most people think education is expensive, so they waste money and time due to ignorance. Your financial education is the engine room of your investment. The more financially literate you are, the better returns you make because you can handle more high-risk high-return investments. So if you want higher returns, pay the price in learning how, rather than turn your money over to someone hoping and praying she knows what she is doing.
Know your account officer
If you have a bank account, you have a banking officer. I would strongly advise you to make friends with that fellow. Get close to your banker, have meetings with them, and take them to lunch if possible. They are an invaluable member of your team of advisers. They are the ones that will educate you on what the bank has on offer in the money market (and other products), the pros and cons, etc. You don’t have to take everything they say.
They are also looking out for themselves, especially with the ‘almighty’ target hanging over their heads with the threat of job loss, they may skew their advice towards products that will count towards their target. That is why you have to know what you are doing, and not simply take every piece of advice. The level of advice you get is based on your level of financial education. If the person knows that you are ignorant, they will tell you anything. They will not try that stunt if they know that you know. So in essence, the more financially literate you are, the better advice you get.
Your accounts officer will put you through the process; the terms and conditions, paperwork required, the minimum amount, if withholding tax is applicable, and penalties if any if you break it before the term. You have to study every clause before you enter, especially the exit clause (there is hardly any problem with entry). Some banks charge up to 25% on interest earned if you break your investment before time. You have to be aware of this before you enter.
Do not stay and home and say your money is too small. There is only one way of finding out. Go and ask. Banks are eagerly looking for people like you to come and invest in the money market. They run many promos, giving out houses, cars, etc to entice people to come. The truth is that most people have no clue who their account officer is. Do not be ashamed, go to your branch and speak to Customer Service to advise who your account officer is. You will be told. Get to meet him, collect his card and arrange to meet. Start a relationship, share your financial goals and they will advise based on what they know. Their input will help you do a reality test on your plan and make adjustments as necessary.
Do your own research
Some money market products are taxable, that is, tax is deducted from your interest e.g. fixed deposits. Treasury bills are tax-free, and interest is paid upfront. If you are serious about investing in the money market, your homework is to go and read up on the various money market instruments and how each works. You can find information on the Internet or in books. Then go and talk to your account officer. You have to do your work. If you are not ready to commit to getting yourself educated, then you have voted for being poor or middle class and broke. There are no shortcuts.
You have to do your own research. Instead of practically living on social media sites and waging cyber wars that add no value, use that time to read up on what you want to do, or know. Spend your time on what adds value to your goals and dreams. Every bank in Nigeria has a website. Each website has a section showcasing its money market offerings. Some go as far as providing information on the minimum for enrolment and provide contact details. Some organizations respond to emails in less than 24 hours. There is no excuse for remaining ignorant.
There are money market funds you can enroll in for N5,000 per month. Some banks have target savings programs with some having entry levels as low as N5,000 or lower. We are in the information age. You no longer have to go look to a library or ‘giraffe’ among the local free readers association at the local vendor to access information. If you have a 2G phone, you can browse the web.
How committed are you to your desired financial future? If you are in a relationship, the lady knows the signals if the man is serious or not. If you keep avoiding meeting the parents, that is a red flag. If you shy away from financial education and doing your own research, that is the equivalent red flag. If you actually went to your account officer and he is not in a position to help, I will be interested to know.
If you want to move beyond where you were last year, do something you have not done before, this year.
