INTIMATE MONEY MOVES TO KEEP YOU IN THE MOOD – LEARN THE STEP-BY-STEP TIPS TO BUILDING A PORTFOLIO

Enjoyable lovemaking does not come easily
to everyone. You see, some do not know
how to do it and do not realize it, so they
fumble around and create an awful
experience. Some think they know, and so
charge in and satisfy themselves while
leaving their partner unsatisfied. Others are
too proud to admit they don’t know, so they
subject themselves and their partners to
misery. Still, some others who don’t know
are willing to admit it. The fact is that
knowing how to please and satisfy your
partner will make for a happier and more
peaceful marriage (lovemaking is more than
physical, so we’re not just talking about the
bedroom!)
Thankfully, it is an art form that can be
learnt . Those willing to learn are the ones
more likely to go on and create wonderful
experiences for them and their partners.
But what does this have to do with
investment, you ask? Well, picking viable
stocks or assembling a solid portfolio
doesn’t come easily to everyone either. But,
just like lovemaking, it’s a skill that can be
learnt. Because being able to financially
provide for and protect your family for the
short and long term will make for a
peaceful and content home. So, if you
belong to the camp of those who don’t
know but want to learn, then please, read
on.
To understand how to pick assets that are
guaranteed to perform, you need to have at
least a working understanding of the
different kinds of assets out there, so you
can decide which one would be suitable for
you, based on your risk profile. When you
start investing, you will be building a
portfolio. This is a collection of different
assets or instruments combined in specific
numbers (called weightings ) to help you
achieve the best returns possible on your
money.
This is a good place to explain what assets
and liabilities are. Think of them like the
opposite sex- assets are those people
(man/woman) that take care of you and
help build you or your bank balance up.
Liabilities, on the other hand, are those
jokers who not only give you headache and
wahala, but also drain your bank balance.
So assets are simply different types of
investments that help your money make
more money. Most people know of stocks
and bonds, but these are not the only types
of assets out there. Assets can be grouped
into two types: growth assets and financial
assets.
Growth assets earn money from dividends
or profits and increase in value. Because
these types of assets can grow in value it
means they can also fall. Types of growth
assets are shares, property, commercial
property, infrastructure, private equity, hedge
funds and commodities.
Financial assets earn money mainly from
interest. They include assets such as fixed
tip, treasury bills, cash, and opportunities.
These types of assets offer low risk; for
instance, fixed tip and treasury bills (more
commonly called T-bills) have a pre-
determined interest rate, depending on the
length of time you choose to hold your
money down for. So if you purchase T-bills
for a maturation date of say, 6 months,
you can generally predict how much your
return will be. But (there’s always a ‘but’,
isn’t there?) because they are low risk, it
also means that returns on them are likely
to be lower in the long term.
If you discover that you have a very low
risk appetite, and don’t relish putting your
money at risk, then this may be an option
for you. The good thing is that, whether
high or low, your money is making money
(the value would simply be lower.)
To find out more about the different assets
and asset classes out there, call our KIIS
lines and chat with one of our KIISAs to get
more info. Remember, knowledge really is
power.
Next: Building Your Portfolio
Now that you have a working idea of what
assets are and the different kinds out there,
it’s time to decide how you’re going to
acquire them to start building your portfolio.
In constructing that portfolio, you must
consider the following-
1. a) Type of asset and in what quantity/
ratio: imagine that you are in the
process of getting a new wardrobe. It
would have things like clothes, shoes,
underwear, jewelry, etc. In putting the
wardrobe together, however, would it
have more shoes than jewelry (shoe
addicts, where you at?), or more
perfumes than underwear? It all depends
on what you like, right? Well, the same
general principle applies when building
your portfolio.
In financial jargon, this is called asset
allocation . You may decide to invest in
stocks and bonds, or in real estate and
infrastructure. This is where your risk
profile helps you determine what kind of
asset to acquire (hence the importance of
knowing what it is.) Remember that if you
can’t bear to lose even one kobo of money,
then you might likely look at assets that
are stable and less likely to lose value in
the long term but would also give you low
returns in exchange.
1. b) Determine the proportion of your
assets: do you want to invest 60% of
your budget in real estate, 10% in
treasury bills and the rest in bonds? In
order to do this, you need to consider
what you’re investing for (recall your
financial goals?), how long you want to
hold those investments for, and how
quickly you can liquidate them, should
you need to. This is very important, so
you can get the maximum benefit from
a combination of investments that suit
you .
2. c) How much risk you are prepared to
undertake: This brings us back to risk
profiling. Some people have a big
appetite for life and seem to embody
the maxim- go big or go home. When it
comes to investing, they can stomach a
large amount of risk and so don’t mind
assets whose value moves with the
market. As a rule of thumb, the larger
the risk, the larger the reward, though
this isn’t always the case. On the other
hand, some approach life as if it were
an exam they haven’t prepared for. If
investing, they’ll usually stick to
relatively stable assets – they market
fluctuations generally don’t affect them-
and so their initial investment stays
reasonably safe. This type is not
prepared to take chances with their
investments.
Generally, we advise that, depending on
your age and risk profile, and most
especially the length of time before you
may need the money, you should consider
some higher risk investments and then
change them to more stable assets the
closer you get to when you need the
money.
Just as you won’t buy your entire wardrobe
at once (for most of us, anyway!), you can
gradually build your portfolio up to where
you want it to be. Start small and add as
you go along. And just as it is important to
review your wardrobe (probably once in a
year), where you throw out the old, and
make room for new stuff, you should also
review or rebalance your portfolio often to
make sure it is giving you the best returns
possible.
To start your portfolio off on the right foot,
we advise that you and your spouse sit
with a financial consultant/planner and
design a plan that is suitable for both of
you, taking into consideration the fact that
you may have different risk profiles. While
it is possible to pick assets to invest in
yourself, we recommend that you consult a
knowledgeable yet accessible planner who
would sit with you and walk you through
what you need to know and do.
Our KIISAs are eagerly waiting to help you
out.