Dear Colleagues,
“Look around, opportunities are in abundance
Look around, investments are in abundance
Let’s plant; Lets sow the seeds
The harvest is almost here
It’s time to reap the seeds[1]”
Few weeks ago, I called on you to save for the rainy day. This week, I’m asking that you do more in anticipation of the rainy day. I’m asking that you take your savings a step farther…invest, so that when the rainy day is finally upon us, you can stay indoors, warm and well fed. I’m sure you love the cozy picture I painted above and if you would like to be the subject of the painting, there is work to be done. Let’s get to it. Shall we?
Generally speaking, savings will meet 3 (three) basic needs which are Emergency, Purchases and Wealth Building. No doubt, savings is one of the ways to build wealth, a smarter way, is to invest the savings. I know we are lawyers and our training is devoid of financial literacy or education, and because of this lacuna in our training, we tend to make a lot of financial mistakes and some of us are not even open to the idea of investment, our exposure to the fraudulent nature of humans vide our craft as lawyers and the criminal tendency of people that we have been exposed to in our trainings and practice respectively have made us suspicious of any investment opportunity.
I am equally guilty of this and I urge you to change your perspective while demanding the requisite due diligence before investing.
There are a lot of benefits in investing and these benefits outweighs the benefits of saving[2] one major reason to invest is simply to stay ahead of inflation. How can you stay ahead of inflation? By investing and growing your money. In recent times and primarily due to the Covid-19 Pandemic, we have heard the word inflation repeatedly by Economist and Financial Analyst. In as much as its usage has become popular, its understanding still remains what it was prior to the Pandemic. Now, Inflation simply means that prices of commodities and standard of living increases such that what you could purchase conveniently with N1,000.00 becomes more expensive, let’s say it becomes N1,200.00. Now imagine you have saved N1,000.00 and it has accrued a simple interest of N20.00, you still will not be able to purchase the item due to inflation. But imagine, that you invested N1,000.00 and it has accrued a return of N200.00 you will still be able to purchase the commodity, the inflation notwithstanding. So, investment meets inflation to the extent that the investment earns a return which will make up for the inflation and increase the value of money.
Investment helps to meet present and future long term financial security, here is the juice, by investing, you’re able to use the returns on the investment to meet present and future financial demands without actually taking out of the investment sum. What a smart thing to do!
Have you heard about compound interest? When you invest, your investment attracts compound interest. Let me do an analysis for ease of understanding. So, for example you save N1,000,000.00 for 6 months and you have a simple interest of N10,000.00, making a total of N1,010,000.00 when you leave your money for another year, it is the original N1,000,000.00 that will keep attracting interest. The accrued interest remains and does not accrue interest of its own.
However, for Compound interest, the invested N1,000,000.00 which has attracted an interest of N10,000.00 to become N1,010,000.00 will keep on attracting interest as a whole, rather than the original sum of N1,000,000.00. That means, the original invested sum and the accrued interest will further attract interest as a whole hence the phrase Compound Interest.
Wealth Building, remember I said that savings will help to build wealth, I am now saying that investing is a smarter way of building wealth, you keep earning an income from the investment.
The above benefits notwithstanding, Investment has its own risks and this risk calls for appropriate due diligence to guarantee that money invested is not only safe but that the returns will be duly paid as at when due. Hence, Investing comes with its own rules and if you cannot play by her rules, you’re bound to lose money, here are my 3 (three) golden rules of Investment:
- Invest in what you Understand-I am aware that there are a lot of investment platforms, I am also mindful of the beautiful pictures painted by the pioneers of these investment platforms. Please note that it does not matter how fantastic the offer or package sounds or looks, if you do not understand it, then there is no point investing in it.
- Start as early as possible-Like the anonymous quote, “the best time to start was yesterday. The next best time is now.” So, you need to start as early as possible, it does not matter that you’re a junior Associate or you’re even a freelancer with no guaranteed monthly income. Please start now.
- Balance your financial plan- Kindly make your financial plan or budget as realistic as possible, you don’t want to invest all your earnings and not have the means to pay your daily, weekly or even monthly bills.
Finally, investing does not breach the Rules of Professional Conduct!
‘Tosin is a lawyer, content creator and blogger, she is passionate about law and its numerous instruments. She can be contacted at: tosinajose22@gmail.com
[1]Poem composed by Oluwatosin Ajose Popoola Esq.
[2] https://thecollegeinvestor.com/16912/5-benefits-of-investing/
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