Start Early

Sade and her friends Tunde and Chinedu have all reached their 65th birthdays. All have invested N4,800,000 each over the course of their lives and they are now ready to retire.
Sade has faithfully invested N10,000 at the end of each month since she completed her NYSC at age 25. Tunde on the other hand began to think about retirement about 20 years ago at the age of 45; because he started close to retirement, Tunde saved N20,000 at the end of each month. Chinedu on the other hand only started saving 10 years ago and had to save N40,000 per month.
Assuming Sade, Tunde and Chinedu''s investments earned an average rate of 15% per annum, at age 65 Chinedu''s investment would have grown to N11,008,682.33. Tunde''s investment would have grown to N29,944,790 while Sade''s investment would have grown to a whopping N310,160,548!
Due to the power of compounding interest, the sooner you start to invest, the more likely you''ll be able to reach your financial goals and retire VERY RICH.
Discovery Fund offers you the flexibility to invest as often as you like at your own pace. Contact your Account Executive today to set up a systematic investment plan.

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What to do in a bearish Market

If you have been paying attention to the activities on the Nigerian Stock Market, you would have noticed that it has been on a downward trend over the last 4 weeks and has lost 12.9% since it reached a year high on 18th of June, 2004. This trend is expected to continue in the short term as investors’ take profits on their investments; invest in the public offers available in the market; and, invest in fixed income instruments to take advantage of rising interest rate.

Don’t follow the herd!
One of the worst mistakes you can make as a long-term investor is to base your investment decisions on short-term market trends as this method of investing could be a good way to lose money. Instead, focus on the long-term investment goals you have set for yourself. The investments you hold were presumably purchased to help you reach those long-term goals.

Bear market remedies
Fluctuations in stock markets are a strong feature of investing. This is why, when you build an investment portfolio, you should not invest the money you need in the short-term in high risk investments like equities. One good way to avoid market jitters and the fear that you’ll lose your money in a falling market is to follow a regular investment plan. In our article on Naira Cost Averaging, we introduced the concept of reducing the impact of volatility in your investments by investing a fixed amount periodically regardless of what direction the market is moving. This strategy can be achieved through The Discovery Fund, a well diversified portfolio, which allows you to add to your investment as often as you like with as little as N5,000.

We also advise that you avoid following the market too closely otherwise you will be tempted to liquidate your investment. Review your investment portfolio once every six months or once a year, but don’t make the stock market a daily obsession. The market’s direction may be influencing the performance of your portfolio or it may not, but there’s no sense in getting worked up over the short term.

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How much of my annual pay should I be saving for retirement?

Exactly what percentage of your annual salary you should earmark for your retirement years depends on a variety of factors. Your current age and the lifestyle you hope to lead when you quit working. As a general rule, financial experts say you should take at least 10% of your annual pre-tax income and set it aside for retirement. You should put even more than 10% away if you plan on lots of travel, expensive hobbies or other extravagances. You will also need to save more than 10% of your annual income for retirement if you are already middle-aged and haven’t been saving much. If you reach age 50 and don’t have much of a nest egg, experts say you must begin tucking away at least 20% of your pre-tax earnings for retirement to have even a hope of maintaining your current lifestyle when you quit working.

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What is the best way to build up a retirement account in a mutual fund?

Religiously putting a little money into an investment account month after month is one of the best ways to painlessly build a retirement nest egg, and there’s no need to pay a financial planner or broker to help you do it. The problem with most contractual investment plans is that up to half of your investment in the first year or two is gobbled up by fees that the mutual fund pays to the broker who signed you up. Losing 50 cents of every dollar you put in is hardly the best way to start saving for retirement. On top of that, most plans charge hefty sales loads, annual management fees, or both. Sponsors of many of these plans must earn an average of 10% or even 15% yearly just to cover the customer’s expenses. Don’t be fooled by the plan’s "guaranteed" average return of at least 5% annually. That’s a paltry figure, and it probably doesn’t include sales loads and management fees. A better way to go would be to contact a true no-load fund directly and arrange such a program yourself. Nearly all funds offer automatic investment plans. You simply sign a few forms, and the fund will automatically debit your checking or savings account every month. There’s no reason to pay a financial planner or other middleman big fees to do such simple paperwork for you, and you’ll avoid costly sales loads in the future.

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How can I teach my kids the basics of budgeting and investing?

Probably the best way to begin teaching your children the basics of budgeting and investing is to show instead of tell. Take your kids to the bank with you and explain what you are doing. Bring them along to the market and have them help you compare prices. Above all, teach by example. Your lessons won’t have much impact if your kids see you spending wildly on items that you don’t really need. Several good books aimed at teaching kids about consumerism and banking can be found at your local bookstore. A growing number of child-related finance sites are also popping up on the Web. Think BIG (Beginers investment group) by the Discovery Fund is a site designed for young investors to learn the basics of investing.

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How will getting married affect my financial and estate planning?

Getting married will affect every facet of your life. It will especially affect issues revolving around money. Everything from health, property, casualty and life insurance to checking, savings, investment, and retirement accounts will need to be revised. Devise a budget, based on your increased or decreased income, that spells out what percentage goes to the paying of which bills. The most important thing is that you and your spouse start planning the financial aspects of your life together so you know what to expect. Every year, be sure that you and your spouse set aside enough time to review your long-term financial plans and make adjustments.

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