Here’s the truth
A Finance Series
By Jesutofunmi Olowoniyi • MoneyAfrica × Ladda Student Club
You must have heard about investing a bunch of times. Probably from your friends, neighbours, on the news or in the movies. You know it’s all about money but you’ve never really put your head down to know what it’s all about. Today is your lucky day.
What is investing?
Investing means putting your money away for some time for it to grow. Think about a tree, you put a seedling in the ground and leave it for a few weeks for it to bear fruit. The same goes for investing. You can’t eat the seedling when it’s young; rather, you wait till it’s big and strong and full of fruits so you can enjoy the big harvest.
Let me tell you about Amara.
Amara is a 200-level student in UNIPORT. Every month, her parents send her ₦100,000 for feeding and upkeep. Like most students, the first week she’s on top of the world, splurging, buying things she doesn’t need. By the third week she’s doing calculations that don’t add up. By the fourth week, she’s in her room drinking garri and counting days till the next alert.
One day, Amara’s coursemate mentions she’s been putting ₦2,000 aside every month into a money market fund on an app. Amara laughs. “Two thousand? What is that one going to do?” she says.
Six months later her coursemate withdraws ₦15,000 with interest to sort out an emergency. Amara had nothing.
That was the day Amara understood what investing meant because she saw it work in real life. Don’t wait to be taught by experience. Start today.
Is it risky? Yes.
Everything in life carries risk. Crossing a busy road in Lagos is risky. Starting a small business is risky. Even keeping your money in a corner of your wardrobe is risky and this one surprises people the most.
While your money sits in that wardrobe doing absolutely nothing, the price of garri, transportation, data and everything else around you keeps going up. So even though your ₦10,000 is still ₦10,000, it can buy less today than it could a year ago. That’s called inflation and it is the quietest, most unbothered thief you will ever meet in your life.
Types of risk you should actually know
There’s market risk which happens when the value of what you invested in goes up and down because of what’s happening in the economy or a particular industry. If you buy shares of a company and that company has a bad quarter, your investment drops temporarily.
There’s inflation risk which we just talked about. Your money loses purchasing power the longer it sits idle.
Then there’s liquidity risk putting your money somewhere you can’t easily access when you need it urgently. This is why it’s important to have a balance between savings you can reach quickly and investments that are locked in for growth.
And finally, there’s the risk of starting too late. Every year you wait is a year of potential growth you can never get back. Investing at 18 with ₦5,000 will always beat investing at 30 with ₦50,000 over the long run because of something called compound interest when your money is making money on top of the money it already made.
It sounds confusing but think of it this way. Your tree doesn’t just give you one fruit. It gives you fruits, and those fruits carry seeds, and those seeds grow more trees. That’s compound interest.
Is it a Ponzi scheme?
This is where a lot of people get confused. A Ponzi scheme promises you unrealistic returns such as “double your money in 3 days.” Investing doesn’t promise overnight riches. It promises gradual, consistent growth over time, like our tree🌳.
So, what can we invest in?
Stocks buying a small piece of a real company, e.g. MTN Nigeria. When they make money, you make money, too.
Mutual funds pooling money with others to invest together.
Money market funds this is one of the best starting points for students with low risk and decent returns, and you can start with very little.
Treasury bills where you’re essentially lending money to the Nigerian government and they pay you back with interest after a fixed period. It’s safe and effective.
Do you need a lot of money to start?
Absolutely not. You can start with ₦1,000. The most important thing isn’t how much you start with; it’s if you start at all. Apps like Ladda make it even easier; you can save consistently, build your money gradually and watch it grow with interest while you focus on your studies. If you would like to learn how to get started step by step as a student, join the MoneyAfrica student club via the link below!
https://forms.gle/Wj8w1TBNN3Vy6ndT7
Investing isn’t just for the rich. It’s how ordinary people become rich.
MoneyAfrica × Ladda Student Club • Finance Series • Episode 03