Every time we turn on the news these days, it’s just one bit of the good news and then a lot of the bad and ugly. Last week, we talked about coronavirus and the three things you need to know about your finances to survive this crisis. Today, we’re going to talk about how you’ll thrive its midst.
You might have already wondered what to do with all the savings you’ve grown so far. You’re thinking, everything is already expensive and scarce all at the same time, so what’s the point? But we got in on a little secret about one huge thing that is ridiculously cheap around this time…
February 27, 2020, the first coronavirus case was recorded in Nigeria. Barely 24 hours after the news broke, the Nigerian stocks hit its lowest level in the year, with 41 losers and only two gainers. In fact, a good friend of ours joked about a Tier one Nigerian bank (let’s call it Bank A), saying “Bank A closed at N10.85 per share? If you literally had N340 billion, you could actually buy the whole bank!”
By March, the oil market followed suit. This happened after Saudi Arabia and Russia agreed to increase production this month, because a previous agreement between OPEC and non-OPEC members, to lower output expired at the end of March. Both countries have refused to cut production as recommended by OPEC, to resuscitate oil prices that were already badly damaged by the event of coronavirus.
Its impact on Nigeria, meant that our National Budget, which leaned on oil prices, took a big hit. And so did the stock market, the global economy and the value of the Naira.
What is its impact on you and I?
Long-term investing is not something we address often at REACH. We learned that a sizeable chunk of our users were early-stage investors who just wanted to keep money liquid while it grows some interest. And that is not a bad thing.
However, when we see an opportunity present itself, it is only right to share it with you. Stock Markets reward long-term patient investors and this could be you.
This is how some top companies listed on the Nigerian Stock Exchange performed as at March 10. Among major decliners were, Stanbic IBTC Holdings Plc, MTN Nigeria Communications Plc, Fidelity Bank Nigeria, and Dangote Sugar Refinery Plc all fell by the maximum-allowed 10%. Guaranty Trust Bank, Nigerian Breweries Plc and Union Bank Nigeria Plc were among stocks to close 9.9% lower.
This should not deter you. Owning stocks over the long-term is a fantastic start on your journey to financial success. In about 5–10 years from now, our all-share index drop to 25,306.22 will probably look like a mere 1–2% drop. Stocks can bounce back and we know that in the long run, when things are under control, markets will recover and the same businesses will be fairly priced again.
For instance, no matter the slowdown, we won’t stop having use for consumer goods like soap or cooking oil. This is exactly where companies like Unilever and Nestlé come into the picture since they will continue to create wealth as they have in the past.
We definitely don’t know if this panic is going to get worse, but if we were to take a leap of faith, looking at how China has recovered, we do know that it is extremely unlikely. Nearly all panics wind up being minuscule looking back, and they also turn out to be timely buying opportunities.
All factors considered, we think that you should take advantage of the month of April, as a good time to consider investing in stocks.
- Buying stocks is not like buying money market funds which are very liquid. For instance, you should be thinking 2–3 years and not 2–3 months.
- When you’re ready, don’t just buy stocks because they were beaten down. Consider more, to buy shares from quality businesses that will stand the test of time, not those that might not exist in the next 5–10 years.
- Don’t put all your eggs in one basket. A diversified portfolio is a solid portfolio.
One fantastic thing about investing, is that it might only take one investment in a profitable entity, to change the course of your family’s history forever. This is how the rich keep getting richer. See Warren Buffett’s most recent purchase.
Something worth thinking about.