COVID-19 has led to a series of the worst financial and commodity crashes. As a result, people and businesses have had to adapt to a world that has become suddenly uncertain. Globally, millions of people are unable to provide and consume goods and services, and has created these ripple effects:
- Stock market crashes as investors pull out of companies they own stock in
- The price of crude oil dropping to its lowest level since November 2002
- Companies laying off thousands of staff
These ripple effects means that a lot of people are uncertain about their financial future and unsure of how to proceed with investments. So we got together financial experts from 3 of our portfolio companies - Risevest, Chaka & Bamboo - to share tips on what a post COVID-19 financial future looks like and how to grow wealth in turbulent times.
We’ve put the webinar into different formats so you can listen to the audio recording, watch the video or read snippets below. You can also find the slides presented here for download.
Introduction- What do the companies do?
Here's what each company does.
Bamboo is an online brokerage service that gives Nigerians access to the US market. Users can invest in thousands of stocks and ETFs using the Bamboo application on their mobile phones. Investments start at $20.
Rise is a digital wealth management company. With Rise, users can fund their accounts, and the company’s fund managers invest for them across diverse asset classes in dollars. Rise's investment options include: Equities, (US stocks), Real-Estate (backed by rental properties in the US) and Fixed income (Euro bonds).
Chaka was born out of the passion for giving people the best opportunities regardless of local conditions. In the Nigerian Stock Exchange, they provide access to 40 plus countries around the world as well as the US stock market, NASDAQ, NYC. Users get access to close to 4,000 assets on the platform.
For more information on what each company does, you can read our explainer article here.
Here are 14 critical questions that were answered during the webinar:
What is the investment sector like now in light of COVID19 and the oil price crash?
These are unsettling times, and people are fleeing to safety. It is a world issue, and this basically means that as an investor, you can't only be worried about just the fundamental asset aspects. The implication of oil prices and the stock market crash will be seen in the reduction in the returns that hard currency pays. Hard currency returns will reduce by 30%, and this is not a Nigeria focused problem, it's a worldwide problem. With all these crashes, there's a need to be smart about investing by focusing on where you want to be post-COVID19. It is imperative to think and invest in the global market because the market is never truly down everywhere.
What Are The Important Things To Know About Investing?
Investment is a life skill, and Global investment is the way forward. To maximize investments, it is necessary to understand what type of investor you are. Whether you are a Fixed Income Investor, Growth or Value Investor, Trader or Short-term Investor, and then invest accordingly.
How Can I Invest During This Stock Market Crisis without prior knowledge or experience in investing?
Before investing, it is imperative to decide what you want from investing (fast money or long money) and how much risk you are willing to take. For the fixed income investor, Risevest has US treasury bonds ETS that protect your value and safety and gold as an ETF, which also protects your value in crisis like times. For a growth/value investor, you need to identify companies that are long-term gainers with or without crisis situation, companies with a good chance to bounce back, companies that are big survivor companies. Solid advice for new day investors will be not to time the market. Instead, have a Dollar-cost average every month, set an amount you want to invest consistently. Also, worrying about how much one share costs is not important, it is advisable to buy as much as you want or can afford.
What can I invest emergency funds in?
With emergency funds since you don't want to lose value, and you want to be able to get in and get out whenever, a fixed income ETF is recommended.
Would you advise buying shares in the US giving the decrease in Naira value?
New investors need to understand that ups and downs are part of investing. With the history of Naira, when it loses value, it rarely bounces back. Hence, it makes sense not to be reactionary with investing. Don't look to trade your stocks if you are not a trader, look to safety.
What Companies Will Survive This Crash?
Companies that will survive are companies with a large capital reserve and can manage long periods of reduced profits. A lot of large companies and CEOs understand that fact, and that's why the Uber CEO felt the need to inform the public that they have $10 billion in cash and over $2 billion in credit. It is also essential to look at companies with brand loyalty. Be careful not to be reactionary and judge the post-COVID market based on what is happening in the market now.
How Do I Know Companies To Invest In?
One useful trick is to invest in companies you loved before the crash and have a good history of bouncing back. Those companies will do well after the crash, e.g. Apple, Disney, Amazon etc. Companies that pay dividends are also an excellent option to invest in. Bamboo is rolling out a new feature that will include analysts ratings which basically lets users see stocks that professional analysts would buy. This new feature will save you the time and stress of doing personal research and analysis on stocks.
What Can I Invest at the moment?
Companies trying to create solutions to the pandemic the world is facing right now might be a good option. Companies that are involved in medical sciences are trying to develop a vaccine for the various, e.g. Juliet Gilead Sciences and Johnson and Johnson.
Is Investing In A Crisis Advisable?
The best time to make a fortune is during a recession because there is a lot of panicking and selling or no investments at all. Warren Buffett's famous quote is 'be fearful when everyone's greedy and then be greedy when everyone's fearful'. The best time to invest is during a recession, in every recession, some investments pay off, you just have to understand what kind of recession you're dealing with.
It's well expected that regardless of how this crisis plays out, the Naira is going to get devalued. Don't worry too much though, there are more investment opportunities outside Nigeria. Rise allows you to invest across equities, fixed incomes and real estate. As a wealth-management operator, they have studied the asset classes that held up well in the last recession. This means they have developed investment options in the asset classes that protect you both in the good times and in bad times. With the 2008 crash, even though it was a real estate driven crash, rental properties held up the best out of the most of the market.
A lot of people who lost their homes moved into the rental market. The people who were in the rental market remained in the rental market because they had to live somewhere despite the recession. The 2008 recession showed that real estate is an asset class that holds up really well. Rise gives users three asset class options so that regardless of where the market is, regardless of what the current situation is, the users always have options.
How are your investments protected from risk on all three platforms?
For Chaka, all investments are through a local brokerage. Investments are insured up to $500,000 by the securities and investment protection corporation in America.
For Bamboo, the broker partner is an SEC broker partner, and your account is protected up to $500,000 for assets and uninvested cash in your wallet are protected up to $250,000. If anything goes wrong, you're able to claim back for your insurance.
For Rise, they invest through a brokerage partner that provides APIs, and you can run a brokerage on our RIA. Their partners offer insurance for real estate, including income loss.
What's the transaction fee on each platform and what are the tax rates?
Chaka :30% for tax and 1% commission
Bamboo : 30% for tax and 1.5% commission
Rise: charges a flat 3% profit on all investments except real estate and 10% on real-estate investments.
What's the exchange rate on these platforms?
The parallel market rate is the exchange rate used.
What happens to my investments if I die?
Our platforms collect next of kin information. It’s important to inform your next of kin so they are aware of your assets.
How many days does it take to liquify my investments?
Chaka: 1 business day
Rise: 3 working days apart from fixed-income assets like real estate
Bamboo: 1 business day
The questions asked and answered during this webinar are important pointers to how you should invest in a crisis and even after the crisis. We'd love to stay in touch and share more resource materials with you, please join our community below.
