Ogbemudia Eddy Uwoghiren,
600 Level, Medicine and Surgery,
University of Benin,
Multiplying your money comes from putting it to work for you, especially through passive investment. Using the 30:30:40 principle, the 30% reserved and consistently saved as investment funds should be employed to make more.
Do you ever wonder why the rich keep getting rich and might likely not go broke anytime soon? They have cultivated the habit of investing their money and using compound interest principles to accumulate more wealth. And when the investment matures, they spend their returns on luxuries which others, who do not have investments, end up borrowing to afford, in a bid to impress and compete with them. This is a pitfall anyone aiming to build wealth should avoid.
Simply put, investment is the act of committing money or capital to an endeavour with the expectation of obtaining an additional income or profit. It can also be likened to putting your money to work for you while you sleep. Investing could be passive or active.
In life, you can’t increase the time you spend making money, so instead, you can send an extension of yourself—your money—to work for you. That way, while you are in the clinic clerking a patient, in a ward round led by the consultant, in the classroom receiving lectures, or even in your room sleeping, you are earning money already. This is what rich people do. They sleep well at night knowing that an extension of themselves—their money—is somewhere working for them and will bring an ROI at a certain time.
Investment is not gambling. You need to do your analysis and verify the portfolio before putting your money there. Outlined below are some key lessons to have in mind as regards investment.
- Start early. You can start as early as 100 level to cultivate the habit of investing your money in verifiable portfolios. Imagine channelling the 200,000 Naira gotten from a scholarship into a portfolio that gives a 50% Return on Investment (ROI) in 12 months. By the end of your stay in medical school, you would have built a fund reserve of almost 4 million Naira for yourself if you decide to compound the interest and reinvest yearly.
- Evaluate your risk appetite. Never jump on an investment you have a low threshold of risk for.
- Diversify your portfolio. I always tell people, if you ever attend a ‘masterclass’ on investment and they never made mention portfolio diversification, please leave. Diversifying your portfolio helps to minimize the risk involved and bring better returns.
- Start small and scale up. Many years ago, I thought investing was all about putting a large sum of money into a portfolio, but experience has shown that I was wrong. You could start investing as little as 5,000 Naira, especially with platforms like Piggyvest. These days, FinTech apps are available to give you access to stock in the US market which you can buy with as low as 10 US Dollars. Over time, as your earnings increase, you can increase the amount you put into investments.
- Watch out for Ponzi schemes. Whenever the ROI is very large with a short turnaround time, the chances that the investment is fake are very high and the risk involved is too much. A colleague once sent me a link to subscribe to an AgriTech company’s Egusi Farm with 75% ROI in 6 months. I declined because I couldn’t fathom how a company would pay subscribers 75% ROI, including the capital, after having deducted their running cost and even insurance.
- Be wary of investment opportunities without insurance cover. Investment is a risk. You are exposing your money to risk and there should be enough insurance to protect against any eventuality.
- Finally, apply the principle of compounding. This entails reinvesting your original capital and ROI at maturity. For example, if Ade invested 500,000 Naira in a business that brings 20% ROI monthly, at the end of three months, Ade will have 864,000 at maturity. If Emeka decides to invest the same 500,000 Naira with 20% ROI monthly without applying the principle of compounding interest, he will have made 800,000 at maturity for the same three-month duration.
What investment options are available?
This is a type of fixed-income security and it is funded in debt. Whenever you purchase bonds, you are simply lending out your money to a company or government who in turn agrees to give you interest on your money or eventually pay you back the money you lent them. Investing in bonds is one of the safest investment plans available but the Return on Investment (ROI) is small. Nevertheless, it is safe, stable and risk-free.
Also called a share or equity, a stock is a type of security that implies you have ownership in the company. People invest in stocks for 2 reasons.
- They expect the price to go up—this is called capital appreciation. Let’s assume Company A’s shares are sold at 20,000 Naira per unit and in the space of 6 months, rose to 40,000 Naira per unit, the investor has made a profit of 20,000. Naira on each share unit owned. For stock, you can consider either the trading component or the investment component. I would advise investment for companies with very good records and trading for companies like biotech because of their extreme volatility.
- People also buy shares to earn dividends which come over a period, when companies make a profit.
Owing to the constant devaluation of the naira, I encourage medical students to buy shares from companies based in the US. The advent of fintech platforms like Bamboo, RiseVest, Chaka, Trove, amongst others, has made it very easy to buy shares from companies like Apple, Amazon, Tesla, Starbucks, Delta Airlines etc. with as low as 10 US Dollars from the comfort of your hostel using your mobile phones. If you do not know how to identify a good stock and can’t manage them yourself, I encourage you to use RiseVest. They help you buy the stock in their portfolio and manage them on your behalf. If you want to manage the individual stock yourself, the other platforms offer you that opportunity.
Unlike bonds, stocks are very volatile. They carry the highest risk and the highest ROI.
With mutual funds, you are basically pooling your money with that of many other investors, which enables you to overcome the challenge of needing some experience in investing. The company or person in charge then goes ahead to invest the money in verifiable portfolios with good returns and shares the ROI as agreed, at maturity.
This is one of the most popular and low-risk investments in Nigeria these days. Owing to the gap in food supply, AgriTech companies have risen to the challenge of pooling money from investors to fund their farms—poultry, fish ponds, cassava, maize, amongst others—for a farming season. Returns on AgriTech investments come in 3 months, 6 months, 9 months and sometimes 12 months. ROI isn’t so high but they are among the safest investments medical students can take advantage of, because most Agritech companies have insurance cover for all eventualities. Some of the most popular ones are AgroPark, AgroPartnership, Thrive Agric etc. I will, however, advise you to do a background survey before investing in them.
Other investment options medical students can consider include real estate, treasury bills, venture capital, Forex, cryptocurrencies and investing in friends’ businesses.
In summary, as medical students, we must cultivate the habit of making our money work for us—through investment platforms—and not wait to become licensed medical doctors before building wealth.
Books on Money
- The Richest Man in Babylon by George Clason
- Rich Dad, Poor Dad by Robert Kiyosaki
- The Intelligent Investor by Benjamin Graham
- Think and Grow Rich by Napoleon Hills
Movies on Money
- American Hustle
- The Pursuit of Happyness
- Molly’s Game
- American Gangstar
- Indecent Proposal
Finally, from the discussion so far, you will agree with me that being rich is often the result of a sound strategy and never tied only to your profession or how much you earn. It is a function of how well you make money, manage the money you have gotten and multiply that money.
So, if you want to date a medical student or marry a doctor, please go ahead. They are not poor and can build wealth if they apply some of the basic financial principles we have discussed so far.