The longest journey still starts with the first step
I have had people ask me a lot of questions about investing. What stock should they buy, what should they invest in and so forth. I can tell them all sorts of stuff but in the end? A lot of them never do it. My cousin has asked me a couple of times "How do I invest" and I tell them. My son's? Same thing. Then I ask them 6 months (or two years) later how they are doing and its the same answer:
I haven't gotten around to doing it yet.
.... and that is really a shame. The longer you wait the less time you have to make money. The most frustrating thing is that it doesn't have to be hard. In fact it can be as easy as just opening a different bank account.
In Canada we have a number of different banks. All are equally safe because the government insures all of them for up to $120,000 per person per bank. We have 5 big banks which pay 0.01% interest. It's just sad. Plus to make things worse they charge you every month for the privilege of having the account. Grrr.... What a waste (usually...there are exceptions).
However, we have newer online only banks which give higher interest. 3% at EQ Bank as an example. Is that a lot of money? No. Is it something? Yes. Which is why when I found out my son had $7,000 in a bank account paying 0.01% interest I cringed.
7000 * 0.01% is $0.70 per year
If he made the switch?
7000 * 3% is $210 per year.
If you were offered $210 would you take it?
And guess what. Switching bank accounts would be an investment in my mind. Reason: $7,000 making nothing is just dead money. $7,000 making interest is an investment. not the most interesting one but an investment nonetheless.
It doesn't need to be a big first step
Now a little while ago a new user named @ecohive made a post about mutual funds. I am curious how Nigerian mutual funds work so I asked if he would buy one and talk about it. You can check his first update here. I was so happy to see his first and subsequent post because he did something most don't get around to.
Taking the first step.
Most people think they should do it but there is always a reason to put it off. I'm too busy. I don't want to make the appointment. I don't have enough money. I don't know enough about investing. You know... Excuses.
But @ecohive took the money I sent him and converted something digital and turned it into something real. Even better. He turned it into something with real world income! Okay. It is only N3.81 per day but that isn't the point right now. The point is that it is real, measurable, income. Now it is my hope that he will (a) reinvest the income into HIVE at some point in the future and (b) think about investing some of it into GLD or at least post about it in the Great Little Dragons once we get up and running. However, even if he doesn't? He can tell others about how virtual money become a real income stream.
So.. I'm sending another $5 HBD and am looking forward to seeing what this investment will do...
The rule of 72
A story of two mom's (fictional)
Let's start with two women who wanted to become mothers. They talked to each other and both decided to join HIVE. They wanted to document their journey to becoming mothers and hopefully make a little money to give something extra to their child.
Each of them wrote regularly for a year. Every week they wrote interesting articles, engaged with the community and shared their story. Every week they took their meager earnings of $5 HBD and converted it to Naira. One woman wanted her son to have a good start. She took that $5 and used it to buy a few pieces of nice clothing. A few toys. Some quality food. When her baby was born at the end of the year she got some very nice pictures of her new baby in a nice room with some nice toys plus of course some solid formula. The other mother took her $5 each week and purchased shares in a mutual fund (much like @ecohive). She saw the income coming in from it and she just put it right back into the mutual fund week after week. When her baby came there was no special clothing, no special toys and no special formula...she hadn't invested in his start, she invested in his future.
Fast forward 21 years and both of the babies thrived. They were smart and graduated from good Universities. Both mothers were proud and gave a party for their child at home. Nothing lavish as neither were rich but they had to show their son how proud they were. But the one who invested the money so long ago?
She gave her son the investment
... Which would pay him N 350,000 monthly for the rest of his life.
But what about the rule of 72?
Well, my guess is you aren't believing that one year of writing Hive posts could lead to N 350,000 monthly income for life. So... here is a little quick math for you using the rule of 72.
If you take the number 72 and divide by the interest rate you get on your investment that will give you the time it takes for your money to double.
In the case of @ecohive mutual fund that number is 19.9%
and 72 / 19.9 is about 3.6... but lets round to 3.5 because it makes math easier.
So...
| Year | Multiplier |
|---|---|
| 3.5 | 2x |
| 7 | 4x |
| 10.5 | 8x |
| 14 | 16x |
| 17.5 | 32x |
| 21 | 64x |
3.5 years -- double your investment
If the woman started with 7000 Naira weekly? * 52 weeks? N 364,000
but if it grows by 64x ?
That makes 23 Million Naira.
Now @ecohive shows that the current daily payment is paltry. Three Naira. I doubt the average Nigerian would bother stopping to pick that up. But fast forward 21 years? How about 12,000 Naira every single day? Would you stop and pick that up?
In 21 years? Who knows what it will be worth. But that's a topic for another article on inflation.
Still, my guess is that 12,000 Naira would still be worth picking up 😁
Disclaimer
I'm not offering investment advice.
Well, the advice I'm offering is.... Investing is worth looking into and starting is the hardest part.
I gave a very simplified example to show the power of compounding and how even small amounts on HIVE can turn into real world value. But... nothing is guaranteed, especially in Nigeria. Things can and often do go wrong... but if they go right? It can really brighten the future
Thanks for reading
... and as always I love feedback.