Why Pastor Ashimolowo took a stock market beating 2005/2006

TUNDE OYEDOYIN  

Tunde Oyedoyin is a London-based personal finance coach and founder of Money Intelligence Coaching Academy, a specialist academy of personal finance. He can be reached as follows: +447846089587 (WhatsApp only); E-mail: tu5oyed@gmail.com

In investment circles, especially among fund managers and stockbrokers, there’s a saying that you “invest for the long term.” There’s a truism in it. 

Secondly, never borrow money from the bank to buy shares. You may do so for private placement, though.

Thirdly, take a look at the spokes of a bicycle wheel or those of the magnificent London Eye. The way the wheels of both go round and round is how things go on the stock market. 

Fourthly, check out the fundamentals of the company whose shares you wish to buy. How long have they been there and is it likely they’ll still be in business in the 20 years from now ?

Let these four things be your reference points for understanding how the stock market works. Let’s get it on from here.

Catching up with the day’s news in the Guardian newspaper was what I had in mind when I logged on to their website in the early hours of Tuesday, August 20th.

In the course of doing that, yours truly came across a report they had published the previous day about Kingsway International Christian Centre, KICC founder, Pastor Mathew Ashimolowo. As a personal finance expert and coach, I knew immediately it was going to become a column material. In fact, the temptation to dump what I scheduled for last week’s piece was there, but l stuck with that.

Here we are now.

The Guardian story was titled: “Ashimolowo loses N200 million to bank shares, warns Nigerians.” That was a heavy pounding to take. Though nearly twenty years ago, still commiserations, sir. But the good news is that despite that catastrophic loss, Pastor Mathew didn’t lose the ranch, thankfully.

Before going to do an X-ray of that monumental beating that the ‘man of God’ took, it’s important to note that the stock market is cyclical in nature. In other words, markets go up and they go down. As mentioned in the opening, the stock market is actually like the wheel of the London Eye and that of a bicycle. It goes round and round and round. Thus, you can use the turning of the wheel to time when you enter and check out of any market.

The Nigerian Exchange (NGX) is no different and by default, bank shares and those of other sectors. Though markets sometimes behave irrationally, they revert to going round and round like the spokes attached to the hub of a bicycle wheel or the London Eye. One should also state that the forces of demand and supply will always be there at the markets. That interplay can result in a home run or a strike out.

Also worth reiterating is that you don’t borrow from the bank to buy shares. Please don’t do it, especially if you want to flip those shares in order to make some quick bucks. You might get lucky. Of course, you may also get caught in the crossfire when any little thing tickles the market. The first mistake that Pastor Mathew made was to borrow to buy shares. When you borrow, you’ll probably be in a hurry to make a profit. Here’s the thing. Panic may set in if the wheel of the market is not turning as you expected.

Besides, the shares you’ve bought may be in the downward cycle at some point. If you’ve borrowed and was hoping to flip them and trouser some bucks, investing for the long term becomes a problem. You’ll probably be screaming: “I’m a celebrity, get me out of here!” Seems that was how it turned out for Pastor Mathew.

According to the story, the pastor disclosed that: “I bought N36 million worth of shares from First Bank at N12 per share and it fell to N6.”

Aside from those of Skye Bank that he bought with borrowed money from Sterling Bank, the pastor said further that his Guaranty Trust Bank shares that he bought at N18 per share, plunged to N3.60 each.

If the money used in getting the Skye Bank shares had come out of his pocket, and assuming he had not disposed of any of the GTB shares as of today, they’re currently priced at over N30 per share. The pastor would have been raking in at least a hundred percent return on every single share and could have recouped his investment and still keep the assets.

The shares of First Bank are not doing badly on the Nigerian Exchange either. So, folks, if Pastor Mathew was in the know of the four points, he wouldn’t have taken the pounding.

Grab a piece of FCMB : Otunba Subomi Balogun may no longer be with us, but First City Merchant Bank (FCMB), which he founded, is still here.

They’re in the market raising more capital. Please grab a slice before they slam the door and close on September 4th.

business a.m. commits to publishing a diversity of views, opinions and comments. It, therefore, welcomes your reaction to this and any of our articles via email: comment@businessamlive.com