Okay I start of with a firm, declarative statement, which I haven’t actually checked if it true. There are always exceptions to every rule.
But honestly, most billionaires out there started their investments when the companies where ideas, startups and new businesses. It’s that whole early bird gets the worm thing.
There are a lot of millionaires in the stock market and its just a few more zeroes so why haggle right?
Well if you want to be on that Forbes list… then you have to realise that simply playing the market or that fixed income portfolio is likely to get you to your realistic goals in your investment policy statement but not grant you the money shot to ‘billionairehood’.
I realised this early in my financial career…as I was preparing for the CFA level I exam I did a money weighted return of my equity portfolio and even though I was able to get alpha and there was that beautiful train ride of Forte oil between 2013 and 2015 from like
N9 to N150, I still could not match up to does HNIs I was advising, who had bought their stocks in kobos.
So I took a risk.
I had friends who were excited about starting their own businesses in the fasters growing markets in Nigeria then, sport betting, entertainment and fashion (So you see when I cry about my fail investments, over a bottle of Heineken, its not that it was destined to fail, its just that I picked the slowest horse in the best race, for sentimental reasons…and I even have maintained some of these equity positions because as Warren says, when investing you have to pick companies you want to hold for 20 years).
Therefore, I used my limited capital from my 9 to 5 to take a risk and invest in various companies around 2015-2016; unfortunately they were not showing the trajectory or management, I expected four years later, so had to pull out of some, but I have since added two new investment in tech and food (two other growing enterprises in my country).
I take these risks because I am in my 30s so have like 40 more working years and with a mutual fund and stock market position that is earning returns slowly… I will not be destitute. Amen.
However some of the things I have learnt the hard way by being a premature angel investor and entrepreneur:
- Don’t invest in a friend’s company due to sentiment: So I believe in my friends and don’t see it as a failing. I have many friends and connections who have started their own companies and if I had cashed in those options, I would have been closer to my goal (you can google if you doubt…we really should form a fund… LJC entrepreneurs); so I am not saying don’t invest in friends (first round of capital should come from friends and family). What I am saying is you should know the friend’s character well and try to understand the value proposition as best you can. You mostly won’t see the vision…they tend to be singular in nature…but you can get an idea of the direction.
- Have a means of oversight on activities and MOST IMPORTANTLY FINANCE: So you don’t know my horror when I realised that one of my chosen goldmines was not counting the gold or labor cost…no record keeping at all which is suicide for a business no matter how good anything else is. I am not an accountant but you can’t work as an investment banker or be a level III candidate in the CFA Exam without dredging through a ton of financial statements and you really do see the business in all its nitty gritty. So anything, all activity of the business, with or without “ego” changing hands, should immediately be written down… and let those accountant’s in suits cook up the books.
- Analyse the facts, Make decisions and Follow through: So I now get everyone to first think through the business with a business model canvas, then draw up a business plan, strategy plan, marketing plan, and first 3 months timetable (my mum says once you do something for 60 days it becomes a habit) with a focus on estimated costs. It helps me analyse better and make decisions faster. I added follow through cause I am still a sentimental guy by nature and this is a friend’s hustle I try to find a way to make it work or at least make taking out my capital not as abrupt as possible:
Yes I know I am not caught out for Machiavellian business environments but I would rather do things my way than be as ruthless as Rockefeller (after all, fundamentally, I know the difference between needs and wants but there is always a niche to target in any business- no one covers the whole spread).Dr. Ezy
So to all you budding billionaires out there whether by entrepreneurial or investment activities, I wish you better success and disciple in your strategies and as I said in an earlier post everything boils down to the scientific method: observe, hypothesis, test, analyse, conclude, repeat. The more you do it the better you get at it and the closer to the truth you will be.