The Marathon Race to Stock Market wealth
Written by:
Peter Oluoch, Bsc, Msc, Computer Science
Web Administrator,
College of Humanities and Social Sciences
University of Nairobi
Every successful and wealthy businessman or businesswoman has one common saying: Trust the process. The journey to wealth creation is not a short sprint, it is a marathon that takes decades. Creating wealth in the stock market is a skill that every young person needs to master.
In the year 2015, while working at the University of Nairobi as part of the Communications team, I was assigned the task of covering a story about the Pension Scheme. The University of Nairobi Pension Scheme organizes yearly retirement seminars for staff members who are about to retire and I got an opportunity to learn first-hand from Retirement Benefits Authority on the dangers Kenyans face when they fail to save, invest and grow wealth during their employment years.
According to Retirement Benefits Authority, only 3% of employed Kenyans retire rich, and 90% retire poor, with about 7% being comfortable in retirement. Chances are that as you reach 60 years and exit employment, you will retire poor and it doesn’t matter whether you are the highest paid or the lowest paid employee – the end result is the same; poverty in old age.
Poverty in old age is so rampant in Kenya, that the Government in its wisdom decided that old men and women should be supported financially. The government set up Social Welfare Fund, for people who are 70 years and above. The elderly get paid two thousand shillings monthly. The money may appear to be peanuts to some people but a one on one conversation with the recipients reveals that the money comes in handy.
Over the last five years, my research into the stock market reveals one thing; that it is possible to become wealthy investing in the market- if you know how. The stock market is double edged sword. Those who understand the workings of the stock market have gained massively and those who don’t understand the workings of the stock market have also lost massively. The gainers for example are those who bought Safaricom at 5/- some 10 years back and the stock is now 35/- as at November 25 2020, hence an increase of 600%. An investment of 100,000/- some 10 years back is now 600,000/-. In the same breadth, some companies have performed dismally over the same time period, case in point Kenya Airways, Uchumi Supermarkets, Mumias Sugar Company, Firestone, Athi River Mining among others. KQ for example was once 147/- per share and it decreased to 1/-, a loss of 99%.
Reading the biographies of Billionaires like Richard Branson, Steve Jobs, Joe Barage Wanjui, Warren Buffet reveals one thing; they didn’t become rich overnight. It took them decades to become wealthy and their wealth exploded overnight, when their companies were listed on the stock exchange. Virtually every billionaire becomes rich when they take their companies for initial public offering, IPO.
It is not only the business owners who get rich during IPOs, but investors too become rich during the IPOs and its not only during the IPOs, when investors make money. They can make money on a regular basis investing in the stock market, picking the right stocks to buy. I have endeavored to teach the inner workings of the stock market on my Youtube Channel and Telegram Channel. I have realized over the last six months that it is possible to make over 10% every quarter in the stock market and hence 40% return per year, a return that is greater than SACCOs, Banks, Money Market and Treasury Bills.
Sample this: In the last six months, Nation Media Group jumped from 9/- to 19/-, Bamburi Cement moved from 19/- to 45/-, NCBA moved from 21/- to 26.50, Safaricom moved from 26/- to 36/-, Equity Bank moved from 28/- to 37/-, KCB moved from 30/- to 38/-. Despite the global pandemic, the stock market has made some great moves that have left investors smiling all the way to the bank.
Recommendations:
When should you invest in the stock market? : When everyone is fearful, that is the best time to join the stock market investing train. Veteran stock market investors advise investors to invest when there is ‘blood on the street’. Corona period for example offered us a good opportunity to invest in the stock market because many stocks had a huge price discount. Many of the stocks were nearly 20% or 30% discounted. While we may not always wait for disasters to happen, any time is an investing time. Like swimming, you get to learn, by being in the swimming pool. Instead of waiting for the appropriate time, begin today and learn.
How much should you invest?
The Chinese have one proverb that has become universally accepted, the journey of 1,000 miles begin with one step. If you plan to be a millionaire, you can begin by saving 1,000/- every month and growing it at a 10% or 20% annually compounded interest and you will be a millionaire after a few decades. That is the long route. The quickest way to become a millionaire is to save not just 1,000/- monthly, but 10,000/- or 20,000/- monthly for about 6 years and growing the money at some 10% or more monthly. You will be a millionaire in less than a decade and that is my goal in life, that as many Kenyans as possible would join the millionaire category and escape poverty, Kenya’s number one enemy.
Investing in the stock market is like investing in any business. You can decide to go big or start small. Investing on a monthly basis. If you wish to go big, you can invest one million or more depending on your capital.
Choosing a broker?
There are over 30 Stock Brokers in Kenya according to Nairobi Securities Exchange Website, www.nse.co.ke. In this digital age, a good stock broker should have an app, that enables you to buy and sell shares from the comfort of your mobile phone. Alternatively, you should have a web platform that enables you to buy and sell shares from your laptop or computer and reduce the monotony of visiting the stock brokerage offices every time you want to buy or sell shares. Over the last ten years, I have comfortably sampled Kingdom Securities, Dyer and Blair Stock Brokers and Genghis Capital. They all seem to be fine.
I have been investing in the stock market over a decade and doing research on the Nairobi Securities Exchange.
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