The 5 Investments You Must Have Before Age 50

[00:00:01]Welcome back to the edge everyone. And in this segment, we're going to be talking about top five investments that everyone must have before they turn 50. And I'm still delighted to be joined by Duo Aay's head income and vice president.

[00:00:27]Also still with us is Adra Joe. Adra Joe is a charted financial analyst, an accountant and wealth management expert.

[00:00:37]Gentlemen, thank you for staying on.

[00:00:42]>> Thank you very much for having me.

[00:00:44]>> Thank you doctor. Thank you for having me.

[00:00:46]>> Okay. So I mean this is a pertinent and I a pertinent question or discussion to have by the age 50 many face what in bureau vera finance we call retirement cliff right and research has shown that inadequate planning leads to about 30 to 50% income drops uh family dependency the building. So building foundations uh early I I would say will prevent this form of retirement cliff that we talk about for people in their 50s. It was um Morgan Hera who notes in his um work on the psychological of money uh that says that wealth is what you don't spend. All right. So that what he described wealth to be. So many Nigerians in their 50s today as either struggling to pay school fees for children. They facing forced retirement, difficulty getting new jobs or relying on family for support. So why is this why is it so important to build a solid investment foundation before turning 50 and what kind of painful realities does this help to prevent um deep what do you make of this and what's your what's your two cent on this? Well um there's um a professional that I listen to one day said something very very essential. He said for every income you earn today is to cater for yesterday expenses today expenses and for for your future expenses. So it means that if you earn 100,000 NRA today there's future expenses that in in that form. So it simply means that you cannot spend the money for future expenses today. So what do you do with that money? You set it aside and you don't just put it in savings account. You set it aside to prepare for that future just like what you have highlighted. And uh for me there's this analogy that always come to mind. Um when you are starting your career you are like someone on a bicycle you can turn anywhere in the world. uh when there's traffic you just imagine yourself that you are married you just started your career you can wake up today and say I'm located to Canada but when you are married you can't just wake up and say you are relocating to Canada you already have a weight on you so it simply means that at that point you are more like a a car that need to turn when you want to turn you must trafficate and ensure that the coast is clear for you to turn and when you now have children Dr. Tony I make be I make make it to say to you that you are now a train you cannot turn until when you get to a terminal the coast must be extremely clear before you can actually make such u-turn and how can you make this coast clear is just like what you are saying now you need to prepared for that day where you need to make such decision for you to actually make those turnings and um as you're growing there's a lot of uh uh investment opportunity that is available for you to actually put in your portfolio that could actually help you prevent uh uh that day that you would not be unable to actually fulfill your financial obligation as I went you when you're starting your career your financial capital is very low but you have huge human capital so what you need to do is that you need to find a way to actually maximize while you are converting your human capital to financial capital you must ensure that you're not consuming the financial capital you are putting in the financial capital in the investment that will protect your future. And I'm sure as we speak along the line, we will dissect some of those assets where you feel that you can actually put your phone in to prevent uh a a situation whereby you're unable to actually meet your financial obligations.

[00:05:07]>> Yeah, that that's uh that's key. Um so, Adira, what do you uh make of this? Why is it so important to build a solid investment foundation before turning 50?

[00:05:24]I mean, does it are we over uh is it that we're overemphasizing the age of 50 or do you think this is just making um you know necessary noise about the age of 50? Why why is it important actually?

[00:05:43]>> Yeah. Uh not at all doctor. Uh it's very important because you know that age is um uh is is is the is the is the is the late career age, >> right? 50 and above is your late career age. And at that age um you have your risk appetite begins to drop.

[00:06:08]>> Right? Just like Deepo said um your human capital at that point begin to drop. Your human capital is the is the is the is the economy benefit of your skill. Your your your professional experience. I mean your professional development and work exper your personal attribute.

[00:06:31]>> Every the economic benefit of being a person a human [clears throat] being you know is embedded in your in your human capital. So by the time you are 50 and above then at that point you are you are close to retirement. It means that uh whatever you have not it you know when you when you are setting a a target for some of us that are conversant with budget setting. When you set a budget and if half way you have not met your budget it what it means is that your own rate increases. It means that for you to meet that target you have to do more to catch up right. So meanwhile between 50 and above is a period of time when risk capital risk capacity begin to to drop also because of age and uh an inability to cope with losses you know when they occur because when you retire and you don't have earnings coming in. So there's nothing to convert to your financial capital, right? What are you going to convert to stock and bond or real estate? It's no longer the it's no longer that time. So it's very important. Um it cannot be overemphasized that um as you are as you attaining that level um if you have not done a lot of work prior to that then the risk that is one major risk that you are standing it's called longevity risk is the risk that you outlive your asset. When you outlive your asset it means that you you outspend what you have. For in you have a career between 30, you spend 30 years in employment >> and God helps you. You now spend 40 years outside employment and you now you your your your I mean your life expectancy you are now 90.

[00:08:30]>> You get the point. So from from okay let's even take care let's say okay 60 is the is the retirement age right between 60 and 90 if god helps you and everybody pray for longevity and it means that you spend 30 years in employment 30 years in so if you don't have sufficient I mean asset in place to take care of your postretirement I mean expenses then what it means is that um you are going to face longevity risk your asset depletion and at the end of the day uh you'll be worse off for it. So that's why it is very important.

[00:09:07]>> That's uh that's deep. Um so so Deepo, if you could recommend five key investments or assets that everyone, you know, every Nigerian should prioritize before turning 50.

[00:09:27]What would your list of investments and in the order of importance be and why is each one of those ones critical?

[00:09:39]Well, um I think um the first on my list would be equities and um uh because uh that is a point where you can still take risk. Uh just like what um um Adra has actually mentioned uh um if you're actually on your way to 50, it's a point where you can still take uh risk, considerate risk. And um so if you need to actually take considerate risk, it means that um you can see you have room to actually load equity into your portfolio. And for me uh equity is more like portfolio amplifier uh because of the level of return you can actually gain uh from actually investing in equity market. And um we can look at some of the a lot of expense example in the Nigerian markets. uh uh look at um there I'll give you some names as at 2017 um 2017 um okoma was trading around 14 naira ok is trading north of 1,200 as we speak now same thing with presc so imagine that you have invested in such name now even with the level of inflationary pressure that we have seen and depletion of the value of uh currency one way or the other you have still been able to actually edge Because one thing the equity can bring a bit of edge mostly if the particular company can transfer uh uh the cost of this to consumer. So it simply means that they can actually be uh you can actually get um your investment heads.

[00:11:09]So equity will rank number one for me.

[00:11:11]And beyond equities as well there's the aspect of bonds as well. bond like what we say he helps you to actually the advantage of bond is the predictability of your cash flow you mentioned you want to pay school fees you want to meet an obligations there's a way you can structure your investment that you can actually structure it in a way that you tend to get those cash flow coming in at that particular point in time where they are mostly needed and that's one of the reason why you have uh you need bond in your portfolio there are points in time where imagine you having like January 2035 bond in your portfolio. Uh the bond that has coupon of 22 22.6% uh uh coupon uh it means that for every 100 million investment you have a cash flow of about uh 22.6 million as cash flow annually uh that comes to your hand over a period of the 10 years. So it gives you an idea of how you can actually use the pred predictability of that cash flow to actually plan your investment and also play meet your financial obligations as I went you and beyond that as well there's the aspect of uh uh real estate as well and there are times that people when you talk about real estate people tend to look at you know buying of land buying of building some of these things there are times that you don't have the capacity to actually buy some of these things but you can buy into listed names on the exchange had actually tracking some of these things. I think in um past segment we mentioned we talked about some of these uh ETFs that we can actually use to actually take advantage of some of some of these things. Uh you have N reads uh on the exchange. You have UPDC reads on the exchange and you have couple of uh other names that they are real estate investment trust assets on the Nigeria exchange and what it would do is that they help you mimic what is happening in that sector. And so it simply means that whatever the return that should have approved to anyone investing in that sector, you can also be partaker of such level of uh of benefit. And thing that comes to mind as well is the commodity and um we are spoken about our mothers. Uh a lot of them paid their school fees with commodity. Uh don't forget that the Nigerian this an average Nigerian woman in Isle has gold stored in their house.

[00:13:33]They use it as um as as jewelry. They use it as accessory and also is a form of investment for the future. And that is a way that you can also layer your portfolio. investing in commodities uh that what it would do is that it helps you to preserve uh the value of your assets. Don't forget that some of these names like uh this commodity we're talking about gold. Gold gold is nominated in dollars. Uh so when you're investing in dollar one way or the other is a way to actually diversify your assets in currency basis. So it means that you are not totally exposed to only n. So simply man when there's volatility uh your investment in commodities like gold could actually help you to mitigate the level of risk uh that your portfolio would have actually uh witnessed. And the last on my we will be money market and money market what it does to you is that is more like your uh bank account is more like your paycheck. Instead of you leaving your money in savings account leaving your money in current account when you put money in money market account you tend to enjoy a better level of cash flow. And I think also helps you to be more disciplined.

[00:14:39]If you have money in current account, you can log into your app and do your money and you do the transfer and do whatever you want to do. But sometime when you know that it's in a money market asset account, what you need to do, you need to actually feel fun for you, you need to liquidate, you need to when you look at the stress that you go through, it sometime limit the level at which you want to go to that route and until when it is very very essential that when you want to actually that route. So for me I think this level of five assets class I've mentioned from equities to bond from bond to real estate real estate to commodity and I will rank money market as the lowest on on my kada because uh that will operate more like your savings accounts.

[00:15:23]>> So great. So you talked about bonds um real estate equities commodities and money market. These are five uh investment uh types that you've identified. Adura, what's other types or do you share similar investment uh types with uh deeper or do you have other types of investments that you think every Nigerian or everyone should have before they turn 50? And if you may, what are some of the common mistakes that people make with it?

[00:15:58]>> Okay. Uh thank you doctor. You know the the work of advisory is a very complex one right.

[00:16:07]>> Okay.

[00:16:08]>> Um of course you have different asset classes that um that are there >> both traditional and mother alternative that you can you can put your money in.

[00:16:22]But beyond that um the work journey right start from you which is your human capital which is the totality of who you are. If I were to recommend to anybody who wants to do investment, you start from yourself, right? Because the foundation of any wealth creation is human capital.

[00:16:53]If you whether you are an entrepreneur or you are a business person or you are a professional if you don't invest in yourself then most likely what you are going to have is any risk um wage if there is any macroeconomic it can take you off the job if you are not in a dynamic industry where you can weather the storm it will take you away. So um if you want to start you have to start with yourself build yourself get sufficient education skill experience uh prof whatever education that you need if you are in the business space too you need to you need to build yourself in that space.

[00:17:42]When you build yourself in that space, as you begin to grow, then you begin to manage your human capital, you begin to because even as a businessman, you know, you can when you grow to a certain point, you can have this sentimental attachment to your business. You don't want it to how do I at a point you knew you you have to start to plan your exit from that business? How do you how do I exit from this? How do I monetize? How do I? So all those decisions will start to come in. Then you can begin to as you are between age 20 and 35 which early career stage uh 35 to 50 and above. So within those life cycle there are specific I mean your risk appetite you know also change along that line. So and whatever recommendation you are is easy to you know to say uh go and buy stock somebody who is age 50 I just say go and buy stock I need to know what what are your goals what do you want to what do you tend to because um at a point your living expenses if you if you if you partition this into risk bucket you got that your risk your your living expenses shouldn't be invested in risky assets right so for instance You can somebody your living expense you you it should be you know it should be it should be in safe asset such that the probability of missing that outcome you know be very low. So when you now have aspirational target I want to you have gifting um intention you want to your legacy plan or you have a philanthropic um I mean intention so those one those one they are long-term event you can push those portfolio you can push them into I mean risky so depending on what you want so along that line there are risk I mean different asset classes you can partition and put them put your put your resources into as you grow along the line so that um uh you will not you you will not um it's good to set a goal because um at a point you your expenses will even outweigh as you are growing your expenses will even outweigh your income but over time but as you grow so you know that between age 20 and 35 this is my early career stage I still have student loan to pay I have this one to as you are moving to 35 to 50 you are of Of course you you would have grown at that level. You would have been in senior management level. You know at that point you have a lot of resources.

[00:20:25]You also have competing demand. You be paying for mortgages, paying for all these things. So you have competing priorities, you know that I mean that that that are that demanding on your on your resources. So at that point in time you need to begin to look at how do I allocate some of these resources to uh to all the different asset class so that I can meet my retirement uh retirement goal and I can retire safely. So that's for me starts with yourself. Then thereafter you now have the different like deep said you have all the other different asset classes that you can now invest in depending on where you are in each of this stage of your I mean uh your life your your financial life cycle. So that's the way I can.

[00:21:11]>> Okay let's let's get practical uh Adura.

[00:21:14]So let's say for someone in their mid30s or 40s who has very little or nothing invested yet. So what are the practical four steps okay that they should take immediately you know based on all of this because I understand when you say invest in yourself okay can you break this down and you know tie it down I mean tie it again to you know these age brackets that we've talked about so that we can get you know uh something that I you know followers uh our viewers can you know hold on to. I'm in my 30s. I'm in my 40s.

[00:22:00]What should I do now?

[00:22:02]>> Okay. So, if you in your 40s, uh, okay, let me like I have 30s. Yeah. 30s, 40s.

[00:22:09]>> Between 20 and 35, you are just coming out of college, right?

[00:22:12]>> You enter the job market.

[00:22:18]Of course, your the cash flow will be negative. So, you have a lot of obligation. You are getting married. you are you want to buy a car, you want to buy a home. So those periods um your cash flow will be negative. But as you move between 35 and you are advancing your career right then you discover that your cash flows will be getting better and as you are attaining seniority level in your organization or your business is becoming more mature then you are getting some cash flow at that point in time then you need to begin to lay put some resources aside just like said earlier on when he was talking about I mean human capital you begin to deploy resources to your financial assets when you at that between 35 and 50 you have [snorts] your asset allocation normal asset allocation will be riskier investment right because you still have a long time to weather any storm at that point equities will be suitable for you you have even if you invest in real estate whether commercial property or or whatever type of real estate you want to even at times you do residential that you can even dispose of if you if you invest in choice areas Right. This investment can be good because if you need liquidity at that point in time >> you you have enough time to convert this asset to to to so so stock investment is a very long-term investment at that point in time when you are getting to between age 20 20 to 35. There are not period that you should be focusing on income right because fix income will not give you that level of growth. your risk capital is is very high that level then you can deploy resources more into equities you can do more stocks you can do ETFs right you can gain exposure to I mean other alternative investment or you want to have gold ETF these are I mean other alternatives that you can gain exposure to right they can give you growth if you look at the growth if you look at the price of I mean I be following go since 2015 when it was5 today is 4,000 said it got to 5,000 It came down. It's still >> Yeah, it got about 5,600 or there about Yeah, that's the last time I checked.

[00:24:29]>> And and if you look at the projection, it's going to go up. Even even the Bitcoin that people don't understand the fundamentals, right? Those assets we they have they have potential but depend depending on your risk appetite and your your age range where you are in your in your financial life cycle, right? So as you are attaining 50 and above of course at that point you are planning for retirement right yes 50 10 years and above if you have 50 to 60 is still okay plus your additional life expectancy let's say 75 well 25 years is a is a long-term I mean but depending on your goal at that point in time what do you want to do okay if you see how children you have obligation in USD And it it will also determine your asset allocation whether it's going to be domestic asset allocation or whether it's going to be foreign you are going to because you have obligation in in USD. So some of these things are will determine you know how you do your your asset um um asset allocation. So so that's that's uh I I hope that breaks it down.

[00:25:39]>> Yeah that that clarifies it. Yeah. uh depot for someone already in their mid4s now with almost nothing saved is it too late and um are there any accelerated strategy you know to catch up that you can recommend uh so that they can still build some meaningful wealth or have some meaningful investment before they turn 50.

[00:26:10]Well, there's this adage from where I am from that uh whenever you wake up that is your money and um so but they're just waking up that is their money and um but just uh the fact is that they are not waking up at the right time and um so just like what idea mentioned earlier on if you have missed your target it means that you have higher run rate so it means that they have higher run rate now and don't forget that the capacity to take risk uh is not so much there uh because um like I said earlier on I was telling you that you get to a point where you have obl so much obligations that you are like a train you can't turn anyhow uh so they getting to that level where they cannot turn anyhow uh so it simply means that um when you want to invest in this level um you need to very very careful and why do I need you need to be very careful um normally what would you have expected is that you would have built financial capital over that long time while your human capital is depleting. Uh but now you have not been able to build financial capital but yet your human capital has actually been depleted. uh so what it simply means that it's a point where uh you have to act now uh there's a lot of thing that you need to do in this at this particular point there has to be risk profile uh because it's not a time that you want someone to take a risk and say oh the market has crashed and someone will have IBP and the next thing is that the person may actually lose their life and so it's a time where you need to be able to sit down with this person profile the person know what I just like what Adra actually mentioned there's a lot things we actually look at. You look at your aspiration needs. Uh you look at your philanth philanthropical needs and many other thing beyond your normal needs. Uh so if I know your cash flow is this, we can actually plan your uh investment strategy around your future cash flow obligations. uh if it's something that u uh so it's a point where you can aggressively do stock or do aggressive um risky assets the point where you can actually put your phone some fund in this thing but not so much risky that if anything happen it can actually job jeopardize your future aspiration or your future need so this for me if I see someone that is this level it means that you can't do equity more than like a 30 to 35 5% uh window or maybe 30 to 40 window. Uh so you see have that 60% headlive investment uh that can actually give you cash flow uh that are predictable and can also help uh uh to actually um uh help you stabilize into into your future. Uh but the good thing about it is that uh in investment there's something we call the core and the satellite. uh what this will be is that the 60% is more like the core of your portfolio. Now it means that that is the base that is where we are actually layering your portfolio around. Uh so the satellite is now your 40% in equities and don't forget I said that will still be premised on your capacity to actually take risk. Uh so your 40% layering on it is what can actually help to actually amplify uh the valuation of your of your of your of your portfolio.

[00:29:31]So for someone waking just waking up now uh it's still not very late but it just mean that you need to run faster than those people that already awake.

[00:29:41]>> All right thank you for adding that Eric there. Okay. So, um Adura, beyond the asset classes that we've talked about, beyond personal savings, um are there useful resources like government programs, loans, grants, or platforms that people maybe in their 30s or 40s can access right now to, you know, really kind of help them begin to build these investments faster.

[00:30:23]>> Yeah. Well, yes. Um when this government came, um I mean they created window for student education loan, right?

[00:30:33]>> These are windows that you can tap into to develop your human capital if is that important to you because you need sufficient education, right? to prepare yourself to generate future income to begin to uh over time allocate your financial asset as you grow from yourself to your financial asset. Uh so you also have there is this real estate um I mean program by the ministry of uh ministry of finance you know uh where you can tap into run through the commercial banks right to give you exposure at a at a at a rate of 9% into into real estate but the the the thing about it is um you need to you need to look at where you are Right? You can't just it's not a decision you just wake up and say uh I want to do this, I want to do that. So it depends on your cash flow capacity. If you have that cash flow and ability to I mean deface those obligation as they become maturing then you can you can tap into those opportunities I mean to to give you that leverage. But very importantly, you know, as you age, um, if [clears throat] you want to grow, if you, as you age, your engine is already your your growth engine is is is is weakening, right? So if it's weakening for this if you look at a vehicle that you bought in the past that spent 20 years and you now want to repair the engine you want to rev it up you are standing the some of the risk you are standing is that the engine can break down along the line. So and if that is the case it means that you have to be very careful uh at age 45 and above is still a long term right it means that at your income level you must be ready to do at least 50% 50 or 40% I mean savings at a go you understand so if you are able to if you want to move at that at at at that at at that growth that will catch up with what you have lost it means that you have to increase.

[00:32:45]So it's no longer a time to be to be to be spending all your cash flow. It means that you in fact if you are very aggressive you can do 50 you know to investment because those are the things that will give you stability as you as you progress. So you have to increase your run rate otherwise you will not meet up as you retire then your income starts I mean stop to I mean stops to flow that flow will stop and when it stops you are left with uh what you have and if you don't plan what you have carefully of course the risk of depleting it and you know what it is emotion can set in when you when you when you you it happens to everyone you think that oh I I've lost it. Oh, how do I recover? For people that if you if you trade if you are for people that trade currency, I mean in the international market, you know what it is. When you are leveraged, you are leveraged. And now you are having losses against you, right? You now want to come back.

[00:33:47]>> You now double your position. And when you double your position, you know what it means? It means that if the market, it means that your debt is going to be twice as what it should have been. In fact, that one is health is help is direct that person will end up in hell directly. So that's what it means. So that's um that's the way I see it. Uh doctor, >> right, thank you so much. I think it's been a wonderful conversation and one that we'll continue to explore. Now we have a a few more minutes. Uh Deepo, we have a question from one of our listeners who was reacting to our last episode on top five uh stocks to purchase from the NGX and some of those opportunities from the dividend window that we have in June. Uh so one is saying um if they have about five million naira and they want to invest about for five years are there particular uh sectors that you think um they should be looking at?

[00:34:54]Well, um if I have five million and I'm investing for five years, it's more like a long time horizon >> and um and um and and look at um just what we discussed around the GDP. ICT ranked number one for me because um that sector is currently printing cash and um um if you remember some years ago maybe about two years ago MT went to negative shareholders fund because of u of the of the FX loss and I remember I mentioned clearly on one TV show like that that um MC will be out of their um negative shareholders and they will return back to positive just within one year of operation and they were able to do Not that they were able to do that only they even declared dividend in in their Q3 result and when you have checked their results in the last in the last three quarters you will see that upside momentum. So it means that playing in that sector will not be a bad idea for someone looking to actually invest uh for uh a long time and the financial sector is not is something that you cannot uh overlook down on. Uh so I mean the banking sector I'm actually a a lover of the banking sector uh they give you cash flows u um they helps you to actually predict your cash flow as well and that that's another sector I will I will look at and um I will also uh look at the oil and gas sector um and um when you look at names and um when I remember that um about 3 years ago u surplus was trading around 8,100 levels uh the same stock is trading uh about 11,000 I'm telling you I have ghost pimple when I when I remember that I was in the market when he was trading at that price and also in the market about 3 years later where is trading this and one of the reason why I feel the oil and gas sectors would try is because of the policies that the current administration is actually shing out in respect of that particular uh sector we heard from the shell um MD where he actually mentioned that they actually bringing lot of funds investment back in Nigeria and don't forget that point in time we saw more like capital dea from the same shell about some years back and so is because of the policies attractive policy that we are seeing in that segment so I will pick the oil and gas sector I'm told and I will pick in the industrial sector and majorly the uh the dangote of this world uh the um the wo of this world and why would I pick a dangote I'll pick Dangote because of stability, I'll pick Wapco because he's currently being run by a Chinese company and you and I know that when you have these guys come into any economy and they come with capital, they come with aggressive uh posture to actually want to take over that sector and so we will see a lot of innovative activity on that on WCO and we'll see also catch up activity on the part of Dangote which would be a very good opportunity for people looking to actually play in that segment. And finally, I'll pick the consumer names as well. We have couple of names in the consumer names as well because Nigeria will continue to consume and we continue to consume this company will try as we continue to thrive. It means that as an investor in that sector as well, you also benefit from them.

[00:38:26]>> All right. Brilliant. Thank you so much for you know expanding more on that and as I mentioned it's been a pleasure having both of you uh Dural Joe is um a wealth management expert he's joined us today to shed more light and provide context into these very two important discussions that we've had it's a pleasure having you and thank you for coming >> thank you once again Doctor, thank you.

[00:38:57]It's a privilege to be here.

[00:38:59]>> Right. And uh uh Deepo, it's always a pleasure uh listening to your insightful analysis. Thank you.

[00:39:08]>> It's always a pleasure to be on the program. Thank you very much for having me again today.

[00:39:13]>> All right. Uh thank you everyone for listening. If you do have a question either for me or for my guest, please put them in the comment section. uh if you're someone above 50 already and obviously you must have already passed through this if you have a question and advice you know some ways to navigate what we've been talking about please put them in the comment section if you are below 30 uh I mean if you're below 50 and you're already in the process of putting structures in place uh if you want to put some comments in the uh comment section that would be appreciated uh so please if you're new to this channel. Uh please um subscribe to the channel and share this video with your communities and like this video on your way out. We are here every weekend providing contest, providing guidance, helping you make sense of the investment world. It's our pleasure um you know doing this again this weekend and we are out. Thank you everyone. Bye.

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