Tutorials of Wise Grandpa (2)

Emeka stepped out of the parade ground in the NYSC orientation camp to pick his grandfather’s call.  “Have you fully settled down in Abuja, son?”

“Yes dad, except that the harmattan wind is severe and I am trying to acclimatize. It has not been easy for me papa”

“Nothing is easy in life, my son. That is the lesson you have to learn, post graduation.

“I know that grandpa.” As soon as I am through with my NYSC, I will become an investor, just as you advised me.”

“Good decision my son. Begin to invest in stocks, shares and bonds.”

“Of who, dad?”

“Of governments and companies; companies that are quoted on the stock exchange.

“Grandpa, you are moving too fast; shares, stocks, bonds, stock exchange. I don’t really understand what they mean.”

“You can, son, if you begin to read the financial pages of newspapers and magazines. That way, you become literate in financial matters. ”

“So what are stocks? Is it same as stock of wood or packets of pure water?” Emeka queried.

“Not at all my son,” chuckled his grandfather. That is the bane of many young graduates, today, tall on entertainment, short on money matters. You can secure your financial freedom by becoming a business owner without ever showing up at work? You sit back, watch your company grow, and collect the dividend as the money rolls in. This sounds like a dream, but is real my son.”

”I am talking about you buying stocks, a category of financial instruments used for building wealth. Stocks are a part of  any investment portfolio. They are bought and sold in the stock market. The average person's interest in this market has grown and you cannot shut yourself out. What was once a privilege of the rich has become the vehicle for growing wealth? Anybody can own stocks now.”

“But most people don't fully understand stocks. So much of this misinformation is based on the get-rich-quick mentality prevalent among youths of today. People still think that stocks are the magic answer to instant wealth with no risk. Not so. Stocks can create massive amounts of wealth, but they have risks too.  The key to protecting yourself in the stock market is to understand where you are putting your

money. That is why I am giving you this tutorial.”

“I appreciate this grandpa,” Emeka said reluctantly. “But I thought you will give me some breathing space. I am still trying to adjust to the weather in Kano and we are stillin camp, for our orientation programme. The military drills are stretching my muscles.

“Good training, my son. Those drills will discipline you, spirit, soul, and body. You will leave camp, fitter, healthier and more alert, and ready to serve the nation and become one of the leaders of a greater Nigeria. That is the whole essence of the NYSC programme, my son.”

“I agree with you dad.”

“I am not done yet. This tutorial is to enable you make investment decisions yourself. Now listen.  Stock is a share in the ownership of a company. It represents a claim on the company's assets and earnings. Assets are things or properties any company can use to make money such as office and manufacturing equipment. As you buy more stock, your ownership of that company increases. Whether you say shares, equity, or stock, they all mean the same thing Emeka. So do not be confused by these terms.”

“You have to understand that buying a company's stock means that you are one of the many owners (shareholders) of a company. It also means you have a claim (depending on the amount of shares you own) to everything the company owns. As an owner, you are entitled to your share of the company's earnings as well as any voting rights attached to the stock.

“Grandpa, if I buy a stock, what do I get to show that I am stock owner? Will the company give me a receipt?”

“No receipts,” grandpa laughs. Buying stocks is not really like buying books and clothes when you were in the university. You own those clothes and books completely, right.  But owning stocks makes you a part owner of large organization from which you can reap constant returns every year.

When you buy a stock, you get a stock certificate. This is a fancy piece of paper that is proof of your ownership. It shows you are a shareholder of that company. Now make up your mind to be a shareholder.”

“I will, grandpa..”